10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 000-54369

Resource Real Estate Opportunity REIT, Inc.

(Exact name of registrant as specified in its charter)

Maryland	27-0331816
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
1845 Walnut Street, 18th Floor, Philadelphia, PA 19103
(Address of principal executive offices) (Zip code)
(215) 231-7050
(Registrant's telephone number, including area code)

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ No o

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

Large accelerated filer	o		Accelerated filer	o
Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	þ

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

As of August 4, 2015, there were 70,775,884 outstanding shares of common stock of Resource Real Estate Opportunity REIT, Inc.

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

INDEX TO ANNUAL REPORT

ON FORM 10-Q

		PAGE
PART 1	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets - June 30, 2015 (unaudited) and December 31, 2014	3
	Consolidated Statements of Operations and Comprehensive (Loss) Income - Three and Six Months Ended June 30, 2015 and 2014 (unaudited)	4
	Consolidated Statement of Changes in Stockholders' Equity - Six Months Ended June 30, 2015 (unaudited)	6
	Consolidated Statements of Cash Flows - Six Months Ended June 30, 2015 and 2014 (unaudited)	7
	Notes to Consolidated Financial Statements - June 30, 2015 (unaudited)	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	51
Item 4.	Controls and Procedures	51
PART II
Item 1A.	Risk Factors
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3.	Defaults Upon Senior Securities	52
Item 6.	Exhibits	53
SIGNATURES		54

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q 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.

PART 1.     FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

CONSOLIDATED BALANCE SHEETS (in thousands)

	June 30, 2015			December 31, 2014
	(unaudited)
ASSETS
Investments:
Rental properties, net	$	986,358		$	775,254
Loans held for investment and preferred equity investments, net	4,223			4,985
Identified intangible assets, net	3,761			2,081
Assets held for sale - rental properties, net	—			36,764
	994,342			819,084
Cash	100,969			140,129
Restricted cash	7,116			6,930
Due from related parties	2,072			1,148
Tenant receivables, net	358			527
Deposits	271			666
Prepaid expenses and other assets	2,893			2,302
Deferred financing costs, net	7,692			6,392
Goodwill	1,231			1,231
Total assets	$	1,116,944		$	978,409
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Mortgage notes payable	$	577,279		$	444,168
Credit facilities	56,394			45,586
Accounts payable	1,481			2,689
Accrued expenses and other liabilities	6,286			6,473
Accrued real estate taxes	5,765			5,689
Due to related parties	1,337			1,630
Tenant prepayments	1,139			1,383
Security deposits	2,665			2,437
Total liabilities	652,346			510,055
Stockholders’ equity:
Preferred stock (par value $.01; 10,000,000 shares authorized, none issued)	—			—
Common stock (par value $.01; 1,000,000,000 shares authorized; 70,961,928 and 69,469,001 shares issued, respectively; and 70,547,010 and 69,254,165 shares outstanding, respectively)	705			693
Convertible stock (“promote shares”; par value $.01; 50,000 shares authorized, issued and outstanding)	1			1
Additional paid-in capital	626,531			614,024
Accumulated other comprehensive loss	(391		)	(266		)
Accumulated deficit	(170,439		)	(154,319		)
Total stockholders’ equity	456,407			460,133
Noncontrolling interests	8,191			8,221
Total equity	464,598			468,354
Total liabilities and stockholders’ equity	$	1,116,944		$	978,409

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

3

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(in thousands, except per share data)

(unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
				(Remeasured)
Revenues:
Rental income	$	28,250		$	24,910		$	55,821		$	45,579
Interest and dividend income	162			58			325			221
Total revenues	28,412			24,968			56,146			45,800
Expenses:
Rental operating	14,841			12,998			29,473			24,782
Acquisition costs	4,108			4,035			5,809			6,535
Management fees	3,719			2,838			7,180			4,947
General and administrative	3,787			3,760			7,837			6,297
Loss on disposal of assets	1,372			21			2,481			1,648
Provision for loan loss	130			—			130			—
Depreciation and amortization expense	12,059			12,953			22,356			24,899
Total expenses	40,016			36,605			75,266			69,108
Loss before other expenses	(11,604		)	(11,637		)	(19,120		)	(23,308		)
Other (expense) income:
Net gains on dispositions	4,376			2,541			33,551			2,541
Interest expense	(5,408		)	(3,509		)	(10,275		)	(5,896		)
Insurance proceeds in excess of cost basis	160			—			407			—
(Loss) income from continuing operations	(12,476		)	(12,605		)	4,563			(26,663		)
Discontinued operations:
Income from discontinued operations	—			—			—			2
Income from discontinued operations, net	—			—			—			2
Net (loss) income	(12,476		)	(12,605		)	4,563			(26,661		)
Net loss attributable to noncontrolling interests	192			1,965			181			1,410
Net (loss) income attributable to stockholders	$	(12,284	)	$	(10,640	)	$	4,744		$	(25,251	)
Amounts attributable to stockholders
(Loss) income from continuing operations	$	(12,284	)	$	(10,640	)	$	4,744		$	(25,253	)
Discontinued operations	—			—			—			2
Net (loss) income attributable to stockholders	$	(12,284	)	$	(10,640	)	$	4,744		$	(25,251	)
Net (loss) income	$	(12,476	)	$	(12,605	)	$	4,563		$	(26,661	)
Other comprehensive (loss) income:
Designated derivatives, fair value adjustments	(41		)	(149		)	(125		)	(207		)
Comprehensive (loss) income	(12,517		)	(12,754		)	4,438			(26,868		)
Comprehensive loss attributable to noncontrolling interests	192			1,965			181			1,410
Total comprehensive (loss) income attributable to stockholders	$	(12,325	)	$	(10,789	)	$	4,619		$	(25,458	)

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

4

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(CONTINUED)

(in thousands, except per share data)

(unaudited)

	Three Months Ended						Six Months Ended
	June 30, 2015						June 30, 2015
	2015			2014			2015		2014
				(Remeasured)
Weighted average common shares outstanding (1)	70,107			67,749			69,798		67,558
Basic and diluted (loss) income per common share (1):
Continuing operations	$	(0.18	)	$	(0.16	)	$	0.07	$	(0.37	)
Discontinued operations	—			—			—		—
Net (loss) income	$	(0.18	)	$	(0.16	)	$	0.07	$	(0.37	)

(1)    Excludes any dilution from the potential conversion of convertible stock, as the actual number of shares of common stock, if any, that will be issuable upon conversion of convertible stock is indeterminable at June 30, 2015.

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

5

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2015

(in thousands)

(unaudited)

	Common Stock					Convertible Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity			Noncontrolling interests			Total Equity
	Shares		Amount			Shares	Amount
Balance at January 1, 2015	69,254		$	693		50	$	1	$	614,024		$	(266	)	$	(154,319	)	$	460,133		$	8,221		$	468,354
Common stock issued through distribution reinvestment plan	1,493		14			—	—		14,418			—			—			14,432			—			14,432
Distributions on common stock	—		—			—	—		—			—			(20,928		)	(20,928		)	—			(20,928		)
Share redemptions	(200	)	(2		)	—	—		(1,911		)	—			64			(1,849		)	—			(1,849		)
Other comprehensive loss	—		—			—	—		—			(125		)	—			(125		)	—			(125		)
Contributions of noncontrolling interests	—		—			—	—		—			—			—			—			151			151
Net income (loss)	—		—			—	—		—			—			4,744			4,744			(181		)	4,563
Balance at June 30, 2015	70,547		$	705		50	$	1	$	626,531		$	(391	)	$	(170,439	)	$	456,407		$	8,191		$	464,598

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

6

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
	Six Months Ended
	June 30,
	2015			2014
Cash flows from operating activities:
Net income (loss)	$	4,563		$	(26,661	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Income from discontinued operations	—			(2		)
Loss on disposal of assets	2,481			1,648
Provision for loan loss	130			—
Net gains on dispositions	(33,551		)	(2,541		)
Depreciation and amortization	22,356			24,899
Amortization of deferred financing costs	906			566
Amortization of fair value adjustment of debt	(374		)	(305		)
Accretion of discount and direct loan fees and costs	(17		)	—
Changes in operating assets and liabilities, net of acquisitions:
Restricted cash	216			708
Tenant receivables, net	168			(52		)
Deposits	(38		)	(82		)
Prepaid expenses and other assets	(17		)	(1,040		)
Due to related parties, net	(1,101		)	(1,764		)
Accounts payable and accrued expenses	(1,286		)	3,807
Tenant prepayments	(172		)	156
Security deposits	55			27
Net cash used in operating activities of continuing operations	(5,681		)	(636		)
Cash flows from investing activities:
Proceeds from disposal of properties, net of closing costs	55,051			10,070
Property acquisitions	(96,953		)	(169,146		)
Ownership acquisitions, net of cash received	—			(56,720		)
Capital expenditures	(17,465		)	(15,634		)
Principal payments received on loans	591			195
Net cash used in investing activities of continuing operations	(58,776		)	(231,235		)

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

7

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued) (in thousands) (unaudited)
	Six Months Ended
	June 30,
	2015			2014
Cash flows from financing activities:
Redemptions of common stock	$	(1,849	)	$	(1,075	)
Payment of deferred financing costs	(402		)	(2,770		)
Increase in borrowings on mortgages	26,280			114,354
Principal payments on borrowings on mortgages	(2,926		)	(1,011		)
Proceeds from borrowings on line of credit	30,918			45,520
Payments on line of credit	(20,288		)	(6,975		)
Distributions paid on common stock	(6,496		)	(4,022		)
Contributions of noncontrolling interests	151			—
Purchase of interest rate caps	(91		)	(65		)
Net cash provided by financing activities	25,297			143,956
Net cash used in continuing operations	(39,160		)	(87,915		)
Cash flows from discontinued operations:
Net cash provided by operating activities	—			90
Net cash provided by discontinued operations	—			90
Net decrease in cash	(39,160		)	(87,825		)
Cash at beginning of period	140,129			270,323
Cash at end of period	$	100,969		$	182,498

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

8

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

(unaudited)

NOTE 1 - NATURE OF BUSINESS AND OPERATIONS

Resource Real Estate Opportunity REIT, Inc. (the “Company”) was organized in Maryland on June 3, 2009 to purchase a diversified portfolio of discounted U.S. commercial real estate and real estate-related assets in order to generate gains to stockholders from the potential appreciation in the value of the assets and to generate current income for stockholders by distributing cash flow from the Company’s investments. Resource Real Estate Opportunity Advisor, LLC (the “Advisor”), an indirect wholly-owned subsidiary of Resource America, Inc. (“RAI”), a publicly traded company (NASDAQ: REXI) operating in the real estate, financial fund management and commercial finance sectors, manages the day-to-day operations of the Company. 

Through its private and public offerings, which concluded on December 13, 2013, the Company raised aggregate gross offering proceeds of $645.8 million from the issuance of 64,926,311 shares of common stock, including 276,056 shares purchased by the Advisor and 1,161,623 shares sold in the distribution reinvestment plan. During 2014, the Company sold 2,410,424 shares for $22.9 million pursuant to its distribution reinvestment plan. During the six months ended June 30, 2015, the Company additionally sold 1,492,928 shares for $14.4 million pursuant to its distribution reinvestment plan. The Company's distribution reinvestment plan offering is ongoing.

The Company has acquired, and intends to continue to acquire, real estate-related debt and equity that has been discounted due to the effects of economic events and high levels of leverage, as well as stabilized properties that may benefit from extensive renovations that may increase their long-term values.  The Company has a particular focus on acquiring and operating multifamily assets, and it has targeted, and intends to continue to target, this asset class while also acquiring interests in other types of commercial property assets consistent with its investment objectives.  The Company’s targeted portfolio consists of commercial real estate assets, principally (i) multifamily rental properties purchased as non-performing or distressed loans or as real estate that was foreclosed upon and sold by financial institutions and (ii) multifamily rental properties to which the Company can add value with a capital infusion (referred to as “value add properties”).  However, the Company is not limited in the types of real estate assets in which it may invest and, accordingly, it may invest in other real estate-related assets either directly or together with a co-investor or joint venture partner.

The Company is organized and conducts its operations in a manner intended to allow it to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes under Subchapter M of the Internal Revenue Code of 1986, as amended.  The Company also operates its business in a manner intended to maintain its exemption from registration under the Investment Company Act of 1940, as amended.

The consolidated financial statements and the information and tables contained in the notes to the consolidated financial statements are unaudited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). However, in the opinion of management, these interim financial statements include all the necessary adjustments to fairly present the results of the interim periods presented. The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The results of operations for the six months ended June 30, 2015 may not necessarily be indicative of the results of operations for the full year ending December 31, 2015.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Principles of Consolidation

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

Subsidiary	Apartment Complex	Number of Units	Property Location
RRE Opportunity Holdings, LLC	N/A	N/A	N/A
Resource Real Estate Opportunity OP, LP	N/A	N/A	N/A
RRE Charlemagne Holdings, LLC	N/A	N/A	N/A
RRE 107th Avenue Holdings, LLC (“107th Avenue”)	(c)	N/A	N/A
RRE Westhollow Holdings, LLC (“Westhollow”)	(b)	N/A	N/A

9

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

RRE Crestwood Holdings, LLC (“Crestwood”)	(a)(b)	N/A	N/A
RRE Iroquois, LP (“Vista”)	Vista Apartment Homes	133	Philadelphia, PA
RRE Iroquois Holdings, LLC	N/A	N/A	N/A
RRE Campus Club Holdings, LLC (“Campus Club”)	(b)	N/A	N/A
RRE Bristol Holdings, LLC (“Bristol”)	(c)	N/A	N/A
RRE Cannery Holdings, LLC (“Cannery”)	Cannery Lofts	156	Dayton, OH
RRE Williamsburg Holdings, LLC (“Williamsburg”)	Williamsburg	976	Cincinnati, OH
WPL Holdings, LLC	N/A (d)	N/A	Cincinnati, OH
RRE Skyview Holdings, LLC ("Skyview")	(c)	N/A	N/A
RRE Park Forest Holdings, LLC ("Park Forest")	Mosaic	216	Oklahoma City, OK
RRE Foxwood Holdings, LLC ("Foxwood")	The Reserve at Mt. Moriah	220	Memphis, TN
RRE Flagstone Holdings, LLC ("Flagstone")	The Alcove	292	Houston, TX
RRE Deerfield Holdings, LLC ("Deerfield")	Deerfield	166	Hermantown, MN
RRE Kenwick Canterbury Holdings, LLC ("Kenwick & Canterbury")	(c)	N/A	N/A
RRE Armand Place Holdings, LLC ("Armand")	Ivy at Clear Creek	244	Houston, TX
RRE Autumn Wood Holdings, LLC ("Autumn Wood")	Retreat at Rocky Ridge	206	Hoover, AL
RRE Village Square Holdings, LLC ("Village Square")	Trailpoint at the Woodlands	271	Houston, TX
RRE Nob Hill Holdings, LLC ("Nob Hill")	Affinity at Winter Park	192	Winter Park, FL
RRE Brentdale Holdings, LLC ("Brentdale")	The Westside Apartments	412	Plano, TX
RRE Jefferson Point Holdings, LLC ("Jefferson Point")	Tech Center Square	208	Newport News, VA
RRE Centennial Holdings, LLC ("Centennial")	Verona Apartment Homes	276	Littleton, CO
RRE Pinnacle Holdings, LLC ("Pinnacle")	Skyview Apartment Homes	224	Westminster, CO
RRE Jasmine Holdings, LLC ("Jasmine")	The Nesbit Palisades	437	Alpharetta, GA
RRE River Oaks Holdings, LLC ("River Oaks")	Maxwell Townhomes	314	San Antonio, TX
RRE Nicollet Ridge Holdings, LLC ("Nicollet Ridge")	Meridian Pointe	339	Burnsville, MN
RRE Addison Place, LLC ("Addison Place")	The Estates at Johns Creek	403	Alpharetta, GA
PRIP Coursey, LLC ("Evergreen at Coursey Place")	Evergreen at Coursey Place (e)	352	Baton Rouge, LA
PRIP 3700, LLC ("Champion Farms")	N/A (e)	N/A	N/A
PRIP 10637, LLC ("Fieldstone")	N/A (e)	N/A	N/A
PRIP 500, LLC ("Pinehurst")	Pinehurst (e)	146	Kansas City, MO
PRIP 1102, LLC ("Pheasant Run")	Pheasant Run (e)	160	Lee's Summit, MO
PRIP 11128, LLC ("Retreat at Shawnee")	Retreat at Shawnee (e)	342	Shawnee, KS
PRIP 6700, LLC ("Hilltop Village")	(b)(e)	N/A	N/A
PRIP 3383, LLC ("Conifer Place")	N/A (e)	N/A	N/A
PRIP Stone Ridge, LLC ("Stone Ridge")	N/A (e)	N/A	N/A
PRIP Pines, LLC ("Pines of York")	Pines of York (e)	248	Yorktown, VA
PRIP 5060/6310, LLC ("Governor Park")	(b)(e)	N/A	N/A
RRE Chisholm Place Holdings LLC ("Chisholm Place")	Chisholm Place	142	Plano, TX
RRE Berkeley Run Holdings, LLC ("Berkley Run")	Perimeter Circle	194	Atlanta, GA
RRE Berkeley Trace Holdings LLC ("Berkley Trace")	Perimeter 5550	165	Atlanta, GA
RRE Merrywood LLC ("Merrywood")	Aston at Cinco Ranch	228	Katy, TX
RRE Sunset Ridge Holdings, LLC ("Sunset Ridge")	Sunset Ridge	324	San Antonio, TX
RRE Parkridge Place Holdings, LLC ("Parkridge Place")	Calloway at Las Colinas	536	Irving, TX
RRE Spring Hill Holdings, LLC ("Spring Hill")	N/A	N/A	N/A
RRE Woodmoor Holdings, LLC ("Woodmoor")	Woodmoor	208	Austin, TX
RRE Gilbert Holdings, LLC ("Springs at Gilbert")	Springs at Gilbert Meadows	459	Gilbert, AZ

10

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

RRE Bonita Glen Holdings, LLC ("Bonita")	Villages at Bonita Glen	295	Chula Vista, CA
RRE Yorba Linda Holdings, LLC ("Yorba Linda")	Yorba Linda	400	Yorba Linda, CA

N/A - Not Applicable

(a) - Discontinued operations

(b) - Sold prior to 2015

(c) - Sold in 2015

(d) - Subsidiary holds a portion of the Williamsburg parking lot    

(e) - Wholly-owned subsidiary of RRE Charlemagne Holdings, LLC

All intercompany accounts and transactions have been eliminated in consolidation.

The consolidated financial statements reflect the Company's accounts and the accounts of the Company's majority-owned and/or controlled subsidiaries. The Company follows the provisions of Accounting Standards Codification (“ASC”) Topic 810, “Consolidation,” and accordingly consolidates entities that are variable interest entities (“VIEs”) where it has determined that it is the primary beneficiary of such entities. Once it has been determined that the Company holds a variable interest in a VIE, management performs a qualitative analysis to determine (i) if the Company has the power to direct the matters that most significantly impact the VIE's financial performance; and (ii) if the Company has the obligation to absorb the losses of the VIE that could potentially be significant to the VIE or the right to receive the benefits of the VIE that could potentially be significant to the VIE. If the Company's interest possesses both of these characteristics, the Company is deemed to be the primary beneficiary and would be required to consolidate the VIE. The Company will continually assess its involvement with VIEs and re-evaluate the requirement to consolidate them. Noncontrolling interests are presented and disclosed as a separate component of stockholders' equity (not as a liability or other item outside of stockholders' equity). Consolidated net (loss) income includes the noncontrolling interests’ share of (loss) income. All changes in the Company’s ownership interest in a subsidiary are accounted for as stockholders' equity transactions if the Company retains its controlling financial interest in the subsidiary. The portions of these entities that the Company does not own are presented as noncontrolling interests as of the dates and for the periods presented in the consolidated financial statements. The consolidated financial statements include the accounts of the Company's majority-owned and/or controlled subsidiaries as follows:

Subsidiary	Ownership %	Apartment Complex	Number of Units	Property Location
Springhurst Housing Partners, LLC	70.0%	Champion Farms	264	Louisville, KY
Glenwood Housing Partners I, LLC	83.0%	Fieldstone	266	Woodlawn, OH
FPA/PRIP Conifer, LLC	42.5%	Conifer Place	420	Norcross, GA
DT Stone Ridge, LLC	77.7%	Stone Ridge	188	Columbia, SC

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Assets Held for Sale

The Company presents the assets and liabilities of any rental properties which have been sold subsequent to the balance sheet date, or otherwise qualify as held for sale, separately in the Consolidated Balance Sheets. Real estate assets held for sale are measured at the lower of carrying amount or fair value less cost to sell. Both the real estate and the corresponding liabilities are presented separately in the Consolidated Balance Sheets. Subsequent to classification of an asset as held for sale, no further depreciation is recorded. At December 31, 2014, the Company had three rental properties included in assets held for sale. At June 30, 2015, there were no rental properties included in assets held for sale.

Rental Properties

11

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

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

Buildings	27.5 years
Building improvements	3.0 to 27.5 years
Tenant improvements	Shorter of lease term or expected useful life

Concentration of Risk

At June 30, 2015, the Company's real estate investments in California, Texas and Georgia represented 17%, 25% and 18% of the net book value of the Company's rental properties, respectively. As a result, the geographic concentration of the Company's portfolio makes it particularly susceptible to adverse economic developments in the California, Texas and Georgia real estate markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for multifamily rental properties resulting from the local business climate, could adversely affect the Company's operating results and its ability to make distributions to stockholders.

Impairment of Long Lived Assets

When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for permanent 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.

An impairment loss will be recorded to the extent that the carrying value exceeds the estimated fair value of a property to be held and used.  For properties held for sale, the impairment loss would be the adjustment to fair value less the estimated cost to dispose of the asset.  There were no impairment charges during the three and six months ended June 30, 2015 and 2014.

Loans Held for Investment, Net

The Company records acquired performing loans held for investment at cost and reviews them for potential impairment at each balance sheet date.  The Company considers a loan to be impaired if one of two conditions exists.  The first condition is, if based on current information and events, management believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.  The second condition is if the loan is deemed to be a troubled-debt restructuring (“TDR”) where a concession has been given to a borrower in financial difficulty.  A TDR may not have an associated specific loan loss allowance if the principal and interest amount is considered recoverable based on current market conditions, expected collateral performance and/or guarantees made by the borrowers.

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, as a practical expedient, the fair value of the collateral.  If a loan is deemed to be impaired, the Company records a reserve for loan losses through a charge to income for any shortfall.    

Interest income from performing loans held for investment is recognized based on the contractual terms of the loan agreement.  Fees related to any buy down of the interest rate are deferred as prepaid interest income and amortized over the term of the loan as an adjustment to interest income.  The initial investment made in a purchased performing loan includes the amount paid to the seller plus fees.  The initial investment frequently differs from the related loan’s principal amount at the date of the purchase.  The difference is recognized as an adjustment of the yield over the life of the loan.  Closing costs related to the purchase of a performing loan held for investment are amortized over the term of the loan and accreted as an adjustment to interest income.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

The Company may acquire real estate loans at a discount due to the credit quality of such loans and the respective borrowers under such loans.  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 held for investment.  The EIR that is calculated when the loan held for investment is acquired remains constant and is the basis for subsequent impairment testing and income recognition.  However, if the amount and timing of future cash collections are not reasonably estimable, the Company accounts for the real estate receivable on the cost recovery method.  Under the cost recovery method of accounting, no income is recognized until the basis of the loan held for investment has been fully recovered. At June 30, 2015 and December 31, 2014, there are no loans held on the cost recovery method.

Preferred Equity Investment

The Company records preferred equity investments at cost and evaluates the collectibility of both interest and principal at each balance sheet date. A preferred equity investment is considered impaired when, based on current information and events, it is probable that the Company will not be able to collect all amounts due according to existing contractual terms. When an investment is impaired, the amount of the loss accrual is calculated by comparing the carrying amount of the investment to its estimated fair value. Fees paid, net of expenses, are deferred and recognized as an adjustment to interest and dividend income earned over the term of the agreement.

Dividend income is recognized based on the contractual terms of the preferred equity agreement. 

Allocation of the Purchase Price of Acquired and Foreclosed Assets

The cost of rental properties acquired directly as fee interests and through foreclosing on a loan are allocated to net tangible and intangible assets based on their relative fair values.  The Company allocates the purchase price of properties to acquired tangible assets, consisting of land, buildings, fixtures and improvements, and to 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. Fair value estimates are 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.  In addition, the Company may obtain independent appraisal reports. The information in the appraisal reports along with the aforementioned information available to the Company's management is used in allocating the purchase price. The independent appraisers have no involvement in management's allocation decisions other than providing market information.

In allocating the purchase price, management also includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period.  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 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.    

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 it were vacant.  Management’s estimates of value are made using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis).  Factors to be considered by management in its analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions and costs to execute similar leases.

The total amount of other intangible assets acquired is further allocated to 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 relationships 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

The Company amortizes the value of in-place leases to expense over the average remaining term of the respective leases.  The value of customer relationship intangibles are 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.  Should a tenant terminate its lease, the unamortized portion of the in-place lease value and customer relationship intangibles associated with that tenant would be charged to expense in that period.

The determination of the fair value of 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 purchase price allocations, which could impact the amount of the Company’s reported net income.  Initial purchase price allocations are subject to change until all information is finalized, which is generally within one year of the acquisition date.

Goodwill

The Company records the excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed as goodwill. Goodwill is not amortized but is tested for impairment at a level of reporting referred to as a reporting unit during the fourth quarter of each calendar year, or more frequently if events or changes in circumstances indicate that the asset might be impaired.

Revenue Recognition

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 and includes amounts expected to be received in later years in deferred rents.  The Company records property operating expense reimbursements due from tenants for common area maintenance, real estate taxes and other recoverable costs in the period in which the related expenses are incurred.

The future minimum rental payments to be received from noncancelable operating leases (excluding commercial and antenna rentals) are $53.9 million and $314,000 for the 12 month periods ending June 30, 2016 and 2017, respectively, and none thereafter. The future minimum rental payments to be received from noncancelable operating leases for commercial rental properties and antenna rentals are $245,000, $231,000, $113,000, $40,000, $41,000, and zero for the 12 month periods ending June 30, 2016, 2017, 2018, 2019, 2020, and thereafter, respectively.

Tenant Receivables

Tenant receivables are stated in the 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 June 30, 2015 and December 31, 2014, there were allowances for uncollectible receivables of $29,687 and $57,300, respectively.

Income Taxes

To maintain its REIT qualification for U.S. federal income tax purposes, the Company is generally required to distribute at least 90% of its taxable net income (excluding net capital gains) to its stockholders as well as comply with other requirements, including certain asset, income and stock ownership tests.  As a REIT, the Company is not subject to federal corporate income tax to the extent that it distributes 100% of its REIT taxable income each year.  If the Company fails to qualify as a REIT, and does not qualify for certain statutory relief provisions, it is 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 fails 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.

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RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

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.  Generally, taxable income 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 taxable REIT subsidiaries (“TRS”). In general, the Company’s TRSs 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.  As of June 30, 2015 and December 31, 2014, the Company had no TRSs.

The Company evaluates the benefits from tax positions taken or expected to be taken in its tax return. Only the largest amount of benefits from tax positions that will more likely than not be sustainable upon examination are recognized by the Company.  The Company does not have any unrecognized tax benefits, nor interest and penalties, recorded in its consolidated financial statements and does not anticipate significant adjustments to the total amount of unrecognized tax benefits within the next 12 months.

The Company is subject to examination by the U.S. Internal Revenue Service and by the taxing authorities in other states in which the Company has significant business operations.  The Company is not currently undergoing any examinations by taxing authorities.

Earnings Per Share

Basic earnings per share are computed by dividing income available to common stockholders by the weighted-average common shares outstanding during the period.  Diluted earnings 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 15) are included in the diluted earnings per share calculations, as the actual number of shares of common stock that will be issuable upon conversion of the convertible stock, if any, is indeterminable at June 30, 2015 and would be anti-dilutive for the three months ended June 30, 2015 and the three and six months ended June 30, 2014 due to the net loss for the periods. For the purposes of calculating earnings per share, all common shares and per common share information in the financial statements have been adjusted retroactively for the effect of seven1.5% stock distributions, two0.75% stock distributions, one0.585% stock distribution and two0.5% stock distributions issued to stockholders. Common stock shares issued on the Consolidated Balance Sheets have also been adjusted retroactively for the effect of these 12 distributions.    

Reclassifications

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

Adoption of New Accounting Standards

Accounting Standards Issued But Not Yet Effective

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”)("ASU No. 2014-09"), “Revenue from Contracts with Customers”, which will replace most existing revenue recognition guidance in GAAP.  The core principle of ASU No. 2014-09 is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive 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. ASU No. 2014-09 will be effective for the Company beginning January 1, 2018, including interim periods in 2018, and allows for both retrospective and prospective methods of adoption. The Company is in the process of determining the method of adoption and assessing the impact of this guidance on the Company’s consolidated financial position, results of operations and cash flows.

15

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

In August 2014, FASB issued ASU No. 2014-15, "Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern." Under the new guidance, an entity should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. The guidance is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of the new requirements is not expected to have a material impact on the Company's consolidated financial statements.

In January 2015, FASB issued ASU No. 2015-01, "Income Statement - Extraordinary and Unusual Items (Subtopic 225-20), Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items" (“ASU No. 2015-01”). The amendments in ASU No. 2015-01 eliminate from GAAP the concept of extraordinary items. Although the amendment will eliminate the requirements for reporting entities to consider whether an underlying event or transaction is extraordinary, the presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. ASU No. 2015-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not expect the adoption of ASU No. 2015-01 to have a significant impact on its consolidated financial statements.

In February 2015, FASB issued ASU 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis" (“ASU 2015-02”), which makes certain changes to both the variable interest model and the voting model, including changes to (1) the identification of variable interests (fees paid to a decision maker or service provider), (2) the variable interest entity characteristics for a limited partnership or similar entity and (3) the primary beneficiary determination. ASU 2015-02 is effective for the Company beginning January 1, 2016. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU 2015-02 to have a significant impact on its consolidated financial statements.

In April 2015, FASB issued ASU 2015-03, "Simplifying the Presentation of Debt Issuance Costs" ("ASU 2015-03"), which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected. Upon adoption, the Company will apply the new guidance on a retrospective basis and adjust the balance sheet of each individual period presented to reflect the period-specific effects of applying the new guidance. This guidance is effective for the Company beginning January 1, 2016. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU 2015-03 to have a significant impact on its consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION

The following table presents supplemental cash flow information (in thousands):

	Six Months Ended
	June 30,
	2015		2014
Non-cash financing and investing activities:
Stock issued from the distribution reinvestment plan	$	14,432	$	9,441
Stock distributions issued	—		3,333
Cash distributions on common stock declared but not yet paid	—		2,263
Deferred financing costs and escrow deposits funded directly by mortgage note and revolving credit facility	10,709		505
Assets and liabilities assumed in acquisitions:
Other assets assumed	—		3,231
Debt assumed	40,185		133,882
Other liabilities assumed	99		2,646
Noncontrolling interests	—		18,901
Rental properties, net	40,284		152,198
Cash paid during the period for:
Interest	$	9,388	$	4,598

NOTE 4 - RENTAL PROPERTIES, NET

The Company’s investments in rental properties consisted of the following (in thousands):

	June 30, 2015			December 31, 2014
Land	$	191,392		$	122,137
Building and improvements	822,147			666,912
Furniture, fixtures and equipment	25,297			21,495
Construction in progress	3,440			3,005
	1,042,276			813,549
Less: accumulated depreciation	(55,918		)	(38,295		)
	$	986,358		$	775,254

Depreciation expense for the three and six months ended June 30, 2015 was $10.6 million and $19.4 million, respectively, and for the three and six months ended June 30, 2014 was $7.4 million and $14.3 million, respectively.

During the three months ended December 31, 2014, the Company entered into agreements to sell three rental properties, The Alcove, Cityside Crossing and The Redford, with a total net book value of $36.8 million. The Company confirmed the intent and ability to sell all three properties in their present condition and all three properties qualified for held for sale accounting treatment upon meeting all applicable criteria on or prior to December 31, 2014, at which time depreciation ceased. As such, the assets associated with these properties are separately classified and included as assets held for sale on the Company's consolidated balance sheets at December 31, 2014. However, the anticipated sale of these properties did not qualify for discontinued operations, and, therefore, the operations for all periods presented continue to be classified within continuing operations on the Company's consolidated statements of operations. The Company completed the sales of The Alcove, Cityside Crossing and The Redford on January 26, 2015, February 27, 2015 and March 2, 2015, respectively (see Note 8).

Loss on disposal of assets. During the three and six months ended June 30, 2015, the Company had a $1.4 million and $2.5 million loss on the disposal of assets, respectively, and during the three and six months June 30, 2014 had a $21,000 and $1.6 million loss on the disposal of assets, respectively, due to the replacement of appliances at its rental properties in conjunction with unit upgrades.

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RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

NOTE 5 - LOANS HELD FOR INVESTMENT AND PREFERRED EQUITY INVESTMENT, NET

The following table presents the components of loans held for investment and preferred equity investment, net (in thousands):

	June 30, 2015		December 31, 2014
Loans held for investment, net	$	752	$	1,523
Preferred equity investment, net	3,471		3,462
	$	4,223	$	4,985

Loans held for investment:    

On March 15, 2011, the Company purchased, at a discount, two non-performing promissory notes (the "Oberlin Note” and the "Heatherwood Note”) and two performing promissory notes (the "Peterson Note” and the "Trail Ridge Note”), collectively referred to as the “Notes”, each of which was secured by a first priority mortgage on multifamily rental apartment communities. The contract purchase price for the Notes was a total of $3.1 million, excluding closing costs. Both the Oberlin and Peterson Notes were resolved in prior years.

On August 18, 2011, the Company was the successful bidder at a foreclosure sale of the property collateralizing the Heatherwood Note. Possession of the Heatherwood Apartments was obtained in February 2012 and the property was subsequently sold in April 2013. On April 18, 2013, in connection with the sale of the Heatherwood Apartments, the Company originated an $800,000 mortgage loan (the "Heatherwood Sale Note") to the purchaser of the Heatherwood Apartments on the same date. In May 2015, the Company agreed to receive $583,000 and apply $58,000 of escrow balances in full satisfaction of the loan. As such, the Company recorded a provision for loan loss of $130,000 during the three months ended June 30, 2015 related to this payoff.

Preferred equity investment:

On November 12, 2014, the Company, through its wholly owned subsidiary, RRE Spring Hill Holdings, LLC, made a $3.5 million preferred equity investment in Spring Hill Investors Limited Partner, LLC (the “Investment Vehicle”) and became the Preferred Member. An unaffiliated limited liability company owns the common equity and acts as the managing member of the Investment Vehicle. The Company is obligated to fund up to an additional $1.5 million in increments of $150,000 upon request as long as no triggering event has occurred. Examples of triggering events include loan defaults, failure of the managing member to make payments to the Preferred Member, and unauthorized managing member interest transfers.

The Investment Vehicle is the sole member of Spring Hill Investors GP, LLC, which is the general partner of Spring Hill Investors, LP, the owner of a 606-unit multifamily residential apartment community commonly known as Spring Hill Apartments (“Spring Hill”) and located in Dallas, Texas. The Company’s preferred equity investment will be predominately utilized for capital improvements and deferred maintenance projects.

The Company is to be paid a dividend equal to 12% of the total amount invested, 7% of which must be paid monthly and of which the remaining amount accrues and is to be paid when the property cash flow allows for the repayment. The mandatory redemption date for the investment is the earliest of (i) April 2017, (ii) any earlier date upon which the mortgage loan secured by Spring Hill Apartments becomes due and payable as a result of the acceleration of the loan maturity date by the lender, or (iii) the date on which a defeasance is effected pursuant to the loan documents.

The preferred equity balance is presented net of nonrefundable origination fees and net of origination expenses which are being amortized over the term of the investment as an adjustment to interest and dividend income.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

The following table provides the aging of the Company’s loans held for investment and preferred equity investment(dollars in thousands):

	June 30, 2015						December 31, 2014
	Loans held for investment		Preferred equity investments		Total		Loans held for investment		Preferred equity investments		Total
Current	$	752	$	3,471	$	4,223	$	1,523	$	3,462	$	4,985
Delinquent:
30−89 days	—		—		—		—		—		—
90−180 days	—		—		—		—		—		—
Greater than 180 days	—		—		—		—		—		—
	$	752	$	3,471	$	4,223	$	1,523	$	3,462	$	4,985

The following table provides information about the credit quality of the Company’s loans held for investment, net and preferred equity investment (in thousands):

	June 30, 2015		December 31, 2014
Performing	$	4,223	$	4,985
Nonperforming	—		—
Total	$	4,223	$	4,985

The following table presents details of the balance and terms of the loan held for investment and the preferred equity investment held at June 30, 2015 (in thousands):

	Unpaid Principal Balance		Unamortized Discount			Deferred (fees) expenses, net			Net book value		Maturity Date	Interest Rate	Average monthly payment
Loan- Trail Ridge	$	991	$	(247	)	$	8		$	752	10/28/2021	7.5%	$	8
Preferred equity investment	3,500		—			(29		)	3,471		4/1/2017	12%	$	35
	$	4,491	$	(247	)	$	(21	)	$	4,223

The following table presents details of the balance and terms of loans held for investment and the preferred equity investment held at December 31, 2014 (in thousands):

	Unpaid Principal Balance		Unamortized (Discount)			Deferred (fees) expenses, net			Net book value
Loan- Trail Ridge	$	994	$	(261	)	$	14		$	747
Loan- Heatherwood	776		—			—			776
Preferred equity investment	3,500		—			(38		)	3,462
	$	5,270	$	(261	)	$	(24	)	$	4,985

The Company has individually evaluated each loan for impairment and determined that, as of June 30, 2015, the loan held for investment and the preferred equity investment were not impaired. 

There was a $130,000 charge-off during the three and six months ended June 30, 2015 and there were no charge-offs during the three and six months ended June 30, 2014.

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RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

NOTE 6 - ACQUISITIONS AND FORECLOSURES

Real Estate Investments

As of June 30, 2015, the Company owned interests in 37 properties. The Company estimated the fair values of certain of the acquired assets and liabilities based on preliminary valuations at the date of purchase. The Company has received final appraisals for all recent acquisitions and has completed the purchase price allocations.

The table below summarizes the Company's wholly-owned acquisitions during the six months ended June 30, 2015 and the respective fair values assigned (dollars in thousands):

Multifamily Community Name	City and State	Date of Acquisition	Purchase Price (1)		Land		Building and Improvements		Furniture, Fixture and Equipment		Intangible Assets		Other Assets		Other Liabilities			Fair Valued Assigned
Villages at Bonita Glen	Chula Vista, CA	6/16/2015	$	49,050	$	17,208	$	32,651	$	506	$	1,130	$	9	$	(30,008	)	$	21,496
Yorba Linda	Yorba Linda, CA	6/1/2015	118,000		39,322		76,124		590		1,964		76		(232		)	117,844
Springs at Gilbert Meadows	Gilbert, AZ	3/19/2015	36,000		8,487		25,867		716		931		—		(152		)	35,849
Woodmoor	Austin, TX	2/26/2015	24,000		5,586		17,493		291		629		—		(12,961		)	11,038

(1) Purchase price excludes closing costs and acquisition expenses.

Acquisitions

The Company acquired two and four properties during the three and six months ended June 30, 2015. In order to finalize the fair values of the acquired assets and liabilities, the Company obtained third-party appraisals. The Company has up to 12 months from the date of acquisition to finalize the valuation for each property. All valuations have been finalized as of June 30, 2015.

The table below summarizes the total revenues, net losses, and acquisition costs of the Company's acquisitions during the three and six months ended June 30, 2015 (dollars in thousands):

	Three Months Ended June 30, 2015						Six Months Ended June 30, 2015
Multifamily Community	Total Revenues		Net Loss		Acquisition Costs		Total Revenues		Net Loss		Acquisition Costs
Woodmoor	$	664	$	339	$	—	$	881	$	799	$	692
Springs at Gilbert Meadows	959		430		—		1,089		1,271		1,005
Yorba Linda	623		1,059		2,761		623		1,059		2,761
Villages at Bonita Glen	185		771		1,351		185		771		1,351
	$	2,431	$	2,599	$	4,112	$	2,778	$	3,900	$	5,809

NOTE 7 - MEASUREMENT PERIOD ADJUSTMENTS

The Company obtains third party appraisals for all of its acquisitions. If the appraisals are not finalized in the period in which the property or interest was acquired, a measurement period adjustment is recorded. For the The Estates at Johns Creek (formerly known as Addison Place) acquisition, which was completed in the three months ended March 31, 2014, the measurement period adjustment was finalized during the three months ended June 30, 2014. For the Paladin acquisition, which was completed in the three months ended March 31, 2014, the measurement period adjustments were finalized during the three months ended December 31, 2014.

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RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

Changes in the Paladin and The Estates at Johns Creek acquisitions are reflected in the tables below (in thousands):

Paladin

	January 28, 2014 (As initially reported)			Measurement period adjustment (1)			January 28, 2014 (As adjusted)
Land	$	44,292		$	(19,420	)	$	24,872
Building	149,155			18,364			167,519
Personal property	—			3,530			3,530
Intangible assets	5,861			(96		)	5,765
Other assets	3,231			(9		)	3,222
Goodwill	6,412			(5,148		)	1,264
Liabilities	(140,970		)	4,442			(136,528		)
Total net identifiable net assets	$	67,981		$	1,663		$	69,644

(1) Remaining balance ($1.7 million) of measurement period adjustments adjusted the noncontrolling interest balance.

The results of operations for the three months ended March 31, 2014 included an additional $867,000 of depreciation and amortization and net income attributable to noncontrolling interests was decreased by $249,000 to reflect the adjustments that would have been included in the three months ended March 31, 2014, as originally issued, had the final appraisals for the Paladin properties been received and recorded during that period.

The Estates at Johns Creek

	March 28, 2014 (As initially reported)		Measurement period adjustment			March 28, 2014 (As adjusted)
Land	$	18,137	$	(11,784	)	$	6,353
Building	51,843		10,406			62,249
Personal property	—		509			509
Intangible assets	520		869			1,389
Total net identifiable net assets	$	70,500	$	—		$	70,500

The measurement period adjustment for The Estates at Johns Creek had no impact on depreciation and amortization for the three months ended March 31, 2014.

NOTE 8 - DISPOSITION OF PROPERTIES AND DISCONTINUED OPERATIONS

2014 Dispositions

The Company sold the Campus Club Apartments on June 16, 2014 for $10.5 million and recognized a gain of approximately $2.6 million on the disposition.

The Company sold its 49% interest in one of the Paladin joint ventures, Parkhill Partners I, LLC ("Hilltop Village"), on July 1, 2014 to its joint venture partner for no consideration and recognized a loss on the sale of $493,000.

The Company sold the Arcadia at Westheimer Apartments on September 19, 2014 for $18.1 million and recognized a gain of approximately $8.3 million on the disposition.     

2015 Dispositions

On January 26, 2015, the Company sold The Alcove Apartments, located in Houston, Texas, for $11.1 million and recognized a gain of $3.8 million on the disposition.

On January 29, 2015, the Company sold 107th Avenue Apartments, located in Omaha, Nebraska, for $250,000 and recognized a gain of $50,000 on the disposition.

21

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

On February 27, 2015, the Company sold the Redford Apartments, located in in Houston, Texas, for $33.0 million and recognized a gain of $15.3 million on the disposition.

On March 2, 2015, the Company sold the Cityside Apartments, located in Houston, Texas, for $24.5 million and recognized a gain of $10.0 million on the disposition.

On June 30, 2015, the Company sold the One Hundred Chevy Chase Apartments, located in Lexington, Kentucky, for $13.5 million and recognized a gain of $4.4 million on the disposition.

NOTE 9 - IDENTIFIED INTANGIBLE ASSETS, NET

Identified intangible assets, net, consist of rental and antennae leases. The value of the acquired in-place leases totaled $3.8 million and $2.1 million as of June 30, 2015 and December 31, 2014, respectively, net of accumulated amortization of $25.4 million and $26.5 million, respectively.  The weighted-average remaining life of the existing rental leases was six months and five months as of June 30, 2015 and December 31, 2014, respectively.  Expected amortization for the antennae leases at the Vista Apartment Homes is $16,000 annually through 2025.  Amortization of the rental and antennae leases for the three and six months ended June 30, 2015 was $1.5 million and $3.0 million, respectively.  Amortization of the rental and antennae leases for the three and six months ended June 30, 2014 was $5.6 million and $10.6 million, respectively.

Expected amortization for the rental and antennae leases for the next five 12-month periods ending June 30, and thereafter, is as follows (in thousands): 

2016	$	3,608
2017	16
2018	16
2019	16
2020	16
Thereafter	89
	$	3,761

22

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

NOTE 10 - MORTGAGE NOTES PAYABLE

The following is a summary of the mortgage notes payable (in thousands, except percentages):

	June 30, 2015							December 31, 2014
Collateral	Outstanding Borrowings		Fair Value Adjustment			Net Book Value		Net Book Value		Maturity Date	Annual Interest Rate		Average Monthly Debt Service
Vista Apartment Homes	$	15,751	$	—		$	15,751	$	15,900	1/1/2022	2.48%	(1)(5)	$	63
Cannery Lofts	8,190		—			8,190		8,190		9/1/2020	3.49%	(1)(3)	36
Deerfield	10,530		—			10,530		10,530		11/1/2020	4.66%	(2)(3)	53
Ivy at Clear Creek	8,503		—			8,503		8,574		11/1/2023	2.60%	(1)(4)	29
Trailpoint at the Woodlands	19,174		—			19,174		19,335		11/1/2023	2.60%	(1)(4)	66
Verona Apartment Homes	22,623		—			22,623		22,843		1/1/2019	3.60%	(2)(5)	106
Skyview Apartment Homes	18,268		—			18,268		18,446		1/1/2019	3.60%	(2)(5)	85
The Nesbit Palisades	20,298		—			20,298		20,298		7/1/2024	2.14%	(1)(3)	53
Maxwell Townhomes	13,970		—			13,970		14,089		1/1/2022	4.32%	(2)(5)	71
Champion Farms	16,350		186			16,536		16,634		7/1/2016	6.14%	(2)(3)	85
Fieldstone	15,568		—			15,568		15,804		6/26/2016	2.59%	(1)(4)	73
Pinehurst	4,162		14			4,176		4,239		1/1/2016	5.58%	(2)(5)	28
Pheasant Run	6,250		128			6,378		6,407		10/1/2017	5.95%	(2)(3)	32
Retreat of Shawnee	13,185		204			13,389		13,522		2/1/2018	5.58%	(2)(5)	78
Conifer Crossing	27,351		50			27,401		27,762		9/1/2015	5.96%	(2)(4)(6)	171
Coursey Place	27,760		135			27,895		28,117		8/1/2021	5.07%	(2)(5)	154
Pines of York	15,396		(396		)	15,000		15,097		12/1/2021	4.46%	(2)(5)	80
The Estates at Johns Creek	50,000		—			50,000		50,000		7/1/2020	3.38%	(2)(3)	204
Chisholm Place	11,587		—			11,587		11,587		6/1/2024	2.58%	(1)(3)	36
Perimeter 5550	14,074		—			14,074		14,211		7/1/2019	3.42%	(2)(5)	64
Perimeter Circle	17,833		—			17,833		18,007		7/1/2019	3.42%	(2)(5)	81
Aston at Cinco Ranch	23,968		—			23,968		24,162		10/1/2021	4.34%	(2)(5)	120
Sunset Ridge 1	20,325		367			20,692		20,930		10/1/2020	4.58%	(2)(5)	113
Sunset Ridge 2	3,028		50			3,078		3,109		10/1/2020	4.54%	(2)(5)	16
Calloway at Las Colinas	36,058		—			36,058		36,375		12/1/2021	3.87%	(2)(5)	171
Woodmoor	12,803		—			12,803		—		8/1/2019	3.64%	(2)(5)	59
Springs at Gilbert Meadows	26,280		—			26,280		—		4/1/2025	2.07%	(1)(3)	80
Yorba Linda	67,500		—			67,500		—		6/1/2020	1.94%	(1)(3)	227
Villages at Bonita Glen	27,323		2,433			29,756		—		10/1/2023	5.33%	(2)(3)	151
	$	574,108	$	3,171		$	577,279	$	444,168

(1) Variable rate based on one-month LIBOR of 0.1865% (as of June 30, 2015) plus a fixed margin.

(2) Fixed rate.

(3) Monthly interest-only payment currently required.

(4) Monthly fixed principal plus interest payment required.

(5) Fixed monthly principal and interest payment required.

(6) On October 1, 2015, this loan will automatically extend for one year at a variable rate based on one-month LIBOR plus a fixed margin.

23

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

Loans assumed as part of the Villages at Bonita Glen, Woodmoor, Paladin, Sunset Ridge and Maxwell acquisitions were recorded at their fair value. The fair value adjustments are amortized over the remaining term of the loans and included in interest expense. For the three months ended June 30, 2015 and 2014, interest expense was reduced by $184,000 and increased by $49,000, respectively, for the amortization of the fair value adjustments. For the six months ended June 30, 2015 and 2014, interest expense was reduced by $374,000 and $305,000, respectively, for the amortization of the fair value adjustments.     

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

As of June 30, 2015 and December 31, 2014, the Company had $7.1 million and $6.9 million of restricted cash related to escrow deposits held by mortgage lenders for real estate taxes, insurance and capital reserves.

Annual principal payments on the mortgage notes payable, excluding the amortization of the fair value adjustments, for each of the next five 12-month periods ending June 30, and thereafter, are as follows (in thousands):

2016	$	37,572
2017	38,497
2018	26,682
2019	49,490
2020	111,639
Thereafter	310,228
	$	574,108

The mortgage notes payable are recourse only with respect to the properties that secure the notes, subject to certain limited standard exceptions, as defined in each mortgage note. The Company has guaranteed the mortgage notes by executing a guarantee with respect to the properties.  These exceptions are referred to as “carveouts.”  In general, carveouts relate to damages suffered by the lender for a borrower’s failure to pay rents, insurance or condemnation proceeds to lender, failure to pay water, sewer and other public assessments or charges, failure to pay environmental compliance costs or to deliver books and records, in each case as required in the loan documents.  The exceptions also require the Company to guarantee payment of audit costs, lender’s enforcement of its rights under the loan documents and payment of the loan if the borrower voluntarily files for bankruptcy or seeks reorganization, or if a related party of the borrower does so with respect to the subsidiary. The Company has also guaranteed the completion and payment of costs of completion of no less than $7.0 million for renovations to The Estates at Johns Creek by July 1, 2018.

The mortgage obtained in connection with the acquisition of Yorba Linda in June 2015 includes a $7.5 million earn-out holdback which may be borrowed when certain debt service coverage and loan to value criteria are met. The Yorba Linda loan includes a net worth and liquidity covenant. The Company was in compliance with all covenants at June 30, 2015. The loan also includes an additional debt service coverage covenant that is only required to be met as of and periods after December 31, 2017.

For the Fieldstone mortgage, beginning with the calendar quarter ended December 31, 2014, the property must maintain a certain level of debt service coverage. The Company was in compliance with the debt covenants for the Fieldstone mortgage at June 30, 2015.

24

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

NOTE 11 - CREDIT FACILITIES

The following is a summary of the credit facilities (in thousands, except percentages):

										Weighted Average Interest Rate for the
	Balance Outstanding at		Current Availability at		Balance Outstanding at		Maturity Date	Interest Rate Basis (1)	Current Interest Rate	Three months ended June 30,		Six Months Ended June 30,
Lender	June 30, 2015				December 31, 2014					2015	2014	2015	2014
Bank of America	$	20,894	$	6,732	10,086		5/23/2017	LIBOR plus 3%	3.19%	3.19%	3.15%	3.21%	3.15%
US Bank	23,000		—		23,000		12/27/2017	LIBOR plus 1.95%	2.14%	2.14%	2.14%	2.13%	2.14%
PNC Bank	12,500		—		12,500		12/20/2018	LIBOR plus 2%	2.19%	2.18%	2.15%	2.18%	2.16%
	$	56,394	$	6,732	$	45,586

(1) Variable rate based on one-month LIBOR of 0.1865% (as of June 30, 2015).

Draws under the secured revolving credit facility (the “Bank of America Credit Facility”) with Bank of America, N.A. (“Bank of America”) are secured by certain of the Company's properties with an aggregate value of $55.5 million as of June 30, 2015 and are guaranteed by the Company.  

      The Bank of America Credit Facility, as amended, matures on May 23, 2017, and may be extended to May 23, 2019 subject to satisfaction of certain conditions and payment of an extension fee equal to 0.25% of the amount committed under the Bank of America Credit Facility.  The Company is required to make monthly interest-only payments.  The Company also may prepay the Bank of America Credit Facility in whole or in part at any time without premium or penalty.

The operating partnership's obligations with respect to the Bank of America Credit Facility are guaranteed by the Company, pursuant to the terms of a guaranty dated as of December 2, 2011, or the Guaranty.  The Bank of America Credit Facility and the Guaranty contain restrictive covenants for maintaining a certain tangible net worth and a certain level of liquid assets, and for restricting the securing of additional debt as follows:

• the Company must maintain a minimum tangible net worth equal to at least (i) 200% of the outstanding principal amount of the Bank of America Credit Facility and (ii) $20.0 million;

• the Company must also maintain unencumbered liquid assets with a market value of not less than the greater of (i) $5.0 million or (ii) 20% of the outstanding principal amount of the Bank of America Credit Facility; and

• the Company may not incur any additional secured or unsecured debt without Bank of America's prior written consent and approval, which consent and approval is not to be unreasonably withheld.

The Company was in compliance with all such covenants at June 30, 2015.  

On December 20, 2013, the Company, through a wholly-owned subsidiary, entered into a secured credit facility, ("Jefferson Point Credit Facility") with PNC Bank, National Association for $15 million.  Draws under the Jefferson Point Credit Facility are secured by the assets of Tech Center Square Apartments (formerly known as the Jefferson Point Apartments). The Company provided a repayment guarantee of all interest and scheduled monthly principal payments (excluding the final payment at maturity for the outstanding balance.) The Company paid certain closing costs in connection with the Jefferson Point Credit Facility, including loan fees totaling $75,000.

The Jefferson Point Credit Facility includes both a debt service coverage covenant and a tangible net worth covenant. In November 2014, the Company amended the Jefferson Point Credit Facility. In accordance with the amendment, the debt service coverage covenant is only required to be complied with as of December 31, 2015 and periods thereafter.

The Company was in compliance with all covenants at June 30, 2015.

On December 27, 2013, the Company, through a wholly-owned subsidiary, entered into a secured credit facility ("Brentdale Credit Facility") with U.S. Bank National Association for $29.7 million.  Draws under the Brentdale Credit Facility are secured

25

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

by the assets of The Westside Apartments (formerly known as the Brentdale Apartments). The Company provided a $6.5 million repayment guarantee. The Brentdale Credit Facility matures on December 27, 2017, and may be extended to December 27, 2019 subject to satisfaction of certain conditions and payment of an extension fee equal to 0.25% of the amount committed under the Brentdale Credit Facility.

The Brentdale Credit Facility includes net worth, liquidity, leverage and debt service coverage covenants. In June 2015, the Company amended the Brentdale Credit Facility to amend the property debt service coverage ratio. The covenant is waived for the three months ended June 30, 2015.

The Company was in compliance with all other covenants at June 30, 2015.

Annual principal payments on the credit facilities for each of the next five 12-month periods ending June 30 and thereafter are as follows (in thousands):

2016	$	—
2017	21,790
2018	23,032
2019	11,572
2020	—
Thereafter	—
	$	56,394

NOTE 12 - DEFERRED FINANCING COSTS

Deferred financing costs incurred to obtain financing are amortized over the term of the related debt.  During the three months ended June 30, 2015 and June 30, 2014, $492,000 and $378,000, respectively, of amortization of deferred financing costs was included in interest expense. During the six months ended June 30, 2015 and June 30, 2014, amortization of deferred financing costs was $906,000 and $566,000, respectively. Accumulated amortization as of June 30, 2015 and December 31, 2014 was $2.2 million and $1.5 million, respectively.  Estimated amortization of the existing deferred financing costs for the next five 12-month periods ending June 30, and thereafter, is as follows (in thousands):

2016	$	1,865
2017	1,623
2018	1,286
2019	1,080
2020	814
Thereafter	1,024
	$	7,692

NOTE 13 - ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents the changes in each component of accumulated other comprehensive loss for the six months ended June 30, 2015 (in thousands):

	Net unrealized loss on derivatives
January 1, 2015	$	(266	)
Unrealized loss on designated derivatives	(125		)
June 30, 2015	$	(391	)

26

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

NOTE 14 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

In the ordinary course of its business operations, the Company has ongoing relationships with several related parties. 

Relationship with RAI

Self-insurance funds held in escrow. Substantially all of the receivables from related parties represents escrow funds held by RAI for self insurance. The Company's properties participate in insurance pools with other properties directly and indirectly managed by RAI for both property insurance and general liability. RAI holds the escrow funds related to the insurance pools on its books. The insurance pool for the property insurance covers losses up to $2.5 million and the insurance pool for the general liability covers losses up to the first $25,000 per incident. Catastrophic insurance would cover property losses in excess of the insurance pool up to $140.0 million. 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.

Internal audit fees. RAI performs internal audit services for the Company.

Relationship with the Advisor

In September 2009, the Company entered into an advisory agreement (the “Advisory Agreement”) pursuant to which the Advisor provides the Company with investment management, administrative and related services.  The Advisory Agreement was amended in January 2010 and further amended in January 2011 and March 2015.  The Advisory Agreement has a one-year term and renews for an unlimited number of successive one-year terms upon the approval of the conflicts committee of the Company's board of directors.  The Company renewed the Advisory Agreement for another year on September 15, 2014. Under the Advisory Agreement, the Advisor receives fees and is reimbursed for its expenses as set forth below:

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

Asset management fees. The Company pays the Advisor a monthly asset management fee equal to one-twelfth of 1.0% of the higher of the cost or the independently appraised value of each asset, 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 or a majority of an asset and does not manage or control the asset.  

Disposition fees. The Advisor earns 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, 2.75% of the contract sales price.

Debt financing fees. The Advisor earns a debt financing fee equal to 0.5% of the amount available under any debt financing obtained for which it provided substantial services.

Expense reimbursements. The Company also pays directly or reimburses 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 ongoing distribution reinvestment plan offering.  This includes all organization and offering costs of up to 2.5% of gross offering proceeds.

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.

Relationship with Resource Real Estate Opportunity Manager

Resource Real Estate Opportunity Manager, LLC (the “Manager”), an affiliate of the Advisor, manages the Company's 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.

27

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

Property management fees. The Manager earns 4.5% of the gross receipts from our properties, provided that for properties that are less than 75% occupied, the manager receives a minimum fee for the first 12 months of ownership for performing certain property management and leasing activities. 

Construction management fees. The Manager earns a construction management fee of 5.0% of actual aggregate costs to construct improvements, or to repair, rehab or reconstruct a property.

Debt servicing fees. The Manager earns a debt servicing fee of 2.75% on payments received from loans held by the Company for investment.  

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. 

Relationship with Other Related Parties

The Company has also made payment for legal services to the law firm of Ledgewood P.C. (“Ledgewood”).  Until 1996, the Chairman of RAI was of counsel to Ledgewood.  In connection with the termination of his affiliation with Ledgewood and its redemption of his interest, the Chairman continues to receive certain payments from Ledgewood.  Until March 2006, a current executive of RAI was the managing member of Ledgewood.  This executive remained of counsel to Ledgewood through June 2007, at which time he became an Executive Vice President of RAI.  In connection with his separation, this executive was entitled to receive payments from Ledgewood through 2013. 

The Company utilizes the services of a printing company, Graphic Images, LLC (“Graphic Images”), whose principal owner is the father of RAI’s Chief Financial Officer.  

The amounts payable and the fees earned/expenses paid to such related parties are summarized in the following tables (in thousands):

	June 30, 2015		December 31, 2014
Receivables from related parties:
RAI and affiliates	$	2,072	$	1,148
Payables to related parties:
Advisor:
Operating expense reimbursements	$	363	$	327
Resource Real Estate Opportunity Manager, LLC:
Property management fees	403		436
Operating expense reimbursements	566		743
Other	5		124
	$	1,337	$	1,630

28

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Fees earned / expenses paid to related parties:
Advisor:
Acquisition fees (1)	$	3,687	$	2,262	$	5,169	$	5,604
Asset management fees (2)	$	2,461	$	1,790	$	4,709	$	3,040
Disposition fees (3)	$	270	$	150	$	1,031	$	150
Debt financing fees (4)	$	474	$	572	$	670	$	1,147
Overhead allocation (5)	$	934	$	564	$	1,822	$	915
Resource Real Estate Opportunity Manager LLC:
Property management fees (2)	$	1,131	$	848	$	2,238	$	1,544
Construction management fees (6)	$	483	$	481	$	839	$	676
Debt servicing fees (2)	$	20	$	2	$	25	$	5
Other:
Ledgewood	$	83	$	71	$	144	$	101
Graphic Images	$	19	$	—	$	22	$	33

(1) Included in Acquisition costs on the consolidated statements of operations and comprehensive (loss) income.

(2) Included in Management fees on the consolidated statements of operations and comprehensive (loss) income.

(3) Included in Net gain on dispositions on the consolidated statements of operations and comprehensive (loss) income.

(4) Included in Deferred financing costs, net, on the consolidated balance sheets.

(5) Included in General and administrative costs on the consolidated statements of operations and comprehensive (loss) income.

(6) Included in Rental Properties, net, on the consolidated balance sheets.

NOTE 15 - EQUITY

Preferred Stock

The Company’s charter authorizes the Company to issue 10.0 million shares of its $0.01 par value preferred stock.  As of June 30, 2015 and December 31, 2014, no shares of preferred stock were issued and outstanding.

Common Stock

As of June 30, 2015, the Company had issued shares of its $0.01 par value common stock as follows (dollars in thousands):

	Shares Issued		Gross Proceeds
Shares issued through private offering	1,263,727		$	12,582
Shares issued through primary public offering (1)	62,485,461		622,077
Shares issued through stock distributions	2,132,266		—
Shares issued through distribution reinvestment plan	5,064,974		48,366
Shares issued in conjunction with the Advisor's initial investment, net of 4,500 share conversion	15,500		155
Total	70,961,928		$	683,180
Shares redeemed	(414,918	)
Total shares outstanding as of June 30, 2015	70,547,010

(1)    Includes 276,056 shares issued to the Advisor.

29

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

Convertible Stock

As of June 30, 2015 and December 31, 2014, the Company had 50,000 shares of $0.01 par value convertible stock outstanding of which the Advisor and affiliated persons own 49,063 shares and outside investors own 937 shares.  The convertible stock will convert into shares of the Company’s 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 10% 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 and, on the 31st trading day after listing, the Company’s value based on the average trading price of its common stock since the listing, plus prior distributions, combine to meet the same 10% return threshold.

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:

(A) the lesser of

(i) 25% of the amount, if any, by which

(1) the value of the Company as of the date of the event triggering the conversion plus the total distributions paid to its stockholders through such date on the then-outstanding shares of its common stock exceeds

(2) the sum of the aggregate issue price of those outstanding shares plus a 10% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, or

(ii) 15% of the amount, if any, by which

(1) the value of the Company as of the date of the event triggering the conversion plus the total distributions paid to its stockholders through such date on the then-outstanding shares of its common stock exceeds

(2) the sum of the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, divided by

(B) the value of the Company divided by the number of outstanding shares of common stock, in each case, as of the date of the event triggering the conversion.      

Redemption of Securities

During the three and six months ended June 30, 2015, the Company redeemed 41,912 and 200,082 of its common shares, respectively. The Company will not redeem in excess of 5% of the weighted-average number of shares 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. All redemption requests tendered were honored during the three and six months ended June 30, 2015.

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.

30

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

Distributions

For the six months ended June 30, 2015, the Company paid aggregate distributions of $20.9 million, including $6.5 million of distributions paid in cash and $14.4 million of distributions reinvested in shares of common stock through the Company's distribution reinvestment plan, as follows (in thousands):

Record Date	Per Common Share	Distribution Date	Distributions Invested in Shares of Common Stock		Aggregate Cash Distribution		Total Aggregate Distribution
January 29, 2015	$0.05	January 30, 2015	$	2,391	$	1,070	$	3,461
February 26, 2015	0.05	February 27, 2015	2,392		1,081		3,473
March 30, 2015	0.05	March 31, 2015	2,400		1,080		3,480
April 29, 2015	0.05	April 30, 2015	2,408		1,084		3,492
May 28, 2015	0.05	May 29, 2015	2,418		1,088		3,506
June 29, 2015	0.05	June 30, 2015	2,423		1,093		3,516
			$	14,432	$	6,496	$	20,928

Since its formation, the Company's Board of Directors has declared a total of seven quarterly stock distributions of 0.015 shares each, two quarterly stock distributions of 0.0075 shares each, one quarterly stock distribution of 0.00585 shares each, and two quarterly stock distributions of 0.005 shares each of its common stock outstanding. In connection with these stock distributions, the Company had increased its accumulated deficit by $21.3 million as of June 30, 2015.

NOTE 16 - FAIR VALUE MEASURES AND DISCLOSURES

In analyzing the fair value of its 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.

Rental properties obtained through a foreclosed note are measured at fair value on a non-recurring basis.  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.

31

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

Derivatives (interest rate caps) which are reported at fair value in the consolidated balance sheets 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 as follows (in thousands):

	Level 1		Level 2		Level 3		Total
June 30, 2015
Assets:
Interest rate caps	$	—	$	80	$	—	$	80
	$	—	$	80	$	—	$	80
December 31, 2014
Assets:
Interest rate caps	$	—	$	114	$	—	$	114
	$	—	$	114	$	—	$	114

The carrying and fair values of the Company’s loans held for investment and preferred equity investments, net, mortgage note payable and revolving credit facilities were as follows (in thousands):

	June 30, 2015						December 31, 2014
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Loans held for investment and preferred equity investments, net	$	4,223		$	4,663		$	4,985		$	4,985
Mortgage notes payable	$	(577,279	)	$	(576,901	)	$	(444,168	)	$	(450,269	)
Credit facilities	$	(56,394	)	$	(56,394	)	$	(45,586	)	$	(45,586	)

The fair value of the loans held for investment and preferred equity investments, net, was estimated using rates available to the Company for debt with similar terms and remaining maturities. (Level 3)

The fair value of the mortgage notes payable was estimated using rates available to the Company for debt with similar terms and remaining maturities. (Level 3)

The fair values of the two credit facilities equal the carrying amounts because the interest rate of each of the credit facilities is variable. (Level 3)

NOTE 17 - DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

The Company is exposed to certain risk 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 served to protect the lender.

32

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

JUNE 30, 2015

(unaudited)

Cash Flow Hedges of Interest Rate Risk

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 a total of six interest rate caps that were designated as cash flow hedges during 2013, 2014 and 2015. 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 three and six months ended June 30, 2015 and the year end December 31, 2014, 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 three and six months ended June 30, 2015, the Company did not record any 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.

As of June 30, 2015, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (dollars in thousands):

Interest Rate Derivative	Number of Instruments	Notional Amount		Maturity Dates
Interest Rate Caps	6	$	102,013	January 1, 2018 to July 1, 2019

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

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification in prepaid expenses and other assets on the Balance Sheet as of June 30, 2015 and December 31, 2014 (in thousands):

Asset Derivatives						Liability Derivatives
June 30, 2015			December 31, 2014			June 30, 2015			December 31, 2014
Balance Sheet	Fair Value		Balance Sheet	Fair Value		Balance Sheet	Fair Value		Balance Sheet	Fair Value
Interest rate caps	$	80	Interest rate caps	$	114	—	$	—	—	$	—

NOTE 18 - OPERATING EXPENSE LIMITATION

Under its charter, the Company must limit its total operating expenses to the lesser 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 quarters ended June 30, 2015 were in compliance with the charter imposed limitation.

NOTE 19 - SUBSEQUENT EVENTS

On July 20, 2015, the Company entered into an agreement to sell its interest in The Reserve at Mount Moriah, located in Memphis, Tennessee, for $5.5 million with an expected closing date in the third quarter of 2015. The Company expects to recognize a gain on the sale in the three months ended September 30, 2015.

The Company has evaluated subsequent events and determined that no events have occurred, other than those disclosed above, which would require an adjustment to or additional disclosure in the consolidated financial statements.

33

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the accompanying financial statements of Resource Real Estate Opportunity REIT, Inc. and the notes thereto. See also “Cautionary Note Regarding Forward-Looking Statements” preceding Part I, as well as the notes to our financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations provided in our Annual Report on Form 10-K for the year ended December 31, 2014. As used herein, the terms “we,” “our” and “us” refer to Resource Real Estate Opportunity REIT, Inc., a Maryland corporation, and, as required by context, Resource Real Estate Opportunity OP, LP, a Delaware limited partnership, and to their subsidiaries.

Overview

We were formed on June 3, 2009.  We commenced active real estate operations on September 7, 2010 when we raised the minimum offering amount in our initial public offering.

We have acquired a diversified portfolio of discounted U.S. commercial real estate and real estate-related debt that has been significantly discounted due to the effects of recent economic events and high levels of leverage on U.S. commercial real estate, including properties that may benefit from extensive renovations that may increase their long-term values. Following years of unprecedented appreciation in commercial real estate values fueled by readily available and inexpensive credit, the commercial real estate market began a significant decline in late 2007 as a result of the massive contraction in the credit and securitization markets. We believe that this decline produced an attractive environment to acquire commercial real estate and real estate-related debt at significantly discounted prices. We have a particular focus on operating multifamily assets and we intend to target this asset class while also purchasing interests in other types of commercial property assets consistent with our investment objectives. Our targeted portfolio will consist of commercial real estate assets, principally (i) multifamily rental properties purchased as non-performing or distressed loans or as real estate owned by financial institutions and (ii) multifamily rental properties to which we can add value with a capital infusion (referred to as “value add properties”). However, we are not limited in the types of real estate and real estate-related assets in which we may invest or whether we may invest in equity or debt secured by real estate and, accordingly, we may invest in other real estate assets or debt secured by real estate assets. We currently anticipate holding approximately 25% of our total assets in categories (i) and 75% of our total assets in category (ii), however, that may change depending on market and economic conditions.

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 our Advisor presents us with investment opportunities that allow us to meet the requirements to be treated as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code") and to maintain our exclusion from regulation as an investment company pursuant to the Investment Company Act, our portfolio composition may vary from what we have initially disclosed.

The primary portion of our initial public offering commenced on June 16, 2010 and closed on December 13, 2013. We continue to offer shares to our existing stockholders pursuant to our distribution reinvestment plan. We describe these offerings further in “Liquidity and Capital Resources” below.

Results of Operations

 As of June 30, 2015, we owned interests in a total of 37 multifamily properties. During the three and six months ended June 30, 2015, we acquired interests in two and four multifamily properties and disposed of one and five properties, respectively. Acquisitions during the three months ended June 30, 2015 included our largest acquisition to date, Yorba Linda, with a purchase price of $118.0 million. Our management is not aware of any material trends or uncertainties, favorable, or unfavorable, other than national economic conditions affecting our targeted portfolio, the multifamily residential housing industry and real estate generally, 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.

The results of operations for the three months ended June 30, 2014 were remeasured to exclude an additional $867,000 of depreciation and amortization and net income attributable to noncontrolling interests has been increased by $249,000 for the measurement period adjustment related to the Paladin acquisition, which were included in the three months ended March 31, 2014 as presented in our Quarterly Report on Form 10-Q for the three months ended March 31, 2015. These adjustments would have been included in the results of operations as originally reported for the three months ended March 31, 2014 had the final appraisals for the Paladin properties been received and recorded during that period.

34

Three Months EndedJune 30, 2015 Compared to the Three Months EndedJune 30, 2014

The following table sets forth the results of our operations (in thousands):

	Three Months Ended
	June 30,
	2015			2014
				(Remeasured)
Revenues:
Rental income	$	28,250		$	24,910
Interest and dividend income	162			58
Total revenues	28,412			24,968
Expenses:
Rental operating	14,841			12,998
Acquisition costs	4,108			4,035
Management fees	3,719			2,838
General and administrative	3,787			3,760
Loss on disposal of assets	1,372			21
Provision for loan loss	130			—
Depreciation and amortization expense	12,059			12,953
Total expenses	40,016			36,605
Loss before other expenses	(11,604		)	(11,637		)
Other (expense) income:
Gains on dispositions	4,376			2,541
Interest expense	(5,408		)	(3,509		)
Insurance proceeds in excess of cost basis	160			—
Net loss	(12,476		)	(12,605		)
Net loss attributable to noncontrolling interest	192			1,965
Net loss attributable to stockholders	$	(12,284	)	$	(10,640	)

35

The following table presents the results of operations separated into two categories: the results of operations of the 28 properties that we owned for the entirety of both periods presented and all other properties (including company level expenses to aid in comparability) for the three months ended June 30, 2015 and 2014 (in thousands):

	For the three months ended									For the three months ended
	June 30, 2015									June 30, 2014
	Properties owned both periods			All other			Total			Properties owned both periods			All other			Total
Revenues:													(Remeasured)
Rental income	$	21,235		$	7,015		$	28,250		$	19,668		$	5,242		$	24,910
Interest income	1			161			162			2			56			58
Total revenues	21,236			7,176			28,412			19,670			5,298			24,968
Expenses:
Rental operating	11,117			3,724			14,841			10,107			2,891			12,998
Acquisition costs	—			4,108			4,108			183			3,852			4,035
Management fees	927			2,792			3,719			840			1,998			2,838
General and administrative	1,264			2,523			3,787			1,740			2,020			3,760
Loss on disposal of assets	270			1,102			1,372			21			—			21
Provision for loan loss	—			130			130			—			—			—
Depreciation and amortization expense	8,224			3,835			12,059			11,198			1,755			12,953
Total expenses	21,802			18,214			40,016			24,089			12,516			36,605
Loss before other expenses	(566		)	(11,038		)	(11,604		)	(4,419		)	(7,218		)	(11,637		)
Other (expense) income:
Net gains on dispositions	4,386			(10		)	4,376			—			2,541			2,541
Interest expense	(3,518		)	(1,890		)	(5,408		)	(3,398		)	(111		)	(3,509		)
Insurance proceeds in excess of cost	—			160			160			—			—			—
Net income (loss)	302			(12,778		)	(12,476		)	(7,817		)	(4,788		)	(12,605		)
Net loss attributable to noncontrolling interests	192			—			192			1,965			—			1,965
Net income (loss) attributable to stockholders	$	494		$	(12,778	)	$	(12,284	)	$	(5,852	)	$	(4,788	)	$	(10,640	)

Revenues: The $1.6 million increase in rental revenue for the 28 properties we owned during both the three months ended June 30, 2015 and the three months ended June 30, 2014 reflects implementation of our investment strategy to increase monthly rental income after renovating and stabilizing operations (including One Hundred Chevy Chase, which was sold on June 30, 2015) was primarily comprised of:

Multifamily Community Name	Rental Income Increase (in thousands)		Increase In Effective Monthly Revenue Per Unit (in dollars)
One Hundred Chevy Chase	$	209	$	59
The Estates at Johns Creek	195		179
Williamsburg	167		54
The Westside Apartments	150		143
Retreat at Rocky Ridge	130		78
All other, net	716
	$	1,567

The $1.8 million increase in rental revenue in the All Other category includes $6.2 million of revenue from the operations of properties purchased from April 2014 to June 2015 and the reduction of $4.4 million of revenue for properties that were sold.

36

Expenses: Our rental operating expenses for the 28 properties we owned during both the three months ended June 30, 2015 and the three months ended June 30, 2014 increased by $1.0 million primarily due to increases in insurance expense, real estate taxes and payroll expenses. Rental operating expenses in the All Other category increased by $833,000 primarily due to a $1.3 million increase in real estate tax expense at properties purchased after or during the three months ended June 30, 2014 offset by a $358,000 reduction in real estate taxes on disposed properties.

Management fees increased by $881,000 for the three months ended June 30, 2015 primarily due to the $683,000 increase in the asset management fee paid to the Advisor due to recent acquisitions. The asset management fee is based on the higher of the cost or appraised value of real estate investments.

During the three months ended June 30, 2015, loss on the disposal of assets increased by $1.4 million due to the replacement of appliances at our rental properties in conjunction with unit upgrades.

In May 2015, we agreed to receive $130,000 less than the book value for one of our loans held for investment. As such, we recorded a provision for loan loss during the three months ended June 30, 2015 related to this payoff. There were no such charges during the three months ended June 30, 2014.

Depreciation and amortization is comprised of the depreciation on our rental properties and amortization of intangible assets related to in-place leases which are amortized over a period of approximately six to eight months after acquisition. The differences in depreciation and amortization during the three months ended June 30, 2015, as compared to the three months ended June 30, 2014, were as follows:

	Properties owned both periods			All Other		Total
Depreciation	$	2,176		$	987	$	3,163
Amortization of intangibles	(5,150		)	1,093		(4,057		)
	$	(2,974	)	$	2,080	$	(894	)

On June 30, 2015, we sold the One Hundred Chevy Chase Apartments, located in Lexington, Kentucky for $13.5 million and recognized a $4.4 million gain on the disposition. We sold the Campus Club Apartments on June 16, 2014 for $10.5 million and recognized a gain of approximately $2.6 million on the disposition.

The $1.9 million increase in interest expense is due to borrowings under 11 additional mortgage loans into which we entered subsequent to June 30, 2014.

37

Six Months EndedJune 30, 2015 Compared to the Six Months EndedJune 30, 2014:

The following table sets forth the results of our operations (in thousands):

	Six Months Ended
	June 30,
	2015			2014
Revenues:
Rental income	$	55,821		$	45,579
Interest and dividend income	325			221
Total revenues	56,146			45,800
Expenses:
Rental operating	29,473			24,782
Acquisition costs	5,809			6,535
Management fees	7,180			4,947
General and administrative	7,837			6,297
Loss on disposal of assets	2,481			1,648
Provision for loan loss	130			—
Depreciation and amortization expense	22,356			24,899
Total expenses	75,266			69,108
Loss before other expenses	(19,120		)	(23,308		)
Other (expense) income:
Net gains on dispositions	33,551			2,541
Interest expense	(10,275		)	(5,896		)
Insurance proceeds in excess of cost basis	407			—
Income (loss) from continuing operations	4,563			(26,663		)
Discontinued operations:
Income from discontinued operations	—			2
Net income (loss)	4,563			(26,661		)
Net loss attributable to noncontrolling interest	181			1,410
Net income (loss) attributable to stockholders	$	4,744		$	(25,251	)

38

The following table presents the results of operations separated into two categories: the results of operations of the 18 properties that we owned for the entirety of both periods presented and all other properties (including company level expenses to aid in comparability) for the six months ended June 30, 2015 and 2014 (in thousands):

	For the six months ended									For the six months ended
	June 30, 2015									June 30, 2014
	Properties owned both periods			All other			Total			Properties owned both periods			All other			Total
Revenues:
Rental income	$	25,849		$	29,972		$	55,821		$	24,134		$	21,445		$	45,579
Interest income	1			324			325			4			217			221
Total revenues	25,850			30,296			56,146			24,138			21,662			45,800
Expenses:
Rental operating	14,759			14,714			29,473			14,277			10,505			24,782
Acquisition costs	—			5,809			5,809			28			6,507			6,535
Management fees	1,154			6,026			7,180			1,046			3,901			4,947
General and administrative	1,820			6,017			7,837			2,117			4,180			6,297
Loss on disposal of assets	437			2,044			2,481			1,604			44			1,648
Provision for loan loss	—			130			130			—			—			—
Depreciation and amortization expense	9,837			12,519			22,356			12,732			12,167			24,899
Total expenses	28,007			47,259			75,266			31,804			37,304			69,108
Loss before other expenses	(2,157		)	(16,963		)	(19,120		)	(7,666		)	(15,642		)	(23,308		)
Other (expense) income:
Net gains on dispositions	4,386			29,165			33,551			—			2,541			2,541
Interest expense	(2,901		)	(7,374		)	(10,275		)	(2,586		)	(3,310		)	(5,896		)
Insurance proceeds in excess of cost	—			407			407			—			—			—
(Loss) income from continuing operations	(672		)	5,235			4,563			(10,252		)	(16,411		)	(26,663		)
Income from discontinued operations, net	—			—			—			—			2			2
Net (loss) income	(672		)	5,235			4,563			(10,252		)	(16,409		)	(26,661		)
Net loss attributable to noncontrolling interests	181			—			181			1,410			—			1,410
Net (loss) income attributable to stockholders	$	(491	)	$	5,235		$	4,744		$	(8,842	)	$	(16,409	)	$	(25,251	)

39

Revenues: The $1.7 million increase in rental revenue for the 18 properties we owned during both the six months ended June 30, 2015 and the six months ended June 30, 2014 reflects implementation of our investment strategy to increase monthly rental income after renovating and stabilizing operations (including One Hundred Chevy Chase, which was sold on June 30, 2015) was primarily comprised of:

Multifamily Community Name	Rental Increase (in thousands)		Increase In Effective Monthly Revenue Per Unit (in dollars)
100 Chevy Chase	$	354	$	45
Williamsburg	258		$	51
The Westside Apartments	246		$	133
Ivy at Clear Creek	232		$	98
Retreat at Rocky Ridge	209		$	99
Skyview Apartment Homes	189		$	115
All other, net	227
	$	1,715

The $8.5 million change in rental revenue in the All Other category is comprised of a $15.2 million increase in revenue on the 20 properties purchased from January 2014 through June 2015, offset by a decrease of $6.6 million of revenue from properties sold during the same periods.

Expenses: Our rental operating expenses for the 18 properties we owned during both the six months ended June 30, 2015 and the six months ended June 30, 2014 increased by $482,000 comprised primarily of insurance costs, payroll and real estate taxes at these properties. Rental operating expenses for the All Other category increased by $4.2 million primarily due to a $2.1 million increase in real estate taxes, $1.0 million increase in payroll-related costs and $309,000 in utility costs.

Acquisition fees decreased by $726,000 for the six months ended June 30, 2015 as compared to the six months ended June 30, 2014 primarily due to the Paladin acquisition in 2014.

Management fees increased by $2.2 million primarily related to the $1.7 million increase in the asset management fee paid to the Advisor due to the $423.0 million increase in the property base on which the fee is calculated due to acquisitions during the periods.

General and administrative expenses increased by $1.5 million comprised of a $874,000 increase in payroll-related expenses due to our increased assets managed by our Advisor and $513,000 of franchise taxes related to the gains on sales of properties.

In May 2015, we agreed to receive $130,000 less than the book value of one of our loans held for investment. As such, we recorded a provision for loan loss of during the six months ended June 30, 2015 related to this payoff. There were no such charges during the six months ended June 30, 2014.

During the six months ended June 30, 2015, loss on the disposal of assets increased by $833,000 due to the replacement of appliances at our rental properties in conjunction with unit upgrades.     

Depreciation and amortization is comprised of the depreciation on our rental properties and amortization of intangible assets related to in-place leases which are amortized over a period of approximately six to eight months after acquisition. The differences in depreciation and amortization during the six months ended June 30, 2015, as compared to the six months ended June 30, 2014, were as follows:

	Properties owned both periods		All Other		Total
Depreciation	1,885		3,196		5,081
Amortization of intangibles	(4,780	)	(2,844	)	(7,624	)
	(2,895	)	352		(2,543	)

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The $31.0 million increase in net gains on dispositions included in other (expense) income for the six months ended June 30, 2015 as compared to the six months ended June 30, 2014 reflects the sale of five properties during the period:

▪ Alcove Apartments - Sold on January 26, 2015 for $11.1 million and we recognized a gain of approximately $3.8 million on the disposition.

▪ 107th Avenue Apartments - Sold on January 29, 2015 for $250,000 and we recognized a gain of approximately $50,000 on the disposition.

▪ Redford Apartments - Sold on February 27, 2015 for $33.0 million and we recognized a gain of approximately $15.3 million on the disposition.

▪ Cityside Apartments - Sold on March 2, 2015 for $24.5 million and we recognized a gain of approximately $10.0 million on the disposition.

▪ One Hundred Chevy Chase Apartments - Sold on June 30, 2015 for $13.5 million and we recognized a gain of approximately $4.4 million on the disposition.

We sold the Campus Club Apartments on June 16, 2014 for $10.5 million and we recognized a gain of approximately $2.6 million on the disposition.

Interest expense increased by $4.1 million as a result of the 21 additional mortgages either entered into or assumed during or after the six months ended June 30, 2014.

Liquidity and Capital Resources

We have derived the capital required to purchase real estate investments and conduct our operations from the proceeds of our private and public offerings, secured or unsecured financings from banks, proceeds from the sale of real estate, and cash flows generated by our real estate and real estate-related investments.

We have allocated a portion of the funds we raised in our initial public offering to preserve capital for our investors by supporting the maintenance and viability of the properties we have acquired and those properties that we may acquire in the future.  If these allocated amounts 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 upon acceptable terms when we need them.

Capital Expenditures.

We deployed a total of $17.5 million during the six months ended June 30, 2015 for capital expenditures. The properties in which we deployed the most capital during the six months June 30, 2015 ended are listed separately and the capital expenditures made on all other properties are aggregated in "All other properties" below (in thousands):

	Capital deployed during the six months ended		Remaining capital budgeted
Property	June 30, 2015
The Estates at Johns Creek	$	2,354	$	4,293
Maxwell Townhomes	1,856		$	—
Meridian Pointe	1,312		$	1,695
Aston at Cinco Ranch	1,292		$	2,625
Calloway at Las Colinas	1,252		$	7,816
All other properties	9,399		52,827
	$	17,465

Initial Public Offering

The primary portion of our initial public offering closed on December 13, 2013.  On December 26, 2013, the unsold primary offering shares were deregistered and, on December 30, 2013, the registration of the shares issuable pursuant to the distribution reinvestment plan was continued pursuant to a Registration Statement on Form S-3.

We continue to offer up to 7.5 million shares of common stock pursuant to our distribution reinvestment plan under which our stockholders may elect to have distributions reinvested in additional shares at $9.50 per share, through June 4, 2015 and at $10.59 per share for periods thereafter. 

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Gross offering proceeds

As of June 30, 2015,shares of our $0.01 par value common stock have been issued as follows (dollars in thousands):

	Shares Issued		Gross Proceeds
Shares issued through private offering	1,263,727		$	12,582
Shares issued through primary public offering (1)	62,485,461		622,077
Shares issued through stock distributions	2,132,266		—
Shares issued through distribution reinvestment plan	5,064,974		48,366
Shares issued in conjunction with the Advisor's initial investment, net of 4,500 share conversion	15,500		155
Total	70,961,928		$	683,180
Shares redeemed	(414,918	)
Total shares outstanding at June 30, 2015	70,547,010

(1)    Includes 276,056 shares issued to the Advisor.

Credit Facilities

The following is a summary of our credit facilities:

											Weighted Average Interest Rate for the
	Balance Outstanding at		Current Availability at		Balance Outstanding at		Maturity Date	Interest Rate Basis	Current Interest Rate		Three Months Ended June 30, 2015				Six Months Ended June 30, 2015
Lender	June 30, 2015				December 31, 2014						2015		2014		2015		2014
Bank of America	$	20,894	$	6,732	$	10,086	5/23/2017	LIBOR plus 3%	3.19	%	3.19	%	3.15	%	3.21	%	3.15	%
US Bank	23,000		—		23,000		12/27/2017	LIBOR plus 1.95%	2.14	%	2.14	%	2.14	%	2.13	%	2.14	%
PNC Bank	12,500		—		12,500		12/20/2018	LIBOR plus 2%	2.19	%	2.18	%	2.15	%	2.18	%	2.16	%
	$	56,394	$	6,732	$	45,586

Draws under the Bank of America Credit Facility are secured by certain of our properties with an aggregate value of $55.5 million and are guaranteed by us. We were in compliance with all covenants under this facility as of June 30, 2015.

Draws under the Jefferson Point Credit Facility are secured by the assets of Tech Center Square Apartments (formerly known as Jefferson Point Apartments). We provided a repayment guarantee of all interest and scheduled monthly principal payments (excluding the final payment at maturity for the outstanding balance.) The Jefferson Point Credit Facility includes both a debt service coverage covenant and a tangible net worth covenant. In November 2014, we amended the Jefferson Point Credit Facility. In accordance with the amendment, the debt service coverage covenant is only required to be complied with as of December 31, 2015 and periods thereafter. We were in compliance with all covenants under this facility at June 30, 2015.

Draws under the Brentdale Credit Facility are secured by the assets of The Westside Apartments (formerly known as Brentdale Apartments). We provided a $6.5 million repayment guarantee. In June 2015, the Company amended the Brentdale Credit Facility to amend the property debt service coverage ratio. The covenant is waived for the three months ended June 30, 2015. We were in compliance with all other covenants under this facility as of June 30, 2015.

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Mortgage Debt

The following is a summary of our mortgage notes payable (in thousands, except percentages):

	Outstanding Borrowings		Fair Value Adjustment			Net Book Value		Net Book Value		Maturity Date	Annual Interest Rate
													Average Monthly Debt Service
Collateral	June 30, 2015							December 31, 2014
Vista Apartment Homes	$	15,751	$	—		$	15,751	$	15,900	1/1/2022	2.48%	(1)(5)	$	63
Cannery Lofts	8,190		—			8,190		8,190		9/1/2020	3.49%	(1)(3)	36
Deerfield	10,530		—			10,530		10,530		11/1/2020	4.66%	(2)(3)	53
Ivy at Clear Creek	8,503		—			8,503		8,574		11/1/2023	2.60%	(1)(4)	29
Trailpoint at the Woodlands	19,174		—			19,174		19,335		11/1/2023	2.60%	(1)(4)	66
Verona Apartment Homes	22,623		—			22,623		22,843		1/1/2019	3.60%	(2)(5)	106
Skyview Apartment Homes	18,268		—			18,268		18,446		1/1/2019	3.60%	(2)(5)	85
The Nesbit Palisades	20,298		—			20,298		20,298		7/1/2024	2.14%	(1)(3)	53
Maxwell Townhomes	13,970		—			13,970		14,089		1/1/2022	4.32%	(2)(5)	71
Champion Farms	16,350		186			16,536		16,634		7/1/2016	6.14%	(2)(3)	85
Fieldstone	15,568		—			15,568		15,804		6/26/2016	2.59%	(1)(4)	73
Pinehurst	4,162		14			4,176		4,239		1/1/2016	5.58%	(2)(5)	28
Pheasant Run	6,250		128			6,378		6,407		10/1/2017	5.95%	(2)(3)	32
Retreat of Shawnee	13,185		204			13,389		13,522		2/1/2018	5.58%	(2)(5)	78
Conifer Crossing	27,351		50			27,401		27,762		9/1/2015	5.96%	(2)(4)(6)	171
Coursey Place	27,760		135			27,895		28,117		8/1/2021	5.07%	(2)(5)	154
Pines of York	15,396		(396		)	15,000		15,097		12/1/2021	4.46%	(2)(5)	80
The Estates at Johns Creek	50,000		—			50,000		50,000		7/1/2020	3.38%	(2)(3)	204
Chisholm Place	11,587		—			11,587		11,587		6/1/2024	2.58%	(1)(3)	36
Perimeter 5550	14,074		—			14,074		14,211		7/1/2019	3.42%	(2)(5)	64
Perimeter Circle	17,833		—			17,833		18,007		7/1/2019	3.42%	(2)(5)	81
Aston at Cinco Ranch	23,968		—			23,968		24,162		10/1/2021	4.34%	(2)(5)	120
Sunset Ridge 1	20,325		367			20,692		20,930		10/1/2020	4.58%	(2)(5)	113
Sunset Ridge 2	3,028		50			3,078		3,109		10/1/2020	4.54%	(2)(5)	16
Calloway at Las Colinas	36,058		—			36,058		36,375		12/1/2021	3.87%	(2)(5)	171
Woodmoor	12,803		—			12,803		—		8/1/2019	3.64%	(2)(5)	59
Springs at Gilbert Meadows	26,280		—			26,280		—		4/1/2025	2.07%	(1)(3)	80
Yorba Linda	67,500		—			67,500		—		6/1/2020	1.94%	(1)(3)	227
Villages at Bonita Glen	27,323		2,433			29,756		—		10/1/2023	5.33%	(2)(3)	151
	$	574,108	$	3,171		$	577,279	$	444,168

(1) Variable rate based on one-month LIBOR of 0.1865% (as of June 30, 2015).

(2) Fixed rate.

(3) Monthly interest-only payment currently required.

(4) Monthly fixed principal plus interest payment required.

(5) Fixed monthly principal and interest payment required.

At June 30, 2015, the weighted average interest rate of all our outstanding indebtedness was 3.59% .

Based on current lending market conditions, we expect that the debt financing we incur, on a total portfolio basis, will not exceed 50% to 55% of the cost of our real estate investments (before deducting depreciation or other non-cash reserves) plus the value of our other assets (53% as of June 30, 2015). We may also increase the amount of debt financing we use with respect to an investment over the amount originally incurred if the value of the investment increases subsequent to our acquisition and if credit market conditions permit us to do so. Our charter limits us from incurring debt such that our total liabilities may not exceed 75% of the cost (before deducting depreciation or other non-cash reserves) of our tangible assets, although we may exceed this limit under certain circumstances. We expect that our primary liquidity source for acquisitions and long-term funding will include proceeds from dispositions and, to the extent we co-invest with other entities, capital from any future joint venture partners. We may also pursue a number of potential other funding sources, including mortgage loans, portfolio level credit lines and government financing.

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Operating Costs

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 and operating 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. We describe these payments in more detail in Note 14 of the notes to our consolidated financial statements.

Under our charter, we are required to limit our total operating expenses to the greater of 2% of our average invested assets or 25% of our net income for the four most recently completed fiscal quarters, as these terms are defined in our charter, unless the conflicts committee of our board of directors has determined that such excess expenses were justified based on unusual and non-recurring factors. Operating expense reimbursements for the four fiscal quarters ended June 30, 2015 did not exceed the charter imposed limitation.

Distributions

For the six months ended June 30, 2015, we paid aggregate distributions of $20.9 million, including $6.5 million of distributions paid in cash and $14.4 million of distributions reinvested in shares of common stock through our distribution reinvestment plan, as follows (in thousands, except per share data):

Record Date	Per Common Share		Distribution Date	Distributions Invested in Shares of Common Stock		Net Cash Distribution		Total Aggregate Distribution
January 29, 2015	$	0.05	January 30, 2015	$	2,391	$	1,070	$	3,461
February 26, 2015	0.05		February 27, 2015	2,392		1,081		3,473
March 30, 2015	0.05		March 31, 2015	2,400		1,080		3,480
April 29, 2015	0.05		April 30, 2015	2,408		1,084		3,492
May 28, 2015	0.05		May 29, 2015	2,418		1,088		3,506
June 29, 2015	0.05		June 30, 2015	2,423		1,093		3,516
				$	14,432	$	6,496	$	20,928

Distributions declared, distributions paid and cash flows used in operating activities were as follows for the three and six months ended June 30, 2015 (dollars in thousands):     

	Distributions Paid												Distributions Declared				Sources of Distributions Paid
2015	Cash		Distributions Reinvested (DRIP)		Total		Cash Provided By (Used In) Operating Activities- QTD			Cash Provided By (Used In) Operating Activities- YTD			Total		Per Share		Amount Paid from Operating Activities/Percent of Total Distributions Paid	Amount Paid from Debt Financing/Percent of Total Distributions Paid
First Quarter	$	3,231	$	7,183	$	10,414	$	(2,195	)	$	(2,195	)	$	20,928	$0.05		$- / -%	$10,414/100%
Second Quarter	$	3,265	$	7,249	$	10,514	$	(3,486	)	$	(5,681	)	$	—	$	—	$- / -%	$10,514/100%

Our net income attributable to common stockholders' for the six months ended June 30, 2015 was $4.7 million and net cash used in operating activities of continuing operations was $5.7 million. Our cumulative cash distributions and net loss from inception through June 30, 2015 were $70.4 million and $78.9 million, respectively. We have funded our cumulative distributions, which includes net cash distributions and distributions reinvested by stockholders, with cash flows from operating activities, proceeds from disposal of real estate and proceeds from debt financing. To the extent that we pay distributions from sources other than our cash flow from operating activities or gains from asset sales, 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.

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Funds from Operations, Modified Funds from Operations and Adjusted Funds from Operations

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.  In addition, FFO will be affected by the types of investments in our targeted portfolio which will consist of, but are not limited to: (i) multifamily rental properties purchased as non-performing or distressed loans or as real estate owned by financial institutions and (ii) multifamily rental properties to which we can add value with a capital infusion (referred to as “value add properties”). We are not limited in the types of real estate and real estate-related assets in which we may invest or whether we may invest in equity or debt secured by real estate assets.

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:

(1) acquisition fees and expenses;

(2) straight-line rent amounts, both income and expense;

(3) amortization of above- or below-market intangible lease assets and liabilities;

(4) amortization of discounts and premiums on debt investments;

(5) impairment charges;

(6) gains or losses from the early extinguishment of debt;

(7) gains or losses on the extinguishment or sales of hedges, foreign exchange, securities and other derivatives holdings except where the trading of such instruments is a fundamental attribute of our operations;

(8) gains or losses related to fair-value adjustments for derivatives not qualifying for hedge accounting, including interest rate and foreign exchange derivatives;

(9) gains or losses related to consolidation from, or deconsolidation to, equity accounting;

(10) gains or losses related to contingent purchase price adjustments; and

(11) adjustments related to the above items for unconsolidated entities in the application of equity accounting.

We believe that MFFO is helpful in assisting management assess the sustainability of operating performancein future periods and, in particular, after our acquisition stage is complete, primarily because it excludes acquisition expenses that affect property operations only in the period in which the property is acquired.  Although MFFO includes other adjustments, the exclusion of acquisition expenses is the most significant adjustment to us at the present time, as we continue to acquire properties.  Thus, MFFO provides helpful information relevant to evaluating our operating performance in periods in which there is no acquisition activity.    

45

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:

• Acquisition expenses. In evaluating investments in real estate, including both business combinations and investments accounted for under the equity method of accounting, management’s investment models and analysis differentiate costs to acquire the investment from the operations derived from the investment. Prior to 2009, acquisition costs for both of these types of investments were capitalized under GAAP; however, beginning in 2009, acquisition costs related to business combinations are expensed.  Both of these acquisition costs will continue to be funded from the proceeds of debt financing and not from operations.  We believe by excluding expensed acquisition costs, MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties.  Acquisition expenses include those paid to our Advisor or third parties.

• Adjustments for straight-line rents and amortization of discounts and premiums on debt investments.  In the proper application of GAAP, rental receipts and discounts and premiums on debt investments are allocated to periods using various systematic methodologies. This application will result in income recognition that could be significantly different than underlying contract terms. By adjusting for these items, MFFO provides useful supplemental information on the realized economic impact of lease terms and debt investments and aligns results with management’s analysis of operating performance.

• Adjustments for amortization of above or below market intangible lease assets.  Similar to depreciation and amortization of other real estate related assets that are excluded from FFO, GAAP implicitly assumes that the value of intangibles diminishes predictably over time and that these charges be recognized currently in revenue.  Since real estate values and market lease rates in the aggregate have historically risen or fallen with market conditions, management believes that by excluding these charges, MFFO provides useful supplemental information on the performance of the real estate.

• Impairment charges, gains or losses related to fair-value adjustments for derivatives not qualifying for hedge accounting and gains or losses related to contingent purchase price adjustments.  Each of these items relates to a fair value adjustment, which is based on the impact of current market fluctuations and underlying assessments of general market conditions and specific performance of the holding which may not be directly attributable to current operating performance.  As these gains or losses relate to underlying long-term assets and liabilities, management believes MFFO provides useful supplemental information by focusing on the changes in our core operating fundamentals rather than changes that may reflect anticipated gains or losses. In particular, because GAAP impairment charges are not allowed to be reversed if the underlying fair values improve or because the timing of impairment charges may lag the onset of certain operating consequences, we believe MFFO provides useful supplemental information related to current consequences, benefits and sustainability related to rental rate, occupancy and other core operating fundamentals.

• Adjustment for gains or losses related to early extinguishment of hedges, debt, consolidation or deconsolidation and contingent purchase price.  Similar to extraordinary items excluded from FFO, these adjustments are not related to continuing operations.  By excluding these items, management believes that MFFO provides supplemental information related to sustainable operations that will be more comparable between other reporting periods and to other real estate operators.

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 acquisition stage is 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.  However, investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our acquisition stage is completed, as it excludes acquisition costs that have a negative effect on our operating performance and the reported book value of our common stock and stockholders’ equity during the periods in which properties are acquired.

46

As an opportunity REIT, a core element of our investment strategy and operations is the acquisition of distressed and value-add properties and the rehabilitation and renovation of such properties in an effort to create additional value in such properties.  As part of our operations, we intend to realize gains from such value-add efforts through the strategic disposition of such properties after we have added value through the execution of our business plan.  As we do not intend to hold any of our properties for a specific amount of time, we intend to take advantage of opportunities to realize gains from our value-add efforts on a regular basis during the course of our operations as such opportunities become available, in all events subject to the rules regarding "prohibited transactions" of real estate investment trusts of the Internal Revenue Code.  Therefore, we also use adjusted funds from operations, or AFFO, in addition to FFO and MFFO when evaluating our operations.  We calculate AFFO by adding/subtracting gains/losses realized on sales of our properties from MFFO.  We believe that AFFO presents useful information that assists investors and analysts in the assessment of our operating performance as it is reflective of the impact that regular, strategic property dispositions have on our continuing operations.

Core to our business plan is the acquisition of distressed assets at deep discounts.  These assets are operationally distressed at the time of purchase. Such assets often require substantial investments of capital and increased operating costs after acquisition to convert these assets into stable, cash flowing properties.  These capital expenditures are central to our revitalization strategy and are critical to creating value and restoring assets to their optimal performance.  These planned expenditures are necessary primarily during the first 12 to 24 months after we take operating control of an asset and often result in negative, or reduced, net operating income, MFFO and AFFO during this turnaround stage. We believe that the presentation of the MFFO and AFFO attributed to our stabilized assets and the MFFO and AFFO attributed to our unstabilized assets allows investors to better understand the operating performance of our stabilized assets as compared to those assets for which we have yet to complete the stabilization process. Stabilized assets are defined as assets that produced a positive MFFO during the three and six months ended June 30, 2015 and 2014, respectively.

Stabilized assets during the three and six months ended June 30, 2015 included: 107th Avenue, The Redford, Cityside Crossing (all three of which were sold in January and February 2015), Vista Apartment Homes, Cannery Lofts, Williamsburg, Deerfield, Mosaic, The Reserve at Mt. Moriah, The Alcove, Ivy at Clear Creek, Retreat at Rocky Ridge, Trailpoint at the Woodlands, Affinity at Winter Park, The Westside Apartments, Verona Apartment Homes, Skyview Apartment Homes, The Nesbit Palisades, Meridian Pointe, Chisholm Place, Aston at Cinco Ranch, Pines of York, Evergreen at Coursey Place, Stone Ridge, Conifer Place, Retreat at Shawnee, Pheasant Run, Pinehurst, Champion Farms, Fieldstone, The Estates at Johns Creek, Perimeter 5550, Perimeter Circle, Aston at Cinco Ranch, Sunset Ridge, Calloway at Las Colinas, The Woodmoor, and Springs at Gilbert. Unstabilized assets during the three and six months ended June 30, 2015 included: One Hundred Chevy Chase Apartments (which was sold in June 2015), Tech Center Square, Maxwell Townhomes, Yorba Linda, and Bonita Glen. Non-property assets and corporate overhead, which consists primarily of general and administrative expenses at the company level, are allocated between stabilized and unstabilized assets based on the percentage of the total purchase price of all of our assets that the aggregate purchase prices of our stabilized and unstabilized assets respectively represent.

Stabilized assets during the three and six months ended June 30, 2014 included: 107th Avenue, Arcadia (which was sold in September 2014), Vista Apartment Homes, Campus Club (which was sold in June 2014), Cannery Lofts, Williamsburg, The Redford, Cityside Crossing, Deerfield, The Reserve at Mt. Moriah, The Alcove, Ivy at Clear Creek, Retreat at Rocky Ridge, Verona Apartment Homes, Trailpoint at the Woodlands, Affinity at Winter Park, The Westside, Skyview Apartment Homes, Nesbit Palisades, The Estates at Johns Creek, Pines of York, Evergreen at Coursey Place, Stone Ridge, Conifer Place, Hilltop Village, Retreat at Shawnee, Pheasant Run, Pinehurst, Fieldstone, Champion, Perimeter Circle and Perimeter 5550. Unstabilized assets during the three and six months ended June 30, 2014 consisted of Mosaic, One Hundred Chevy Chase Apartments, Tech Center Square, Maxwell Townhomes, Meridian Pointe, Chisholm Place and Aston at Cinco Ranch. Non-property assets and corporate overhead, which consists primarily of general and administrative expenses at the company level, are allocated between stabilized and unstabilized assets based on the percentage of the total purchase price of all our assets that the aggregate purchase prices of stabilized and unstabilized assets respectively represent.

Neither FFO, MFFO nor AFFO should be considered as an alternative to net income (loss), nor as 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 may continue to acquire properties as part of our ongoing operations, acquisition costs and other adjustments that are increases to MFFO and AFFO are, and may continue to be, a significant use of cash.  Accordingly, FFO, MFFO and AFFO should be reviewed in connection with other GAAP measurements.  Our FFO, MFFO and AFFO as presented may not be comparable to amounts calculated by other REITs.

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The following section presents our calculation of FFO, MFFO and AFFO and provides additional information related to our operations (in thousands, except per share amounts).  Amounts reported in the table below include adjustments attributable to noncontrolling interests. The three months ended June 30, 2014 was remeasured, as such amounts reflect the adjustments that would have been included as originally issued had the final appraisals for the Paladin properties been received and recorded during the three months ended March 31, 2014.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
				(Remeasured)
Net (loss) income attributable to stockholders – GAAP	$	(12,284	)	$	(10,640	)	$	4,744		$	(25,251	)
Net gains on dispositions	(4,376		)	(2,541		)	(33,551		)	(2,541		)
Depreciation expense	10,118			7,167			18,753			13,415
FFO	(6,542		)	(6,014		)	(10,054		)	(14,377		)
Adjustments for straight-line rents	(219		)	(216		)	(348		)	(370		)
Amortization of intangible lease assets	1,504			5,067			2,972			9,606
Debt premium amortization	(128		)	44			(253		)	(172		)
Acquisition costs	4,108			4,035			5,809			6,535
MFFO	$	(1,277	)	$	2,916		$	(1,874	)	$	1,222
Net gains on dispositions	4,376			2,541			33,551			2,541
AFFO	$	3,099		$	5,457		$	31,677		$	3,763
Basic and diluted (loss) income per common share - GAAP	$	(0.18	)	$	(0.16	)	$	0.07		$	(0.37	)
FFO per share	$	(0.09	)	$	(0.09	)	$	(0.14	)	$	(0.21	)
MFFO per share	$	(0.02	)	$	0.04		$	(0.03	)	$	0.02
AFFO per share	$	0.04		$	0.08		$	0.45		$	0.06
Weighted average shares outstanding (1)	70,107			67,749			69,798			67,558

(1) Excludes any dilution from the potential conversion of convertible stock, as the actual number of shares of common stock, if any, that will be issuable upon conversion of convertible stock is indeterminable at June 30, 2015.

48

	Three Months Ended June 30, 2015									Three Months Ended June 30, 2014
	MFFO and AFFO Attributed to Stabilized Assets			MFFO and AFFO Attributed to Unstabilized Assets			Total			MFFO and AFFO Attributed to Stabilized Assets			MFFO and AFFO Attributed to Unstabilized Assets			Total
										(Remeasured)
Net (loss) income attributable to stockholders- GAAP	$	(14,080	)	$	1,796		$	(12,284	)	$	(8,423	)	$	(2,217	)	$	(10,640	)
Net gains on dispositions	—			(4,376		)	(4,376		)	(2,541		)	—			(2,541		)
Depreciation expense	9,158			960			10,118			6,174			993			7,167
FFO	(4,922		)	(1,620		)	(6,542		)	(4,790		)	(1,224		)	(6,014		)
Adjustments for straight-line rents	(204		)	(15		)	(219		)	(214		)	(2		)	(216		)
Amortization of intangible lease assets	1,153			351			1,504			4,147			920			5,067
Debt premium amortization	(115		)	(13		)	(128		)	(9		)	53			44
Acquisition costs	3,694			414			4,108			3,832			203			4,035
MFFO	(394		)	(883		)	(1,277		)	2,966			(50		)	2,916
Net gains on dispositions	—			4,376			4,376			2,541			—			2,541
AFFO	$	(394	)	$	3,493		$	3,099		$	5,507		$	(50	)	$	5,457

	Six Months Ended June 30, 2015									Six Months Ended June 30, 2014
	MFFO and AFFO Attributed to Stabilized Assets			MFFO and AFFO Attributed to Unstabilized Assets			Total			MFFO and AFFO Attributed to Stabilized Assets			MFFO and AFFO Attributed to Unstabilized Assets			Total
Net income (loss) attributable to stockholders- GAAP	$	5,168		$	(424	)	$	4,744		$	(16,247	)	$	(9,004	)	$	(25,251	)
Net gain on dispositions	(29,175		)	(4,376		)	(33,551		)	(2,541		)	—			(2,541		)
Depreciation expense	16,998			1,755			18,753			11,365			2,050			13,415
FFO	(7,009		)	(3,045		)	(10,054		)	(7,423		)	(6,954		)	(14,377		)
Adjustments for straight-line rents	(304		)	(44		)	(348		)	(368		)	(2		)	(370		)
Debt premium amortization	(240		)	(13		)	(253		)	(172		)	—			(172		)
Amortization of intangible lease assets	2,494			478			2,972			8,018			1,588			9,606
Acquisition costs	5,123			686			5,809			4,036			2,499			6,535
MFFO	64			(1,938		)	(1,874		)	4,091			(2,869		)	1,222
Net gain on dispositions	29,175			4,376			33,551			2,541			—			2,541
AFFO	$	29,239		$	2,438		$	31,677		$	6,632		$	(2,869	)	$	3,763

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP.  The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and cost and expenses, and related disclosure of contingent assets and liabilities.  On an on-going basis, we evaluate our estimates, including those related to certain accrued liabilities.  We base our estimates on historical experience and on various other assumptions that we believe reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

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For a discussion of our critical accounting policies and estimates, see the discussion in our Annual Report on Form 10-K for the year ended December 31, 2014 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies.”

Off-Balance Sheet Arrangements

As of June 30, 2015 and December 31, 2014, we were obligated to fund up to an additional $1.5 million for the Spring Hill preferred equity investment in increments of $150,000 upon request as long as no triggering event has occurred. We did not have any other off-balance sheet arrangements or obligations.

Subsequent Events

On July 20, 2015, we entered into an agreement to sell our interest in The Reserve at Mount Moriah, located in Memphis, Tennessee, for $5.5 million with an expected closing date in the third quarter of 2015. We expect to recognize a gain on the sale in the three months ended September 30, 2015.

We have evaluated subsequent events and determined that no events have occurred, other than those disclosed above, which would require an adjustment to or additional disclosure in the consolidated financial statements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Omitted as permitted under rules applicable to smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the period covered by this report, management, including our principal executive officer and principal financial officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon, and as of the date of, that evaluation, our principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this quarterly report to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms, including providing a reasonable level of assurance that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the quarter ended June 30, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II.

ITEM 1A. RISK FACTORS

In addition to our risk factors previously disclosed in Part I, Item 1A of our Annual Report on 10-K for the year ended December 31, 2014, the following risk factor was identified due to recent acquisitions:    

Because of the concentration of a significant portion of our assets in three geographic locations, any adverse economic, real estate or business conditions in these areas could affect our operating results and our ability to make distributions to our stockholders.

At June 30, 2015, our real estate investments in California, Texas and Georgia represented 17%, 25% and 18% of the net book value of our rental properties, respectively. As a result, the geographic concentration of our portfolio makes it particularly susceptible to adverse economic developments in the California, Texas and Georgia real estate markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for multifamily rental properties resulting from the local business climate, could adversely affect our operating results and our ability to make distributions to stockholders.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sale of Equity Securities

All securities sold by us during the six months ended June 30, 2015 were sold in an offering registered under the Securities Act of 1933, as amended (the "Securities Act").

Redemption of Securities

During the three months ended June 30, 2015, we redeemed shares of our common stock as follows:

Period	Total Number of Shares Redeemed (1)	Average Price Paid per Share	Total 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
April 2015	2,020	$8.91	2,020	(3)
May 2015	—	—	—	(3)
June 2015	39,892	$8.60	39,892	(3)
	41,912

(1) All redemptions of equity securities in the three months endedJune 30, 2015 were made pursuant to our share redemption program.

(2) The share redemption program commenced on June 16, 2010 and was subsequently amended on September 29, 2011.

(3) We currently limit the dollar value and number of shares that may be redeemed under the program as described below.

All redemption requests tendered were honored during the three months ended June 30, 2015.

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

Our board of directors, in its sole discretion, may suspend, terminate or amend our share redemption program without stockholder approval upon 30 days' notice if it determines that such suspension, termination or amendment is in our best interest. Our board may also reduce the number of shares purchased under the share redemption program if it determines the funds otherwise available to fund our share redemption program are needed for other purposes. These limitations apply to all redemptions, including redemptions sought upon the stockholder's death, qualifying disability or confinement to a long-term care facility.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

(a) There have been no defaults with respect to any of our indebtedness.

(b) Not applicable.

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ITEM 6. EXHIBITS

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated July 18, 2013, by and among Paladin Realty Income Properties, Inc., Paladin Realty Income Properties, L.P., Resource Real Estate Opportunity OP, LP, and RRE Charlemagne Holdings, LLC (incorporated by reference to the Company’s Post-Effective Amendment No. 13 to the Registration Statement on Form S-11 (No. 333-163411) filed September 16, 2013)
2.2	Second Amendment to Agreement and Plan of Merger, dated September 13, 2013, by and among Paladin Realty Income Properties, Inc., Paladin Realty Income Properties, L.P., Resource Real Estate Opportunity OP, LP, and RRE Charlemagne Holdings, LLC (incorporated by reference to the Company’s Post-Effective Amendment No. 13 to the Registration Statement on Form S-11 (No. 333-163411) filed September 16, 2013)
2.3	Third Amendment to Agreement and Plan of Merger, dated December 16, 2013, by and among Paladin Realty Income Properties, Inc., Paladin Realty Income Properties, L.P., Resource Real Estate Opportunity OP, LP, and RRE Charlemagne Holdings, LLC (incorporated by reference to Post-Effective Amendment No. 15 to the Company's Registration Statement on Form S-11 (No. 333-160463) filed December 30, 2013)
3.1	Amended and Restated Articles of Incorporation (incorporated by reference to Pre-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed February 9, 2010)
3.2	Bylaws (incorporated by reference to Pre-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed February 9, 2010)
4.1	Form of Distribution Reinvestment Plan Enrollment Form, included as Appendix B to the prospectus (incorporated by reference to Post-Effective Amendment No. 15 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed December 30, 2013)
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 Pre-Effective Amendment No. 2 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed November 12, 2009)
4.3	Amended and Restated Distribution Reinvestment Plan, included as Appendix A to the prospectus (incorporated by reference to Post-Effective Amendment No. 15 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed December 30, 2013)
10.1	Purchase and Sale Contract And Joint Escrow Instruments between LMI Riverbend, LLC and Resource Real Estate Opportunity OP, LP dated April 28, 2015

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 the Company's Quarterly Report on Form 10-Q filed November 14, 2011)
101.1	Interactive Data Files

53

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.
August 13, 2015	By:	/s/ Alan F. Feldman
		ALAN F. FELDMAN
		Chief Executive Officer
		(Principal Executive Officer)
August 13, 2015	By:	/s/ Steven R. Saltzman
		STEVEN R. SALTZMAN
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

54

EX-10.1

EXHIBIT 10.1

PURCHASE AND SALE CONTRACT

AND JOINT ESCROW INSTRUCTIONS

between

LMI RIVERBEND, LLC

SELLER

and

RESOURCE REAL ESTATE OPPORTUNITY OP, LP

BUYER

ARCHSTONE YORBA LINDA

Yorba Linda, California

as of April 28, 2015

TABLE OF CONTENTS

ARTICLE 1. DESCRIPTION OF PROPERTY		1
1.1	Property	1
1.2	Marks Excluded	2
ARTICLE 2. SALE SUBJECT TO LEASES		3
ARTICLE 3. PURCHASE PRICE AND PAYMENT		3
3.1	Purchase Price	3
3.2	Escrow	3
3.3	Purchase Price adjustments	4
ARTICLE 4. CONVEYANCE OF TITLE		4
4.1	Title Policy	4
4.2	Title Objections	4
4.3	Post-Signing Objections	5
ARTICLE 5. CLOSING		5
5.1	Escrow Instructions	5
5.2	Closing Date	5
5.3	Seller Deliveries	6
5.4	Buyer Deliveries	7
ARTICLE 6. PROPERTY INSPECTION		8
6.1	Termination Right	8
6.2	Property Inspection	9
ARTICLE 7. CONDITIONS TO CLOSING		10
7.1	Buyer’s Conditions	10
ARTICLE 8. DEFAULT		11
8.1	Seller Default	11
8.2	Buyer Default	11
ARTICLE 9. DAMAGE OR DESTRUCTION; CONDEMNATION		11
9.1	Damage or Destruction	11
9.2	Condemnation	12
ARTICLE 10. “AS-IS” SALE		12
10.1	Disclaimers	12
10.2	Release	13
10.3	Negotiated Provision	14
ARTICLE 11. REPRESENTATIONS AND WARRANTIES		14
11.1	Representations and Warranties of Seller	14
11.2	Knowledge Standard	16
11.3	Limitations	16
11.4	Representations and Warranties Of Buyer	16
ARTICLE 12. OPERATIONS		17
12.1	Operational Covenants	17
12.2	Operating Contracts	17
ARTICLE 13. CLOSING ADJUSTMENTS AND COSTS		18
13.1	Pro-Rations	18
13.2	Closing Costs	19
13.3	Closing Statement	20

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ARTICLE 14. BROKER		20
14.1	Indemnity	20
14.2	Payment of Commission	20
ARTICLE 15. MISCELLANEOUS PROVISIONS		20
15.1	Recording	20
15.2	Notice	20
15.3	Captions	22
15.4	Successors and Assigns	22
15.5	Governing Law	22
15.6	Multiple Counterparts	22
15.7	Entire Agreement	22
15.8	Post‑Closing Obligations	22
15.9	Waiver of Jury Trial	23
15.10	Additional Offers	23
15.11	Like-Kind Exchange	23
15.12	Time of the Essence	23
ARTICLE 16. CONFIDENTIALITY		24
ARTICLE 17. DUTIES AND RESPONSIBILITIES OF ESCROW AGENT		24
17.1	Application of Deposit	24
17.2	Dispute	25
17.3	Liability; Miscellaneous	25
ARTICLE 18. PROHIBITION OF CONDOMINIUM CONVERSION.		26

EXHIBITS

Exhibit A    Description of Real Property

Exhibit B    Personal Property

Exhibit C    Leases and Rent Roll

Exhibit D    Form of Deed

Exhibit E    Form of Bill of Sale

Exhibit F    Form of Assignment and Assumption Agreement (re: Leases)

Exhibit G    Form of Assignment and Assumption Agreement (re: Contracts)

Exhibit H    Form of FIRPTA Affidavit

Exhibit I    Operating Contracts

Exhibit J    Litigation

Exhibit K    Form of Assignment and Assumption Agreement (re Declaration)

Exhibit L    Declaration Estoppel

ii

PURCHASE AND SALE CONTRACT

THIS PURCHASE AND SALE CONTRACT AND JOINT ESCROW INSTRUMENTS (the "Contract") is made as of April 28, 2015 between LMI RIVERBEND, LLC, a Delaware limited liability company ("Seller"), and RESOURCE REAL ESTATE OPPORTUNITY OP, LP, a Delaware limited partnership ("Buyer").

Seller owns certain land in Yorba Linda, Orange County, California, and the buildings and improvements thereon, comprising a multifamily residential housing complex consisting of 400 multifamily apartment units, and commonly known as the Archstone Yorba Linda.

Seller desires to sell and Buyer desires to purchase the Property (as hereinafter defined) on the terms and subject to the conditions set forth herein.

For the consideration hereinafter named, and for other good and valuable consideration, receipt of which is acknowledged hereby, the parties do hereby agree as follows:

ARTICLE 1. DESCRIPTION OF PROPERTY

1.1    Property

Seller agrees to sell and Buyer agrees to buy upon the terms and conditions hereinafter set forth, all of Seller’s right, title and interest in and to the following:

(i) Certain premises located in the City of Yorba Linda, County of Orange, State of California, commonly known as “Archstone Yorba Linda”, as more particularly described in Exhibit A attached hereto and incorporated herein by reference, together with all right, title and interest of Seller in and to (x) all rights, privileges, transferable easements, development rights, covenants, tenements, hereditaments and appurtenances thereto, including, without limitation, any water rights related to such premises, and any easements, rights of way or other interests in, on, or under any land, highway, alley, street, gap, gore or right of way abutting or adjoining such premises, and (y) any walls, sidewalks, or land lying in the bed of any street (opened or proposed) adjacent to or abutting or adjoining such premises (collectively, the "Real Property"), and

(ii) all buildings, structures and other improvements located thereon (the "Improvements", and, together with the Real Property, the "Premises"), and

(iii) all items of personal property owned by Seller and located on the Premises or used in connection with the ownership or operation of the Premises, described in Exhibit B attached hereto and incorporated herein by reference, including, without implied limitation, whether or not listed on Exhibit B, all furniture, fixtures, equipment, machines, apparatus, appliances, supplies and personal property of every nature and description and all replacements thereof (collectively, the “Personal Property”) but expressly excluding (a) items of personal property owned by Seller and used in connection with the Property as part of Seller’s integrated systems of ownership, management and/or operations of apartment projects, such as, by way of example and without limitation, the computer software for the key track system, computer and phone systems and software, corporate licenses, and management and financial reporting systems and software, (b) utility deposits, (c) non-refundable resident fees received by Seller, and (d) lump sum payments previously received under any contract or leases.

1

(iv) all leases, licenses and other occupancy agreements affecting the Premises, including leases entered into after the date of this Contract pursuant to the provisions of Article 12 hereof (hereinafter called the "Leases"), and

(v) only to the extent the same are in Seller’s possession or control and are assignable without payment, all intangible property owned by Seller and related to or used in connection with the ownership, use or operation of the Premises (collectively the “Intangible Property”), including, without limitation, (1) all local transferable telephone exchange and facsimile numbers but excluding all toll free numbers, (2) all plans and specifications, engineering plans and studies, floor plans, landscape plans and warranties and guaranties; (3) all licenses, permits, certificates of occupancy, approvals, dedications, subdivision maps and entitlements now or hereafter issued, approved or granted by governmental agencies having jurisdiction over the Premises or any portion thereof, together with all renewals and modifications thereof (collectively, the “Licenses and Permits”); (4) all social media accounts and the logo, photo, video and e-brochure files for the Premises but excluding any such matters which include or are related to the Marks (as hereinafter defined) or which are proprietary to Seller or its affiliates; and (5) the Operating Contracts (as hereinafter defined) other than the Terminated Contracts (as hereinafter defined).

All items referred to in clauses (i), (ii), (iii), (iv) and (v) are herein sometimes collectively referred to as the "Property".

1.2    Marks Excluded

In connection with the ownership, management and operation of the Property and other properties owned and/or managed by Seller, Seller has used and may continue to use the tradenames, trademarks and service marks “Archstone”, “AVA”, “Avalon”, “Avalon on”, Avalon at”, “Avalon by the”, “Avalon on the”, “Avalon at the”, “AvalonBay”, “Avalon Communities”, “a Avalon”, “D’Tails”, “eaves”, “eaves by Avalon”, fleur de lis, “Great Apartments. Great Service. Guaranteed”, “Leaders in Urban Living”, “Live Awesome”, “Live Up”, “Seal of Service”, “Time Well Spent” and “Where We Want, We Live” (collectively, the “Marks”). Notwithstanding anything herein express or implied to the contrary, Buyer acknowledges that it has no interest in and is not acquiring any right to the Marks and agrees and acknowledges that the Marks are trademarks and servicemarks owned by Seller and that the Marks are and will continue to be the sole property of Seller. Following the Closing, Buyer shall have no rights to use or display any of the Marks for any purpose whatsoever. As soon as possible following the Closing Buyer will remove any and all signs, materials, documents, inventory, amenities, supplies or other matter containing the Marks. If Buyer fails to remove any signs containing the Marks within thirty (30) days following the Closing, then Seller may enter upon the Property and cause such signage to be removed and Buyer will reimburse Seller for its costs in having the signage removed. Buyer agrees that it shall not challenge or contest in any way (i) Seller's registration or application for registration of the Marks with the U.S. Patent & Trademark Office, or with any other trademark office; (ii) the validity of the Marks; (iii) Seller's exclusive worldwide ownership of the Marks; or (iv) Seller's right to grant to others licenses to use the Marks. The provisions of this Section 1.2 shall survive the Closing and the delivery of the Deed.

2

ARTICLE 2. SALE SUBJECT TO LEASES

Subject to the provisions of Article 4 hereof, the Premises will be conveyed subject to the Leases.

ARTICLE 3. PURCHASE PRICE AND PAYMENT

3.1    Purchase Price

The total purchase price (the "Purchase Price") for the Property is One Hundred Eighteen Million and 00/100 Dollars ($118,000,000.00) which shall be payable to Seller through Escrow (as hereinafter defined), at the Closing (as hereinafter defined), in lawful currency of the United States of America in immediately available funds by wire transfer to an account designated to Escrow Agent by Seller.

3.2    Escrow

Within three (3) business days following the execution of this Contract and the opening of an escrow in connection herewith (the “Escrow”) at First American Title Insurance Company, 666 Third Avenue, New York, NY 10017, Attention: Phillip Salomon (the "Escrow Agent"), as security for Buyer’s performance hereunder, Buyer shall make an initial deposit (the “Initial Deposit”) of Two Million and 00/100 Dollars ($2,000,000.00) with Escrow Agent to be held and disbursed by Escrow Agent according to the terms of this Contract. Notwithstanding anything herein to the contrary, the Initial Deposit shall be non-refundable to Buyer under all circumstances except if: (1) the Closing does not occur because of a failure of a condition to Closing set forth in Section 7.1 hereof, a default by Seller governed by Section 8.1, a casualty governed by Section 9.1 or a taking governed by Section 9.2 hereof or (2) the Phase I ordered by Buyer reveals a material adverse change from the condition of the Property shown in the Phase I Environmental Site Assessment dated January 31, 2013 (a “Material Environmental Matter”) or an encumbrance or defect in title or survey matter that materially adversely affects Buyer’s ability to own and operate the Property that is not shown on the Title Commitment or the Survey, as such terms are hereinafter defined (a “New Material Title Defect”). If Buyer does not terminate this Contract on or prior to 5 p.m. California time (“Close of Business”) on May 19, 2015 (the “Due Diligence Expiration Date”), Buyer shall deposit, within three (3) business days, an additional deposit (the “Additional Deposit”) of One Million Dollars ($1,000,000.00) with the Escrow Agent. The Initial Deposit and Additional Deposit, together with all interest earned thereon, are hereinafter referred to as the "Deposit". Escrow Agent shall deposit the Deposit in a federally insured interest-bearing money market account. The Deposit shall be non-refundable except as expressly provided in this Contract. The Deposit shall be applied in reduction of the Purchase Price payable at the Closing. A portion of the Initial Deposit in the amount of One Hundred and no/100ths Dollars ($100.00) (the “Non-Refundable Amount”) shall be paid to Seller in consideration of Seller’s entry into this Contract. The Non-Refundable Amount shall be paid to Seller promptly upon receipt by Escrow Agent, shall be non-refundable in all circumstances, and shall be applicable to the Purchase Price if Closing occurs. Escrow Agent's duties and responsibilities with respect to the Deposit are governed by the terms of Article 17 hereof.

3

3.3    Purchase Price Adjustments

The payment on account of the Purchase Price required to be deposited by Buyer into Escrow and paid to Seller at the Closing shall be increased or decreased, as the case may be, to account for all items to be apportioned or prorated pursuant to this Contract.

ARTICLE 4. CONVEYANCE OF TITLE

4.1    Title Policy

At Closing, Seller shall convey and transfer to Buyer such fee simple marketable title to the Premises as will enable Escrow Agent (the “Title Company”) to issue to Buyer an Owner’s Policy of Title Insurance (ALTA Form 2006) (the “Title Policy”) covering the Premises, in the full amount of the Purchase Price (subject only to the Permitted Exceptions). Notwithstanding anything contained herein to the contrary, the Premises shall be conveyed subject to the following matters, which shall be deemed to be Permitted Exceptions:

(a)    the rights of tenants, as residential tenants only, under the Leases and any new Leases entered into between the date hereof and Closing in accordance with the terms of this Contract;

(b)    the lien of all ad valorem real estate taxes and assessments not yet due and payable or delinquent as of the date of Closing for the fiscal year 2015 and subsequent years, subject to adjustment as herein provided;

(c)    local, state and federal laws, ordinances or governmental regulations, including but not limited to, building and zoning laws, ordinances and regulations, now or hereafter in effect relating to the Property;

(d)    such state of facts as may be shown on the ALTA survey of the Premises obtained by Buyer prior to the Due Diligence Expiration Date or any update thereto (the “Survey”);

(e)    the exceptions set forth in the Title Policy; and

(f)    those matters which are so deemed pursuant to Section 4.2 below.

4.2    Title Objections

Buyer acknowledges receipt of (i) a current title commitment for an extended coverage title insurance policy with respect to the Premises issued by the Escrow Agent with an effective date of April 8, 2015 (the “Title Commitment”) and copies of all underlying documents relating to title exceptions referred to therein, and (ii) a survey of the Property dated as of February 20, 2015 (the “Survey”). Buyer shall have until Close of Business on the sixth (6^th) business day prior to the Due Diligence Expiration Date to notify Seller, in writing, of such objections to title or survey as Buyer may have. Any title or survey matter to which Buyer does not so object by such time shall be deemed a Permitted Exception. In the event Buyer shall so notify Seller of any objection(s) to title, Seller shall have the right, but not the obligation, to cure such objection(s), other than any defects, objections or exceptions which comprise mortgages or liens voluntarily created by Seller, and, to a maximum of One Hundred Fifty Thousand Dollars ($150,000.00) in the aggregate, involuntary liens over a liquidated sum, which can be satisfied by payment of a liquidated amount, which Seller agrees that it shall either pay, discharge or comply with at or before the Closing or

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make arrangement with the Title Company to insure (at normal rates) without such objection as an exception in Buyer’s Title Policy. In the event there are any objections which Seller is not obligated to cure, then within three (3) business days after receipt of Buyer’s notice of objection(s), Seller shall notify Buyer in writing whether Seller elects to attempt to cure such objection(s). Failure of Seller to give such notice shall be deemed an election by Seller not to cure such objection(s). If Seller elects to attempt to cure any such matter, Seller shall use reasonable efforts to cure such objections. If Seller elects not to cure any objection(s) specified in Buyer’s notice which Seller is not required hereby to cure, or if Seller is unable to effect a cure prior to the Closing, Buyer shall have the following options to be given by written notice within three (3) business days of Seller’s notice or deemed election: (i) to accept a conveyance of the Property subject to the Permitted Exceptions, specifically including any matter objected to by Buyer which Seller is unwilling or unable to cure (which such matter(s) shall thereafter be deemed to be a Permitted Exception), without reduction of the Purchase Price, or (ii) to terminate this Contract by sending written notice thereof to Seller, and upon delivery of such notice of termination, this Contract shall terminate, in which case the Deposit shall be paid to Seller (or, in the event of a New Material Title Defect, the Deposit shall be returned to Buyer), and thereafter neither party hereto shall have any further rights, obligations or liabilities hereunder except for the Surviving Obligation, as hereinafter defined.

4.3    Post-Signing Objections

Buyer may prior to Closing, notify Seller in writing of any objection to title (excluding objections to title or survey which have been waived by Buyer as hereinabove provided or that are or are deemed to be Permitted Exceptions) arising after the date hereof. With respect to any objections to title set forth in such notice, Seller shall have the same options to cure and Buyer shall have the same option to accept title subject to such maters or to terminate this Contract, as set forth above.

ARTICLE 5. CLOSING

5.1    Escrow Instructions

Upon mutual execution of this Contract, Buyer and Seller shall deposit an executed counterpart of this Contract with Escrow Agent and this Contract shall serve as instructions to Escrow Agent for consummation of the purchase and sale contemplated hereby. Seller and Buyer shall execute such supplemental escrow instructions as may be appropriate to enable Escrow Agent to comply with the terms of this Contract, provided such supplemental escrow instructions are not in conflict with this Contract as it may be amended in writing from time to time. In the event of any conflict between the provisions of this Contract and any supplementary escrow instructions signed by Buyer and Seller, the terms of this Contract shall control.

5.2    Closing Date

The closing of the transactions contemplated hereunder (the "Closing") shall take place through escrow on June 1, 2015 (the “Closing Date”), subject to the provisions of Section 7.1(a)(iii) below. Time is of the essence. In the event the Closing does not occur on or before the Closing Date (as the same may be extended pursuant to the provisions of Section 7.1(a)(iii)), Escrow Agent shall, unless it is notified by both parties to the contrary within five (5) days after the Closing Date, and subject to the provisions of section 3.2 and 8.2 below, return to the depositor thereof items which were deposited under section 5.3 or section 5.4. Any such return shall not, however, relieve Buyer or Seller of any liability it may have for its wrongful failure to consummate the Closing.

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5.3    Seller Deliveries

At or before the Closing, Seller shall deliver to Escrow Agent the following documents in the forms attached hereto or otherwise reasonably satisfactory in form and substance to Seller and Buyer and their counsel, properly executed and acknowledged as required:

(i)    An original deed (the “Deed”) in the form of Exhibit D attached hereto and incorporated herein by reference;

(ii)    An original of a Bill of Sale in the form of Exhibit E attached hereto and incorporated herein by reference;

(iii)    An original of an Assignment and Assumption Agreement relating to the Leases and security deposits, key deposits, last month’s rent and accrued interest thereon to the extent required by the Lease or applicable law but excluding any of such deposits which are non-refundable (collectively, the “Security Deposits”) in the form attached hereto as Exhibit F and incorporated herein by reference (the "Lease Assignment");

(iv)    Originals of all Leases, any renewals thereof and all amendments thereto to the extent in Seller’s possession or control will be delivered at the Premises;

(v)    An original of an Assignment and Assumption Agreement in the form attached hereto as Exhibit G and incorporated herein by reference relating to the Operating Contracts and the Intangible Property, as hereinafter defined (the "Contract Assignment");

(vi)    To the extent not previously delivered originals or copies of all certificates of occupancy in Seller’s possession or control for all of the Improvements that form a part of the Property and all tenant‑occupied space included within such buildings;

(vii)    An original of a certification of non‑foreign status in the form attached hereto as Exhibit H and incorporated herein by reference;

(viii)    Evidence satisfactory to the Title Company that all necessary approvals and/or consents by the directors of Seller have been delivered and such other evidence satisfactory to the Title Company of Seller's authority and the authority of the signatory on behalf of Seller to convey the Premises pursuant to this Contract;

(ix)    Originals or a copy of as‑built plans and specifications for the Improvements (if in Seller's possession or control if not delivered at the Premises);

(x)    All Security Deposits, together with accrued interest thereon if payable under the Leases or pursuant to applicable law;

(xi)    Originals of affidavits sufficient for the Title Company to delete any exceptions for parties in possession (other than tenants under the Leases, as tenants only) and mechanics' or materialmen's liens from the Title Policy and otherwise issue the Title Policy;

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(xii)    A Rent Roll certified as true and correct in all material respects as of five days before the Closing Date which certification shall be subject to the qualifications and limitations set forth in section 11.3;

(xiii)    An original of a closing statement setting forth the Purchase Price, the closing adjustments and prorations and the application thereof at the Closing (the "Closing Statement");

(xiv)    Such transfer tax, gains or other similar forms required by law, including, without limitation, an original California Franchise Tax Board Form 593;

(xv)    An original of the Memorandum (as hereinafter defined);

(xvi)    An original of an Assignment and Assumption Agreement with respect to the Declaration (as hereinafter defined) in substantially the form attached hereto as Exhibit K (the “Declaration Assignment”);

(xvii)    Copy of a standard tenant notification letter in a form to be drafted by Buyer and satisfactory to Seller and as required by law;

(xviii)    An original of the City Consent (as hereinafter defined);

(xix)    Written evidence of termination of the current written property management agreement (if any);

(xx)    An original of an Assignment and Assumption Agreement (the “CCR Declaration Assignment”) with respect to that certain Declaration of Covenants, Conditions, Restrictions, and Reservation of Easements for Riverbend dated as of September 13, 2005 recorded on September 21, 2005as Instrument No. 2005-000748213 with the of the Official Records of Orange County, California (the “Official Records”) as affected by "Assignment of Declarant’s Rights under Declaration of Covenants, Conditions, Restrictions, and Reservation of Easements for Riverbend" recorded December 01, 2006 as Instrument No. 2006-000805654 of Official Records (collectively, the “CCR Declaration”), which CCR Declaration Assignment shall be in substantially the form of the assignment document to Seller which described above recorded on December 1, 2006; provided, however that it shall contain a provision stating that it is subject to the terms and conditions of the Memorandum; and

(xxi)    Such other instruments as are reasonably required by the Escrow Agent to close the escrow and consummate the acquisition of the Property in accordance with the terms hereof, provided the same does not impose any additional liability or obligation on Seller.

5.4    Buyer Deliveries

At or before the Closing, Buyer shall deliver, or cause to be delivered, to Escrow Agent or Seller the following payment and documents, reasonably satisfactory in form and substance to Seller and Seller's counsel properly executed and acknowledged as required:

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(i)    The Purchase Price, as adjusted in accordance with section 3.3 hereof (provided that the balance of the Purchase Price shall be delivered into Escrow with Escrow Agent by 10:00 AM Pacific time on the Closing Date);

(ii)    An original of the Lease Assignment;

(iii)    An original of the Contract Assignment;

(iv)    An original of the Closing Statement;

(v)    An original of the Memorandum;

(vi)    An original of the Declaration Assignment;

(vii)    An original of the CCR Declaration Assignment;

(viii)    Such transfer tax, gains or other similar forms required by law; and

(ix)    Such other instruments as are reasonably required by the Escrow Agent to close the escrow and consummate the acquisition of the Property in accordance with the terms hereof, provided the same does not impose any additional liability or obligation on Buyer.

ARTICLE 6. PROPERTY INSPECTION

6.1    Termination Right

(a) Seller acknowledges the Buyer intends to conduct an investigation of the Property, which may include examination of all structural and mechanical aspects thereof, review of any and all documentation with respect to the Property including without limitation its income and expenses, Leases and tenant files, records of repairs and capital improvements, examination of the title to the Property, obtaining a current as‑built survey thereof, and determining the compliance of the Property with all applicable laws, rules, codes and regulations.

(b) Notwithstanding anything to the contrary contained in this Contract, Seller acknowledges that Buyer shall have the right, in its sole discretion, to terminate this Contract by giving written notice of termination (the “Termination Notice”) to Seller no later than Close of Business on the Due Diligence Expiration Date. If Buyer fails to give a timely Termination Notice, Buyer shall be deemed to have waived any objection to the condition of the Property in accordance with this Article 6. If Buyer gives a timely Termination Notice, this Contract shall be deemed terminated, the Initial Deposit shall be retained by Seller, and all obligations of the parties hereto shall cease and the parties shall be without further recourse or remedy hereunder other than (i) Buyer’s indemnity to Seller set forth in section 6.2 below and (ii) Buyer’s confidentiality obligations set forth in Article 16 (collectively, the “Surviving Obligation”). Notwithstanding the foregoing, in the event Buyer terminates this Contract prior to the Close of Business on the Due Diligence Expiration Date as a result of a Material Environmental Matter, the Initial Deposit shall be returned to Buyer.

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6.2    Property Inspection

(a) Seller shall make the Property available at reasonable times (but in no event during weekends, holidays or after Close of Business) to the Buyer Parties (as defined below) for such inspections and tests as Buyer deems appropriate, including for Buyer's engineering inspection(s), hazardous materials inspections, site evaluations, and such other inspections and tests as Buyer deems appropriate. Buyer shall give Seller at least two (2) business days’ prior notice of any visit or tests describing who will visit and the nature of such visit and/or tests. Seller shall be entitled to have a representative present during any visits or tests. Other than for the purpose of routine review of public records, the Buyer Parties may not meet with any governmental authority regarding the Property without Seller’s prior written consent; provided, however, the Buyer Parties shall be permitted to communicate with governmental authorities in connection with obtaining a zoning report. If Seller’s consent is obtained by Buyer, Buyer shall provide to Seller at least two (2) business days prior written notice of the intended contact and shall permit Seller to have a representative present when Buyer has such contact with any governmental official or representative. No invasive tests (including, without limitation, tests for mold, soils and water samples and soils borings) shall be conducted without Seller’s consent, which may be withheld in Seller’s sole discretion, and all investigations shall be subject to the rights of tenants and shall be done in a manner which minimizes disruption to tenants. Buyer shall not (i) unreasonably disturb the tenants or interfere with their use of the Property pursuant to their respective leases; (ii) unreasonably interfere with the operation and maintenance of the Property; (iii) damage any part of the Property or any personal property owned or held by any tenant or any third party without restoring the same in accordance with subsection (d) below; (iv) injure or otherwise cause bodily harm to any person; (v) permit any liens to attach to the Property by reason of the exercise of its rights hereunder.

(b) To the fullest extent permitted by law, Buyer hereby indemnifies and holds Seller and Seller’s agents and representatives harmless from, all claims, liabilities, liens, damages, losses, costs, expenses, including reasonable attorneys' fees (collectively, “Claims”) to the extent arising out of (i) any entry onto the Property, or any inspections performed, by Buyer or any of its employees, agents, representatives, contractors, engineers or consultants (“Buyer Parties”), or (ii) a breach of this Section 6.2 by Buyer. Buyer shall not have any liability to Seller under the foregoing indemnity for any Claim that arises out of the mere discovery of a pre-existing condition on the Property by the Buyer Parties that is not exacerbated by the Buyer Parties or disclosed in violation of this Contract or the gross negligence or willful misconduct of Seller, its employees, agents, consultants, contractors and representatives.

(c) Buyer waives and releases any Claims against Seller or Seller’s agents and representatives for property damages or bodily injury to the Buyer Parties arising out of the exercise of the rights under this Section 6.2 except to the extent caused by the gross negligence or willful misconduct of Seller, its employees, agents, consultants, contractors and representatives.

(d) Buyer shall each provide Seller with evidence of $2,000,000 commercial general liability insurance, naming Seller and AvalonBay Communities, Inc., as additional insureds, prior to entering the Premises, and such other insurance coverage as may reasonably be required by Seller. Buyer shall (i) promptly repair any damage to the Property and restore any areas disturbed resulting directly or indirectly from any inspections substantially to their condition prior to the performance of such inspections and (ii) comply with all applicable laws.

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(e) The provisions of this section 6.2 shall survive the termination of this Contract.

ARTICLE 7. CONDITIONS TO CLOSING

7.1    Buyer’s Conditions

(a)    Without limiting any other conditions to Buyer's obligations to close set forth in this Contract, the obligations of Buyer under this Contract are subject to the satisfaction at the time of Closing of each of the following conditions (any of which may be waived in whole or in part by Buyer at or prior to Closing):

(i)    All of the representations by Seller set forth in this Contract or any Exhibit attached hereto shall be true and correct in all material respects as of the Closing Date, subject to any change to a representation or warranty based upon actions by Seller expressly permitted hereby;

(ii)    Seller shall have performed, observed, and complied in all material respects with all covenants and agreements required by this Contract to be performed by Seller at or prior to Closing; and

(iii)    Seller shall have received the consent (the “City Consent”) to the transfer of the Property to Buyer from the City of Yorba Linda as successor to the Yorba Linda Redevelopment Agency (the “City”) pursuant to that certain Owner Participation Agreement and Declaration of Restrictive Covenants by and between the Yorba Linda Redevelopment Agency and Yorba Linda Associates dated August 12, 1985 and recorded December 17, 1985 as Instrument No. 85-505113 of the Official Records as affected by that certain Assignment and Assumption of Owner Participation Agreement and Declaration of Restrictive Covenants” dated November 30, 2006 and recorded December 1, 2006 as Instrument No. 2006-000805653 of the Official Records and that certain Consent to Transfer of Property between Yorba Linda Associates and Seller dated November 13, 2006 and recorded December 1, 2006 as Instrument No. 2006-000805655 of the Official Records (collectively, the “Declaration”). The City Consent may be in the form attached to the form of the Declaration Assignment attached hereto as Exhibit K. In addition to the City Consent, Seller shall request that the City execute an estoppel certificate with respect to the Declaration in the form attached hereto as Exhibit L, but it is expressly understood and agreed that obtaining the same shall not be a condition to Closing. If the City Consent is not obtained by May 20, 2015, Seller shall give Buyer notice of the same by the Close of Business on May 22, 2015. Buyer shall then have the right which shall be exercised by written notice given no later than the Close of Business on May 26, 2015, either (i) to terminate this Contract, or (ii) to extend the Closing Date to July 1, 2015. If Buyer shall fail to give the notice specified in the preceding sentence, the same shall be deemed to be an election to extend the Closing Date to July 1, 2015. If the City Consent is not obtained by July 1, this Contract shall automatically terminate without the requirement of notice to or from either party hereto.

(b)    If any condition set forth herein is not fully satisfied on or before the Closing Date, Seller may elect to attempt to satisfy any such unsatisfied condition, and if Seller so elects by written notice to Buyer, Seller shall have until the date occurring thirty days after the Closing Date in which to satisfy such condition, and the Closing Date shall be extended for such period.

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ARTICLE 8. DEFAULT

8.1    Seller Default

If Seller fails to fulfill any of its obligations hereunder and such failure continues for thirty (30) days after written notice from Buyer to Seller, Buyer shall have any one of the following rights and remedies:

(i)    Buyer shall have the right to terminate this Contract by notice to Seller, in which event the Deposit together with interest thereon shall be paid to Buyer and in the case of a willful default as to which the remedy of specific performance is not available, Seller shall reimburse Buyer for all out-of-pocket costs incurred by Buyer in connection with this transaction in an amount not to exceed Seventy Five Thousand Dollars ($75,000.00), and all obligations of the parties under this Contract shall terminate except for Buyer’s Surviving Obligation; or

(ii)    Buyer shall have the right to waive the breach or default and proceed to Closing in accordance with the provisions of this Contract without reduction of the Purchase Price; or

(iii)    Buyer may seek specific performance for Seller’s failure to execute and deliver the documents necessary to convey the Property to Buyer.

8.2 Buyer Default

IF THE SALE OF THE PROPERTY IS NOT CONSUMMATED BECAUSE OF A DEFAULT UNDER THIS CONTRACT ON THE PART OF THE BUYER, BUYER AND SELLER AGREE THAT IT WOULD BE EXTREMELY DIFFICULT AND IMPRACTICAL TO DETERMINE THE AMOUNT AND EXTENT OF DETRIMENT TO SELLER. BUYER AND SELLER THEREFORE AGREE THAT THE ENTIRE DEPOSIT PLUS ACCRUED INTEREST THEREON IS A REASONABLE ESTIMATE OF SELLER’S DAMAGES AND THAT SELLER SHALL BE ENTITLED TO SAID SUM AS LIQUIDATED DAMAGES, WHICH SHALL BE SELLER’S SOLE AND EXCLUSIVE REMEDY, EITHER AT LAW OR IN EQUITY, AS A RESULT OF SUCH DEFAULT. IN SUCH EVENT, THE ESCROW AGENT SHALL UPON WRITTEN DEMAND BY SELLER WITHOUT JOINDER OF BUYER, SUBJECT TO THE PROVISIONS OF SECTION 17.1, DELIVER THE DEPOSIT PLUS ACCRUED INTEREST THEREON TO SELLER. TO SIGNIFY THEIR AWARENESS AND AGREEMENT TO BE BOUND BY THE TERMS AND PROVISIONS OF THIS SECTION, BUYER AND SELLER HAVE SEPARATELY INITIALED THIS SECTION. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 8.2 SHALL LIMIT ANY RECOVERY BY SELLER UNDER ANY INDEMNITIES MADE BY BUYER HEREIN OR SELLER'S RIGHTS TO ANY ATTORNEYS' FEES OR COSTS RECOVERABLE BY SELLER HEREUNDER.

SELLER INITIALS: /s/ TWBUYER’S INITIALS: /s/ SRS

ARTICLE 9. DAMAGE OR DESTRUCTION; CONDEMNATION

9.1    Damage or Destruction

(a)    In the event of partial damage or destruction of the Property of a type which can, under the circumstances, be expected in the reasonable judgment of Seller and Buyer to be restored or repaired at a cost of $3,000,000 or less, then, this Contract shall be consummated on the Closing Date at the Purchase Price, and unless such damage has been repaired by Seller prior to Closing, Seller shall assign to Buyer the

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proceeds of any insurance policies payable to Seller, less any amounts expended by Seller for partial restoration and with a credit to Buyer for the amount of any deductible or self-insured retention.

(b)    In the event that the Property shall have been damaged or destroyed by fire or other casualty and the cost of repair or restoration of which would, in the reasonable judgment of Seller and Buyer, exceed the sum of $3,000,000, then, at Buyer’s election, Seller shall either (a) pay over or assign to Buyer, on delivery of the Deed all proceeds of any insurance policies payable to Seller, less any amounts reasonably expended by Seller for partial restoration, with a credit to Buyer for the amount of any deductible or self-insured retention, or (b) direct Escrow Agent to return the Deposit to Buyer in which case, except for the Surviving Obligation, all other obligations of the parties hereto shall cease and this Contract shall terminate and be without further recourse or remedy to the parties hereto.

(c)    In the event of damage or destruction to the Property caused by an uninsured casualty, then, at Buyer’s election, Seller shall either (a) credit Buyer with the amount necessary to fully restore the Property to the condition prior to such damage or destruction, as determined by Seller and Buyer (but in no event shall such credit exceed $3,000,000), or (b) direct Escrow Agent to return the Deposit to Buyer in which case, except for the Surviving Obligation, all other obligations of the parties hereto shall cease and this Contract shall terminate and be without further recourse or remedy to the parties hereto.

9.2    Condemnation

If, prior to the Closing, the any portion of the Property is taken under power of eminent domain and the value thereof exceeds $3,000,000, or if access or parking is materially affected (the “Threshold”), Buyer may elect to terminate this Contract by giving written notice of its election to Seller within fourteen (14) days after receiving notice of such destruction or taking. If Buyer does not give such written notice within such fourteen (14) day period, this Contract shall be consummated on the Closing Date at the Purchase Price, and Seller will assign to Buyer Seller's portion of any condemnation award. If, prior to the Closing, there is an eminent domain taking the result of which does not exceed the Threshold, this Contract shall be consummated on the Closing Date at the Purchase Price, and Seller will assign to Buyer Seller's portion of any condemnation award.

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ARTICLE 10. “AS-IS” SALE

10.1Disclaimers

Except as set forth in this Contract, the Property is being acquired by Buyer in an “AS IS” “WHERE IS” condition and “WITH ALL FAULTS” existing as of the Closing Date. Buyer acknowledges that it will be acquiring the Property on the basis of its own investigations. Except as expressly set forth in this Contract, no representations or warranties have been made or are made and no responsibility has been or is assumed by Seller or by any officer, person, firm, agent or representative acting or purporting to act on behalf of the Seller as to condition or repair of the Property or the value, expense of operation, or income potential thereof, the reliability of any information furnished to Buyer or as to any other fact or condition which has or might affect the Property or the condition, repair, value, expense of operation or income potential of the Property or any portion thereof. The parties agree that all understandings and agreements heretofore made between them or their respective agents or representatives are merged in this Contract and the Exhibits hereto annexed, which alone fully and completely express their agreement, and that this Contract has been entered into after full investigation, or with the parties satisfied with the opportunity afforded for investigation, neither party relying upon any statement or representation by the other unless such statement or representation is specifically embodied in this Contract or the Exhibits annexed hereto. Buyer acknowledges that Seller has required Buyer to inspect fully the Property and investigate all matters deemed by Buyer to be relevant thereto, and to rely solely upon the results of Buyer’s own inspections or other information obtained or otherwise available to Buyer, provided that the foregoing shall not diminish Buyer’s rights with respect to any representations or warranties expressly made by Seller in this Contract.

10.2Release

Buyer hereby expressly releases the Seller Group (hereinafter defined) from any and all claims, losses, proceedings, damages, causes of action, liability, costs or expenses (including attorneys' fees) arising from, in connection with or caused by (a) Buyer's reliance upon any of the Property Information or statements, representations or assertions contained therein, (b) inaccuracy, incompleteness or unreliability of any of the Property Information. Except with respect to a breach by Seller of any representation or warranty expressly contained herein, Buyer hereby waives, releases and forever discharges Seller, any shareholder, officer, director, employee, agent or person acting on behalf of Seller and any affiliate of Seller (the "Seller Group") of and from any and all claims, actions, causes of action, demands, rights, damages, liabilities and costs whatsoever, direct or indirect, known or unknown, which Buyer now has or which may arise in the future, against any of the Seller Group related in any way to the Property. Buyer hereby agrees not to assert any claim for contribution, cost, recovery or otherwise against the Seller Group relating directly or indirectly to the physical condition of the Property including, without limitation, the existence of oil, lead paint, lead, radon, asbestos, mold, or hazardous materials or substances on, or the environmental condition of, the Property, whether known or unknown.

Buyer further acknowledges that "Natural Hazards" described in the following California code sections (the “Natural Hazard Laws”) may affect the Property: Government Code Sections 8589.4; 8589.3;  Government. Code Sections 51183.4, 51183.5 (Fire Hazard Severity Zone); Public Resource Code Section 2621.9 (Earthquake Fault Zone); Public Resource Code Section 2694 (Seismic Hazard Zone); and Public Resource Code Section 4136 (Wildland Area). Buyer acknowledges and agrees that Buyer has had the opportunity to independently evaluate and investigate whether any or all of such Natural Hazards affect the Property and Seller shall have no liabilities or obligations with respect thereto. Without limiting the foregoing, Buyer acknowledges and agrees that Buyer knowingly and intentionally waives any disclosures, obligations or requirements of Seller with respect to Natural Hazards, including, without limitation, any disclosure obligations or requirements under the aforementioned code sections or under California Civil Code section 1102. Buyer represents that Buyer has experience acquiring and conducting due diligence and that this waiver has been negotiated and is an essential aspect of the bargain between the parties.

In connection with the release and waiver set forth in this Article 6(b), Buyer acknowledges that Buyer is aware of the provisions of Section 1542 of the California Civil Code which reads as follows:

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“A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.”

Buyer hereby waives the provisions of such Section 1542 of the California Civil Code and the provisions of any similar laws as to the release and waiver set forth in this Article 6(b) or any other release of Seller by Buyer contained in this Contract or in the documents to be delivered at Closing. Buyer realizes, agrees and acknowledges that factual matters now unknown to Buyer may have given or hereafter give rise to claims which are presently unknown, unanticipated and unsuspected, and the release provided hereunder has been negotiated and agreed upon in light of that realization. This Article 10.2 shall survive the Closing and delivery of the Deed.

10.3Negotiated Provision

Buyer realizes, agrees and acknowledges that factual matters now unknown to Buyer may have given or hereafter give rise to claims which are presently unknown, unanticipated and unsuspected, and the release provided in this Article 10 has been negotiated and agreed upon in light of that realization. Notwithstanding the foregoing, nothing in this Contract shall be deemed to be a release of any liability Seller may have to third parties arising prior to the Closing Date. This Article 10 shall survive the Closing and delivery of the Deed.

TO SIGNIFY THEIR AWARENESS AND AGREEMENT TO BE BOUND BY THE TERMS AND PROVISIONS OF THIS ARTICLE 10, BUYER AND SELLER HAVE SEPARATELY INITIALED BELOW.

SELLER INITIALS: /s/ TWBUYER’S INITIALS: /s/ SRS

ARTICLE 11. REPRESENTATIONS AND WARRANTIES

11.1    Representations and Warranties of Seller

In order to induce Buyer to enter into this Contract and to consummate the purchase of the Property, Seller hereby represents and warrants to Buyer as of the date of this Contract and as of the Closing Date (updated to reflect the then state of facts if expressly permitted herein) as follows:

(a)    Seller is a limited liability company duly and validly organized and existing, in good standing and governed by the laws of Delaware and qualified to do business in the State. This Contract, including the authority to transfer the Property to Buyer, and all documents that are to be executed by Seller and delivered to Buyer at the Closing are, or, solely with respect to such documents to be delivered at Closing, at the time of Closing will be, duly authorized, executed and delivered by Seller, and all consents required under Seller's organizational documents or by law have been or, solely with respect to such documents to be delivered at Closing, will have been obtained before Closing. This Contract and such documents are, or at the Closing will be, legal, valid, and binding obligations of Seller, and do not, and, at the time of Closing will not, violate any provisions of any agreement or judicial order to which Seller is a party or to which it is subject.

(b)    To Seller’s actual knowledge, the Rent Roll is a true, complete and correct listing of all Leases in effect as of the date of this Contract or the Closing Date, as applicable. The Rent Roll is the rent roll used and relied upon by Seller in its operation of the Property. To Seller’s actual knowledge, there are no persons in occupancy of or who have any rights to occupy any portion of the Property, other than residential tenants under the Leases. To Seller’s actual knowledge, except as set forth in the Rent Roll, no tenant of any portion of the Property is in default in any monetary obligation under its Lease.

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(c)    To Seller’s actual knowledge, Seller has made available to Buyer true and complete copies of the Leases, and all extensions, renewals and amendments thereto.

(d)    To Seller’s actual knowledge, except as set forth in the Rent Roll, the rents set forth in the Leases are being collected on a current basis and no tenant has paid rent more than one (1) month in advance.

(e)    To Seller’s actual knowledge, Exhibit I attached hereto and incorporated herein by reference is a complete list of all management, service, supply and maintenance agreements, equipment leases, and all other contracts and agreements with respect to or affecting the Property as of the date of this Contract that either must be assumed by Buyer or may be assumed by Buyer (collectively with all extensions, renewals and amendments thereto, the "Operating Contracts"), but specifically excluding (i) any contracts the existence or terms of which Seller is prohibited from disclosing pursuant to the terms thereof, (ii) any property management agreements, or (iii) master agreements between Seller and the respective vendor that cover the Property and other properties of Seller and its affiliates (collectively, the “Excluded Contracts”). To Seller’s actual knowledge, Seller has made available to Buyer true and complete copies of the Operating Contracts. To Seller’s actual knowledge, all Operating Contracts are in full force and effect and free from material default.

(f)    To Seller’s actual knowledge and except as set forth in any reports delivered by Seller to Buyer, Seller has not received any written notice from governmental authorities advising Seller of any violation of any law or regulation applicable to the Property which has not been cured, including the presence, now or in the past, on, under or affecting the Property of asbestos, mold, lead, radon or hazardous material, waste or substances in violation of applicable law, which remains uncured. As used in this Contract, hazardous material, waste or substances means material, waste or substances which pose a serious hazard to human health and the use, generation, processing, storage, release, discharge and presence thereof is regulated by the State or the United States of America.

(g)    Except as set forth in Exhibit J attached hereto and incorporated herein by reference, to the Seller’s actual knowledge, there is not now pending nor has there been threatened in writing, any action, suit or proceeding against or affecting Seller or the Property before or by any federal or state court, commission, regulatory body, administrative agency or other governmental body, domestic or foreign, wherein an unfavorable ruling, decision or finding, upon consummation of the sale contemplated hereby to Buyer or otherwise, may reasonably be expected to have a material adverse effect on the business or prospects of or on the condition or operations of the Property, or would interfere with Seller's ability to consummate the transactions by this Contract.

(h)    Seller is not a "foreign person" as defined by the Internal Revenue Code ("IRC"), Section 1445. Seller will execute and deliver to Buyer at Closing an affidavit or certification in compliance with IRC Section 1445.

(i)    Seller is in compliance with the requirements of Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 23, 2001) (the “Order”) and other similar requirements contained in the rules and regulations of the Office of Foreign Assets Control, Department of the Treasury (“OFAC”) and in any enabling legislation or other Executive Orders or regulations in respect thereof (the Order and such other rules, regulations, legislation, or orders are collectively called the “Orders”).

(j)    Seller has not: (i) made a general assignment for the benefit of creditors; (ii) filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by Seller’s creditors; (iii) suffered the appointment of a receiver to take possession of all, or substantially all, of Seller’s assets; (iv)

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suffered the attachment or other judicial seizure of all, or substantially all, of Seller’s assets; (v) admitted in writing its inability to pay its debts as they come due; or (vi) made an offer of settlement, extension or composition to its creditors generally.

11.2    Knowledge Standard

Any representations and warranties made to the actual knowledge of Seller shall be deemed to be the current, conscious knowledge of Tim Walters, the Senior Vice President for Investments, and Deborah Coombs, the Senior Vice President for Operations for the region in which the Property is located, without imputation of knowledge or duty of investigation or inquiry.

11.3    Limitations

Seller shall not be liable to Buyer for any representation or warranty which is untrue at the time of Closing and with respect to which Buyer had knowledge thereof at that time. Furthermore, any claim for a breach of representation and warranty by Seller must be commenced by the filing of a complaint not later than December 31, 2015. No single claim may be brought against Seller unless the amount of the claims exceeds $50,000, and Seller’s liability for all claims, in the aggregate, shall be capped at One Million Five Hundred Thousand Dollars ($1,500,000.00), which sum shall be Seller’s sole liability.

11.4    Representations and Warranties Of Buyer

Buyer hereby represents and warrants to Seller as of the date hereof and as of the Closing Date as follows:

(a)    Buyer is a limited partnership, duly and validly organized and existing under the laws of Delaware, and at Closing will be qualified to do business in the State. This Contract and all documents executed by Buyer that are to be delivered to Seller at the Closing are, or at the time of Closing will be, duly authorized, executed and delivered by Buyer. This Contract and such documents are, or at the Closing will be, legal, valid, and binding obligations of Buyer, and do not, and, at the time of Closing will not, violate any provisions of any agreement or judicial order to which Buyer is a party or to which it is subject.

(b)    There are no proceedings pending or, to Buyer's knowledge, threatened against it in any court or before any governmental authority or any tribunal which, if adversely determined, would have a material adverse effect on its ability to purchase the Property or to carry out its obligations under this Contract.

(c)    Buyer is in compliance with the Orders.

ARTICLE 12. OPERATIONS

12.1    Operational Covenants

(a)    Between the date hereof and the Closing, Seller agrees hereby that it will maintain, operate, rent and manage the Property in its customary manner as of the date of this Contract. Until the Closing Date, Seller shall maintain insurance on the Premises as currently insured.

(b)    Seller shall not remove any material item of the Personal Property from the Premises unless the same is obsolete and is replaced by tangible personal property of equal or greater utility and value.

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(c)    Seller shall not without the prior written consent of Buyer, which consent shall not be unreasonably withheld, enter into any contract (but excluding new leases entered into in the ordinary course of business) which could bind Buyer or the Property after the Closing unless the same may be canceled on thirty (30) days’ notice at no cost. Failure of Buyer to respond within three (3) business days of written request from Seller for consent shall be deemed consent by Buyer.

(d)    Seller will give Buyer prompt written notice of any threatened or actual litigation, suit, arbitration, unsatisfied order or judgment, governmental investigation or proceeding concerning or affecting the Property which is instituted after the date of this Contract and for which Seller has received written notice.

(e)    To the extent that any rental units become vacant at the Property more than five (5) business days prior to the Closing Date, Seller shall cause such vacant units to be put in rent ready condition in accordance with Seller's present Property operations, and if Seller fails to place such units in rent ready condition by the Closing Date (“Non-Rent Ready Unit”), Seller shall grant to Buyer a credit at Closing against the Purchase Price in an amount equal to Seven Hundred Fifty Dollars ($750.00) for each such Non-Rent Ready Unit. Units that become vacant five (5) business days or less prior to the Closing shall be assumed to be non-rent ready and accordingly, Buyer shall receive the applicable rent ready credit(s) therefor. Rent-ready condition shall mean the condition in which Seller currently delivers vacant units to new tenants at the Property, painted and cleaned, with all appliances, fixtures, and equipment therein in good working order. In connection with the covenant in this Section 12.1(e), within two (2) business days prior to the Closing Date, Buyer will be permitted to inspect the vacant units at the Property with a representative of Seller upon not less than 24 hours prior notice to Seller to determine what units are not in rent ready condition.

(f)    Seller will promptly give written notice to Buyer of all written notices received by Seller asserting any breach or default under any of the Leases or the Operating Contracts or any violation of any licenses and permits or any covenants, conditions, restrictions, laws, statutes, rules, regulations or ordinates applicable to the Property.

12.2    Operating Contracts

(a)    Not less than three (3) business days after the Due Diligence Expiration Date, Buyer shall give Seller notice specifying the Operating Contracts (other than those designated on Exhibit I as Operating Contracts that must be assumed by Buyer), if any, that Buyer requires Seller to terminate (the “Terminated Contracts”). Seller shall send notice to the vendors terminating the Terminated Contracts. Any Terminated Contract for which notice of termination has been given, but which will not terminate until after Closing due to a required minimum notice period, shall not be deemed a Terminated Contract and shall be assumed by Buyer.

(b)    Buyer shall assume all of the Operating Contracts other than the Terminated Contracts.

(c)    If the assignment of an Operating Contract requires the consent of the vendor and Seller is unable to obtain the required consent, then the Operating Contract shall be terminated by Seller at its expense.

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ARTICLE 13. CLOSING ADJUSTMENTS AND COSTS

13.1    Pro-Rations

(a)    All normal and customarily pro-ratable items, including without limitation, real estate taxes (based upon the most recent tax bills with a readjustment as specified below), and personal property taxes and assessments, utility bills (except as hereinafter provided), collected rents and other income, and Operating Contract payments (under Operating Contracts assumed by Buyer including those for which notice of termination has been given pursuant to section 12.2(a) but have not yet expired), shall be prorated in escrow as of the Closing Date, Seller being charged and credited for all of the same relating to the period up to the Closing Date and Buyer being charged and credited for all of the same relating to the period on and after the Closing Date.

(b)    If Closing occurs before that year's tax bills are available, the proration will be based on the latest tax rate applied to the latest tax value. If an estimated proration is made, then after the taxes and assessments for the year in which the Closing occurs are finally assessed, within 30 days after demand, Buyer shall refund to Seller any amount overpaid by Seller or Seller shall pay to Buyer the amount of any deficiency in the proration.

(c)    No proration shall be made in relation to delinquent rents existing, if any, as of the Closing Date. In adjusting for uncollected rents, no adjustment shall be made in Seller's favor for rents which have accrued and are unpaid as of Closing, but Buyer shall pay Seller such accrued and unpaid rents, as and when collected by Buyer, it being agreed that Buyer shall not be deemed to have collected any such arrearages attributable to the period prior to Closing until such time as the tenant is current in the payment of all rents accruing in the month of and after the Closing. Buyer agrees to bill tenants of the Property for all past due rents and to take any additional reasonable actions requested by Seller to collect rents that are accrued but unpaid as of the Closing for a period of twelve (12) months, provided that Buyer shall not be obligated to incur any out‑of‑pocket third party expense in connection with such actions and Buyer shall not be obligated to take any action to terminate a tenancy. Seller reserves the right to bring suit against tenants of the Property to collect for accrued but unpaid rents owed Seller as of the Closing Date, but Seller may not, subsequent to Closing, bring suit for possession of the premises occupied by such tenants. Non-refundable fees or deposits, including pet deposits, amenity fees, pet fees, application fees, or parking fees, paid by tenants to Seller prior to the Closing Date shall not be prorated. Buyer shall receive a credit for all Security Deposits, together with accrued interest as required by the Leases or by law.

(d)    Seller shall terminate all utility accounts in its name as of the Closing Date. Any deposits in connection with such utility accounts shall be released to Seller and shall not be assigned to Buyer at Closing. Buyer shall arrange to have all necessary utility accounts opened and deposits made in Buyer’s name as of the Closing Date. To the extent utilities are in the name of any tenant, Buyer shall notify the utility providers that, as of the Closing Date, upon the termination of any utilities in the name of any tenant, the utility service shall revert to Buyer and Seller shall have no liability therefor. Buyer acknowledges that Seller recovers the cost of certain utility services originally paid for by Seller by billing each tenant in arrears for an allocated share of those utility costs (collectively, the “Utility Reimbursements”). At Closing, Seller shall receive a credit representing two (2) months’ average utility billings for the Property (based upon the prior six (6) month average) as an estimate of the amount of Utility Reimbursements accruing before Closing, but not payable until after the Closing, which amount shall be reasonably approved by Seller and Buyer. Buyer shall bill tenants for Utility Reimbursements that are uncollected as of the Closing Date, and for Utility Reimbursements that relate to periods prior to the Closing Date, but for which reimbursement amounts have not yet been billed (collectively, the “Uncollected Utilities”). Buyer shall bill and collect Uncollected Utilities in the same manner as Uncollected Rents (as defined below). For Utility

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Reimbursements not yet billed to tenants, Seller shall provide to Buyer the allocation worksheets, when available, to enable Buyer to bill tenants.

(e)    Insurance premiums shall not be prorated. Neither insurance policies nor, except as contemplated in Article 5, any claims or amounts payable under insurance policies will be assigned to Buyer. Seller shall be entitled to all refunds of any premiums for insurance policies maintained by Seller with respect to the Property.

(f)    Except as provided above with respect to real estate taxes and assessments, the provisions of this section 13.1 shall survive the Closing for a period of ninety (90) days at which time there will be a one-time readjustment, if necessary.

(g)    Seller bears responsibility for all tenant improvement costs and/or brokerage commissions due and owing with respect to any of the Leases related to the period prior to the Closing Date.

13.2    Closing Costs

Except as hereinafter specifically provided, Seller and Buyer shall allocate all closing costs between them in accordance with standard practice in the local jurisdiction in which the Property is located. Each of Seller and Buyer shall be responsible for preparing such documents as it is obligated to deliver pursuant to Article 5 hereof and for its own legal expenses. Seller and Buyer agree to allocate closing costs as follows:

(i)    Transfer taxes shall be paid by Seller.

(ii)    Seller shall pay the premium for the basic title insurance coverage for Buyer’s Title Policy and Buyer shall pay the premium for extended title insurance coverage and any endorsements.

(iii)    Survey expenses shall be paid by Buyer.

(iv)    The cost of preparation and recordation of any releases and termination statements required to clear title to the Property shall be paid by Seller.

(v)    The cost of recordation of the Deed shall be shared equally by Seller and Buyer.

(vi)    Escrow charges, if any, shall be split equally between Seller and Buyer.

13.3    Closing Statement

Escrow Agent shall prepare the Closing Statement setting forth the manner of computation of the closing adjustments and costs, the first draft of which should be provided to the parties no later than two (2) full business days prior to Closing.

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ARTICLE 14. BROKER

14.1    Indemnity

Each party represents hereby to the other that it dealt with no broker in the consummation of this Contract except for Moran and Company ("Broker"), and each party indemnifies the other from any claim arising from the breach of such representation by the indemnifying party. This indemnity shall survive Closing.

14.2    Payment of Commission

Any commission due Broker shall be paid by Seller through the Escrow upon the Closing, as provided in a separate agreement between Seller and Broker, and Escrow Agent shall obtain and provide to Buyer and Seller a receipt from such broker at Closing.

ARTICLE 15. MISCELLANEOUS PROVISIONS

15.1    Recording

It is agreed hereby that this Contract shall not be filed for recording with any governmental body.

15.2    Notice

Any notice, consent or approval required or permitted to be given under this Contract shall be in writing and shall be deemed to have been given upon (i) hand delivery, (ii) one business day after being deposited with Federal Express or another reliable overnight courier service for next day deliver, (iii) upon facsimile or e-mail transmission (except that if the date of such transmission is not a business day, then such notice shall be deemed to be given on the first business day following such transmission), or (iv) two business days after being deposited in the United States mail, registered or certified mail, postage prepaid, return receipt required, and addressed as follows:

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To Seller:	c/o AvalonBay Communities, Inc. 2050 Main Street, Suite 1200 Irvine, California 92614 Attention: Tim Walters, Senior Vice President - Investments Fax: (949) 724-9208 e-mail: twalters@avalonbay.com
	c/o AvalonBay Communities, Inc. Ballston Tower 671 N. Glebe Road, Suite 800 Arlington, Virginia 22203 Attention: Brian Lerman, Esq., Director - Senior Counsel Fax: (703) 329-4830 Email: brian_lerman@avalonbay.com
And to: To Buyer:	Goulston & Storrs 400 Atlantic Avenue Boston, Massachusetts 02110 Attention: Steven Schwartz, Esq. Fax: (617) 574-7636 e-mail: sschwartz@goulstonstorrs.com Resource Real Estate, Inc. 1845 Walnut Street, 18th Floor Philadelphia, PA 19103 Attention: Pamela Arms Telephone: 215-640-6607 Fax No.: 215-761-0491 Email: parms@resourcerei.com
With a copy to:	Resource Real Estate, Inc. 1845 Walnut Street, 18th Floor Philadelphia, PA 19103 Attention: Aldie Jennings Loubier, Esq. Telephone: 215-209-4424 Fax No.: 215-553-8426 Email: aloubier@resourcerei.com
To Escrow Agent:	First American Title Insurance Company 666 3rd Avenue, 5th Floor New York, New York 10017 Attention: Phillip Salomon, Esq. Fax: (212) 331-0428 File number: 3020-618689

or such other address as either party may from time to time specify in writing to the other.

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15.3    Captions

The captions in this Contract are inserted only for the purpose of convenient reference and in no way define, limit or prescribe the scope or intent of this Contract or any part hereof.

15.4    Successors and Assigns

(a)    This Contract shall be binding upon the parties hereto and their respective successors and assigns.

(b)    Subject to Buyer's right to assign this Contract to an entity controlled by or under common control with Buyer or its affiliates prior to Closing without Seller’s consent, in which case Buyer shall remain fully liable hereunder, Buyer may not assign this Contract nor any of the rights or benefits thereof including, without limitation, the benefit of the representations and warranties contained in Article 11 hereof, to any third party either before or after the Closing without the written consent of Seller which may be given or withheld in Seller’s sole discretion, and any such unauthorized attempted assignment shall be null and void.

15.5    Governing Law

The laws of the state, commonwealth, or federal district in which the Property is located (the “State”) shall govern the validity, construction, enforcement and interpretation of this Contract.

15.6    Multiple Counterparts

This Contract may be executed in any number of identical counterparts. If so executed, each of such counterparts shall constitute this Contract. In proving this Contract, it shall not be necessary to produce or account for more than one such counterpart.

15.7    Entire Agreement

The parties understand and agree that their entire agreement is contained herein and that no warranties, guarantees, statements, or representations shall be valid or binding on a party unless set forth in this Contract. It is further understood and agreed that all prior understandings and agreements heretofore had between the parties are merged in this Contract which alone fully and completely expresses their agreement and that the same is entered into after full investigation, neither party relying on any statement or representation not embodied in this Contract. This Contract may be changed, modified, altered or terminated only by a written agreement signed by the parties hereto.

15.8    Post‑Closing Obligations

After the Closing, Seller and Buyer shall cooperate with one another at reasonable times and on reasonable conditions and shall execute and deliver such instruments and documents as may be necessary in order fully to carry out the intent and purposes of the transactions contemplated hereby. Except for such instruments and documents as the parties were originally obligated to deliver by the terms of this Contract, such cooperation shall be without additional cost or liability. The provisions of this section shall survive the Closing and delivery of the Deed.

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15.9    Waiver of Jury Trial

EACH OF SELLER AND BUYER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT EITHER OR BOTH MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS CONTRACT OR ANY DOCUMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY.

15.10    Additional Offers

Seller shall not negotiate with, accept “back up” offers from, or enter into a binding or non-binding agreement with, any other party with respect to the purchase and sale of the Property.

15.11    Like-Kind Exchange

Each party agrees to cooperate reasonably with the other party in effecting an exchange transaction which includes the Property pursuant to Section 1031 of the United States Internal Revenue Code, provided that any exchange initiated by either party shall be at such party’s sole cost and expense, nor delay the Closing. In addition, the initiating party shall indemnify and hold the other party harmless from any and all cost, expense or liability incurred solely as a result of the other party accommodating such tax deferred exchange. The provisions of this paragraph shall survive the Closing indefinitely.

15.12    Time of the Essence

Time is of the essence of this Contract. As used in this Contract, the term “business day” shall mean any day other than a Saturday, Sunday or recognized federal holiday or a recognized state holiday of the State. If the last date for performance by either party under this Contract occurs on a day which is not a business day, then the last date for such performance shall be extended to the next occurring business day.

15.13    Rule 3-14 Compliance.

Seller shall provide to Buyer (at Buyer’s expense) copies of, or shall provide Buyer reasonable access to, such factual information as may be reasonably requested by Buyer, and in the possession or control of Seller, necessary to enable Buyer's auditor to conduct an audit, in accordance with Rule 3-14 of Securities and Exchange Commission Regulation S-X (“Regulation S-X”), of the income statements of the Property for the year to date of the year in which Closing occurs plus the one (1) immediately preceding calendar year.  Buyer shall be responsible for all costs associated with this audit.  Seller shall reasonably cooperate (at no cost to Seller) with Buyer’s auditor in the conduct of such audit, which will include verbal requests for information regarding internal controls and follow-up questions on the financial information provided to the Buyer.  In connection with the foregoing, (i) Buyer or its designated independent or other auditor may audit Seller’s operating statements of the Property, at Buyer’s expense, and Seller shall provide such documentation as Buyer or its auditor may reasonably request in order to complete such audit, and (ii) Seller shall furnish to Buyer such financial and other information as may be reasonably required by Buyer or any affiliate of Buyer to make any required filings with the Securities and Exchange Commission or other governmental authority.  Notwithstanding anything in this Section 15.13 to the contrary, (i) in no event shall Seller have any liability or obligation to Seller whatsoever arising out of, or in connection with, Buyer’s exercise of its rights under this Section 15.13, including without limitation, as a result of any information discovered by Buyer or any of its agents in its audits or other review of information provided

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pursuant to this Section, and (ii) the provisions of this Section 15.13 derogate from, or limit in any manner, the provisions of Article 10 hereof.

ARTICLE 16. CONFIDENTIALITY

Buyer agrees to hold all materials and information related to the Property and this transaction, including the existence and terms of this Contract, whether received from Seller, third parties, or generated by Buyer, in the strictest confidence and not disclose the same to any third parties; provided, however, Buyer may disclose such information for use only in connection with evaluating this transaction to its officers, directors, employees, consultants, attorneys, potential investors, potential lenders and their advisors and agents so long as such persons are informed by Buyer of the confidential nature of such information and are directed by Buyer to treat such information confidentially. If this Contract is terminated prior to the Closing Date, all such confidences shall continue to be maintained. In the event this Contract is terminated, whether before or after the Due Diligence Expiration Date, Buyer and its respective officers, directors, employees, consultants, advisors, attorneys, and agents shall deliver to the Seller, upon request, all documents and other materials, and all copies thereof, obtained from Seller or its agents in connection with this Contract. Any public announcement of this transaction shall be made only with the mutual approval of Seller and Buyer. Notwithstanding the foregoing, Seller and Buyer shall be permitted to make filings and disclosures related to the transactions contemplated by this Contract as may, in such party’s reasonable judgment, be required by applicable law, including, without limitation, disclosures required to be made to the Securities and Exchange Commission, provided such party obtains consent to the content of such disclosure from such other party, which consent cannot be unreasonably withheld, conditioned or delayed. Buyer shall be deemed to have obtained Seller’s consent to any disclosure (i) if Seller fails to respond to Buyer’s request for consent within two (2) business days and (ii) if the content of such disclosure is identical or substantially similar to the form 8-K approved by Seller prior to the date of this Contract. By execution of this Contract, Escrow Agent hereby agrees to maintain the existence of this Contract and the nature and details of the transaction contemplated hereby in confidence, unless Escrow Agent is required by law to disclose some or all of such information.

ARTICLE 17. DUTIES AND RESPONSIBILITIES OF ESCROW AGENT

17.1    Application of Deposit

Escrow Agent shall deliver the Deposit to Seller or Buyer promptly after receiving a joint written notice from Seller and Buyer directing the disbursement of the same, such disbursement to be made in accordance with such direction. If Escrow Agent receives written notice from Buyer or Seller that the party giving such notice is entitled to the Deposit, which notice shall describe with reasonable specificity the reasons for such entitlement, then Escrow Agent shall (i) promptly give notice to the other party of Escrow Agent's receipt of such notice and enclosing a copy of such notice and (ii) subject to the provisions of the following section, on the tenth (10^th) business day after the giving of the notice referred to in clause (i) above, deliver the Deposit to the party claiming the right to receive it.

17.2    Dispute

If Escrow Agent shall be uncertain as to its duties or actions hereunder or shall receive instructions or a notice from Buyer or Seller which are in conflict with instructions or a notice from the other party or which, in the reasonable opinion of Escrow Agent, are in conflict with any of the provisions of this Contract, it shall be entitled to take any of the following courses of action:

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(a)    Hold the Deposit (and any other documents received by Escrow Agent) as provided in this Contract and decline to take any further action until Escrow Agent receives a joint written direction from Buyer and Seller or any order of a court of competent jurisdiction directing the disbursement of the Deposit (and, if applicable such other documents), in which case Escrow Agent shall then disburse the Deposit (and, if applicable, such other documents) in accordance with such direction;

(b)    In the event of litigation between Buyer and Seller, Escrow Agent may deliver the Deposit (and any other documents received by Escrow Agent) to the clerk of any court in which such litigation is pending; or

(c)    Escrow Agent may deliver the Deposit (and any other documents received by Escrow Agent) to a court of competent jurisdiction and therein commence an action for interpleader, the cost thereof to Escrow Agent to be borne by whichever of Buyer or Seller does not prevail in the litigation.

17.3    Liability; Miscellaneous

(a)    Escrow Agent shall not be liable for any action taken or omitted in good faith and believed by it to be authorized or within the rights or powers conferred upon it by this Contract and it may rely, and shall be protected in acting or refraining from acting in reliance upon an opinion of counsel and upon any directions, instructions, notice, certificate, instrument, request, paper or other documents believed by it to be genuine and to have been made, sent, signed or presented by the proper party or parties. In no event shall Escrow Agent's liability hereunder exceed the aggregate amount of the Deposit. Escrow Agent shall be under no obligation to take any legal action in connection with the Deposit or this Contract or to appear in, prosecute or defend any action or legal proceedings which would or might, in its sole opinion, involve it in cost, expense, loss or liability unless, in advance, and as often as reasonably required by it, Escrow Agent shall be furnished with such security and indemnity as it finds reasonably satisfactory against all such cost, expense, loss or liability. Notwithstanding any other provision of this Contract, Buyer and Seller jointly indemnify and hold harmless Escrow Agent against any loss, liability or expense incurred without bad faith on its part and arising out of or in connection with its services under the terms of this Contract, including the cost and expense of defending itself against any claim of liability.

(b)    Escrow Agent shall not be bound by any modification of this Contract affecting Escrow Agent’s duties hereunder unless the same is in writing and signed by Buyer, Seller and Escrow Agent. From time to time on or after the date hereof, Buyer and Seller shall deliver or cause to be delivered to Escrow Agent such further documents and instruments that fall due, or cause to be done such further acts as Escrow Agent may reasonably request (it being understood that the Escrow Agent shall have no obligation to make any such request) to carry out more effectively the provisions and purposes of this Contract, to evidence compliance with this Contract or to assure itself that it is protected in acting hereunder.

(c)    Unless otherwise agreed in writing by Buyer and Seller, Escrow Agent shall serve hereunder without fee for its services as escrow agent, but shall be entitled to reimbursement for expenses incurred hereunder, which expenses shall be paid and borne equally by Buyer and Seller, unless such expenses are associated with litigation between Buyer and Seller, in which event they shall be borne by the party that does not prevail in the litigation. Escrow Agent agrees that it will not seek reimbursement for the services of its employees or partners, but only for its actual and reasonably incurred out‑of‑pocket expenses.

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ARTICLE 18.PROHIBITION OF CONDOMINIUM CONVERSION.

Buyer represents, warrants and covenants to Seller that, to the fullest extent permitted by law, Buyer shall not, for a period ending on December 31, 2019 (the “Termination Date”), convert the Property into condominiums or similar forms of subdivided ownership. In connection with the foregoing, Buyer further agrees that (a) the prohibition against condominium conversions is reasonable under the circumstances existing as of the date hereof, (b) if Buyer sells or otherwise transfers the Property prior to the Termination Date, then Buyer shall notify its buyer in writing of this restriction and include a similar prohibition against condominium conversions in any purchase and sale or similar agreement to so transfer the Property, (c) Buyer shall indemnify, defend, protect and hold the Seller Group harmless, from any and all claims, losses, proceedings, damages, causes of action, liability, costs or expenses (including attorneys' fees) resulting from Buyer’s breach of the representation, warranty and covenant contained in this Article 18, without in any way limiting the materiality of the other provisions of this Contract, the provisions of this Article 18 are material and included as a material portion of the consideration given by Buyer to Seller in exchange for Seller’s performance under this Contract, (e) Buyer acknowledges that Seller has given Buyer material concessions regarding this transaction in exchange for Buyer agreeing to the provisions of this Article 18, and (f) Buyer’s obligations under this Article 18 shall expressly survive the Closing and the delivery of the Deed. In addition, Buyer acknowledges and agrees that its breach of the terms and conditions of this Article 18 will constitute immediate and irreparable damage to the Seller, which cannot be fully and adequately compensated in money damages and which will warrant preliminary and other injunctive relief, an order for specific performance, and other equitable relief. In connection with the foregoing, Buyer further agrees that no bond or other security shall be required in obtaining such equitable relief and Buyer hereby consent to the remedy of an injunction or specific performance to the extent Seller is entitled thereto. Buyer acknowledges that Seller’s remedies hereunder are cumulative and other action may be taken and remedies enforced against it in the event of a breach of this Section. At the Closing, Buyer and Seller shall, at Seller’s election, incorporate the foregoing prohibition into the Deed or a memorandum of agreement (the “Memorandum”) which shall be recorded in the Official Records of Orange County at the Closing after the Deed but, in all events, prior to any deeds of trust or other instruments securing any financing obtained by Buyer to acquire the Property.

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IN WITNESS WHEREOF, the parties hereto have executed this Contract as of the day and date first written above.

SELLER:

LMI RIVERBEND LLC,

a Delaware limited liability company

By: Lake Mendota Investments LLC, a Delaware

limited liability company, its Manager

By: ASN Lake Mendota Investments LLC, a Delaware

limited liability company, its manager

By:    Archstone Residual JV, LLC, a Delaware

limited liability company, its sole member

By:    AVB Development Transactions, Inc., a

Maryland corporation, its Designated Manager

By:    /s/ Timothy Walters

Name: Timothy Walters

Title: SVP Investments

BUYER:

RESOURCE REAL ESTATE OPPORTUNITY OP, LP,

a Delaware limited partnership

By:    Resource Real Estate Opportunity REIT, Inc.,

a Maryland corporation, its general partner

By:    /s/ Steven R. Saltzman

Name: Steven R. Saltzman

Title: SVP and CFO

ESCROW AGENT:

FIRST AMERICAN TITLE INSURANCE COMPANY

By: /s/ Jack Feirman

Name: Jack Feirman

Title: Senior Underwriting Counsel

27

EXHIBIT A

DESCRIPTION OF REAL PROPERTY

LOTS 1 TO 7, INCLUSIVE, AND LOT A OF TRACT NO. 12374, IN THE CITY OF YORBA LINDA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON A MAP RECORDED IN BOOK 549, PAGES 10 TO 19 INCLUSIVE OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

EXCEPTING ALL MINERALS, OILS, GAS, PETROLEUM AND OTHER HYDROCARBON SUBSTANCES IN OR UNDER, OR WHICH MAY BE PRODUCED FROM SAID LAND WHICH UNDERLIES A PLANE PARALLEL TO AND 500 FEET BELOW THE PRESENT SURFACE OF SAID LAND, FOR THE PURPOSE OF PROSPECTING FOR, THE EXPLORATION, DEVELOPMENT, PRODUCTION, EXTRACTION AND TAKING OF SAID MINERALS, OIL, GAS, PETROLEUM AND OTHER HYDROCARBON SUBSTANCES FROM SAID LAND BY MEANS OF MINES, WELLS, DERRICKS AND/OR OTHER EQUIPMENT FROM SURFACE LOCATIONS ON ADJOINING OR NEIGHBORING LAND OR LYING OUTSIDE OF THE ABOVE DESCRIBED LAND, IT BEING UNDERSTOOD THAT THE OWNER OF SUCH MINERALS, OIL, GAS, PETROLEUM AND OTHER HYDROCARBON SUBSTANCES AS SET FORTH ABOVE, SHALL HAVE NO RIGHT TO ENTER UPON THE SURFACE OF THE ABOVE DESCRIBED LAND BEING CONVEYED BY THIS DEED, NOR TO USE ANY OF THE SAID LAND OR ANY PORTION THEREOF ABOVE SAID PLANE PARALLEL TO AND 500 FEET BELOW THE PRESENT SURFACE OF THE SAID LAND FOR ANY PURPOSE WHATSOEVER, AS RESERVED IN THE DEEDS RECORDED NOVEMBER 14, 1978 IN BOOK 12922, PAGE 519 AND OTHERS, OF OFFICIAL RECORDS.

A-1

EXHIBIT B

Personal Property Inventory

B-1

EXHIBIT C

RENT ROLL

C-1

EXHIBIT D

FORM OF DEED

RECORDING REQUESTED BY AND

WHEN RECORDED RETURN TO AND

MAIL TAX STATEMENT TO:

____________________________

____________________________

____________________________

Attn: _______________________

____________________________________________________________________________________

(space above line for Recorder's use only)

GRANT DEED

In accordance with Section 11932 of the California Revenue and Taxation Code, Grantor has declared the amount of the transfer tax which is due by a separate statement which is not being recorded with this Grant Deed.

FOR VALUE RECEIVED, ____________________, a __________________ hereby GRANTS to ____________________________, a __________________, all that certain real property in the City of _____________, County of ____________, State of California, described on Schedule 1 attached hereto and by this reference incorporated herein (the “Property”) subject only to those matters described on Schedule ___.

IN WITNESS WHEREOF, the undersigned has executed this Grant Deed as of ______________, 2015.

___________________________________________

By:___________________________

Print Name:____________________

Its:___________________________

D-1

STATE OF ________________)

) ss.

COUNTY OF ______________)

On ________________, 2015, before me, the undersigned, a Notary Public in and for said County and State, personally appeared ________________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the within instrument.

WITNESS my hand and official seal.

_____________________________

Notary Public

D-2

SCHEDULE 1

LEGAL DESCRIPTION OF THE PROPERTY

That certain real property situated in the State of California, County of Orange, described as follows:

D-3

EXHIBIT E

BILL OF SALE

LMI Riverbend LLC ("Seller"), for and in consideration of the sum of ten dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, does hereby bargain, sell, grant, transfer, assign, and convey to __________________________, a ___________________ ("Buyer"), its successors and assigns, for its and their own use and benefit, forever, any and all personal property owned by Seller and now at, in or upon or used in connection with certain real property and buildings, structures and other improvements located thereon and known as Archstone Yorba Linda, located in Yorba Linda, California, and more particularly described in Exhibit A attached hereto (the "Premises"). Said personal property to include the following:

All items of personal property owned by Seller and located on the Premises or used in connection with the ownership or operation of the Premises, described in Exhibit B attached hereto and incorporated herein by reference, including, without implied limitation, whether or not listed on Exhibit B, all furniture, fixtures, equipment, machines, apparatus, appliances, supplies and personal property of every nature and description and all replacements thereof), but expressly excluding the trade names, trade marks and service marks listed on Schedule A attached hereto, and items of personal or intangible property owned by Seller and used in connection with the Property as part of Seller’s integrated systems of ownership, management and/or operations of apartment projects, such as, by way of example and without limitation, key entry system, computer and phone systems and software, corporate licenses, and management and financial report systems and software.

Seller makes no warranty, express or implied, as to the condition of the personal property or its merchantability of fitness for any particular purpose. By its acceptance of this Bill of Sale, Buyer acknowledges that it has fully inspected the personal property and Buyer accepts the same in its present use and "as is condition".

E-1

Seller does hereby agree to warrant and defend title to said personal property other than the Trade Name and intangible property unto Buyer, its successors and assigns.

LMI RIVERBEND LLC,

a Delaware limited liability company

By: Lake Mendota Investments LLC, a Delaware

limited liability company, its Manager

By: ASN Lake Mendota Investments LLC, a Delaware

limited liability company, its manager

By:Archstone Residual JV, LLC, a Delaware

limited liability company, its sole member

By:AVB Development Transactions, Inc., a

Maryland corporation, its Designated Manager

By:                         (SEAL)

Name:

Title:

E-2

EXHIBIT F

ASSIGNMENT AND ASSUMPTION AGREEMENT (RE: LEASES)

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is made as of this _____ day of _______________, 2015, by and between Avalon California Value VIII, LLC ("Assignor") and _________________________, a ___________ ("Assignee").

Assignee has this date purchased from Assignor certain real property and the buildings, structures and other improvements located thereon (the "Premises"), known as _______________ in _________________, all more particularly described on Exhibit A attached hereto made a part hereof, and

WHEREAS, under the terms and conditions of the Purchase and Sale Contract pursuant to which the Premises were purchased, it was contemplated that Assignor and Assignee would enter into this Assignment;

NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto do hereby agree as follows:

1.Assignor hereby transfers and assigns to Assignee all right, title and interest of Assignor, if any, in and to the following described property:

(a)All leases, subleases and other occupancy agreements relating to or affecting the Premises, together with all guarantees of obligations of tenants and other parties under such leases and agreements, said leases and other agreements being more fully described in Exhibit B attached hereto and hereby made a part hereof (all together, the "Leases"); and

(b)The current outstanding balance of all security deposits, key deposits, pet deposits, and prepaid rents, together with all interest accrued thereon if payable under the Leases or applicable law, as more fully described on Exhibit C hereto but excluding any non-refundable deposits (collectively, the "Security Deposits");

(c)Assignor shall indemnify and defend Assignee against, and hold Assignee harmless from, any and all claims, liabilities and costs arising out of or relating to Assignor’s failure to perform any duty or obligation of Assignor under the Leases or with respect to the Security Deposits attributable to the acts or omissions of Assignor and arising prior to the date hereof.

TO HAVE AND TO HOLD all of the foregoing unto the Assignee, its successors and assigns, from and after the date hereof, subject to the terms, covenants, conditions and provisions contained herein.

2.Assignee hereby accepts the foregoing assignment of the Leases and Security Deposits and does hereby covenant that with respect thereto:

(a)Assignee shall indemnify and defend Assignor against, and hold Assignor harmless from, any and all claims, liabilities and costs arising out of or relating to Assignee's failure to perform any duty or obligation of Assignee under the Leases or with respect to the Security Deposits attributable to the acts or omissions of Assignee and arising after the date hereof.

F-1

(b)Assignee hereby assumes all the duties and obligations of Assignor accruing from and after the date hereof under the Leases and with respect to the Security Deposits.

3.This Agreement and the obligations of the parties hereunder shall survive the closing of the transactions referred to in the Purchase and Sale Contract, shall be binding upon and inure to the benefit of the parties hereto, their respective legal representatives, successors and assigns and shall be governed by and construed in accordance with the laws of the State of California and may not be modified or amended except by written agreement signed by both parties.

IN WITNESS WHEREOF, the parties have executed this agreement under seal on the day and year first above written.

ASSIGNOR:

LMI RIVERBEND LLC,

a Delaware limited liability company

By: Lake Mendota Investments LLC, a Delaware

limited liability company, its Manager

By: ASN Lake Mendota Investments LLC, a Delaware

limited liability company, its manager

By:Archstone Residual JV, LLC, a Delaware

limited liability company, its sole member

By:AVB Development Transactions, Inc., a

Maryland corporation, its Designated Manager

By:                     (SEAL)

Name:

Title:

ASSIGNEE:

F-2

EXHIBIT G

ASSIGNMENT AND ASSUMPTION AGREEMENT (RE: CONTRACTS AND INTANGIBLE PROPERTY)

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is made as of this _____ day of _______________, 2015, by and between __________________

________________________, a ________________________, ("Assignor") and ________________________, a ________________________ ("Assignee").

WITNESSETH:

WHEREAS, Assignee has this date purchased from Assignor certain real property and buildings, structures and other improvements located thereon (the "Premises"), known as ______________ in ____________________, all more particularly described on Exhibit A attached hereto made a part hereof, and

WHEREAS, under the terms and conditions of the Purchase and Sale Contract pursuant to which the Premises were purchased, it was contemplated that Assignor and Assignee would enter into this Assignment;

NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto do hereby agree as follows:

1.Assignor hereby transfers and assigns to Assignee all right, title and interest of Assignor, if any, in and to the following described property:

(a)All those certain service, supply and maintenance agreements, equipment leases and other contracts with respect to or affecting the Premises which Buyer has elected to assume pursuant to the Purchase and Sale Contract for the Premises, all as specifically listed on Schedule "Contracts" attached hereto and made a part hereof (collectively, the "Contracts"); and

(b)only to the extent the same are in Assignor’s possession or control and are assignable without payment, all intangible property owned by Assignor and related to or used in connection with the ownership, use or operation of the Premises (collectively the “Intangible Property”), including, without limitation, (1) all local transferable telephone exchange and facsimile numbers but excluding all toll free numbers, (2) all plans and specifications, engineering plans and studies, floor plans, landscape plans and warranties and guaranties; (3) all licenses, permits, certificates of occupancy, approvals, dedications, subdivision maps and entitlements now or hereafter issued, approved or granted by governmental agencies having jurisdiction over the Premises or any portion thereof, together with all renewals and modifications thereof (collectively, the “Licenses and Permits”); (4) all social media accounts and the logo, photo, video and e-brochure files for the Premises but excluding any such matters which include or are related to the Marks (as defined in the Purchase and Sale Contract ) or which are proprietary to Assignor or its affiliates.

Assignor shall indemnify and defend Assignee against, and hold Assignee harmless from, any and all claims, liabilities and costs arising out of or relating to Assignor’s failure to perform any duty or obligation of Assignor under the Contracts or with respect to the Contracts attributable to the acts or omissions of Assignor and arising prior to the date hereof.

G-1

TO HAVE AND TO HOLD all of the foregoing unto the Assignee, its successors and assigns, from and after the date hereof, subject to the terms, covenants, conditions and provisions contained herein.

2.Assignee hereby accepts the foregoing assignment of the Contracts and the Intangible Property and does hereby covenant that with respect thereto Assignee hereby assumes all the duties and obligations of Assignor accruing from and after the date hereof under the Contracts.

Assignee shall indemnify and defend Assignor against, and hold Assignor harmless from, any and all claims, liabilities and costs arising out of or relating to Assignee’s failure to perform any duty or obligation of Assignee under the Contracts or with respect to the Contracts attributable to the acts or omissions of Assignee and arising after the date hereof.

3. This Agreement and the obligations of the parties hereunder shall survive the closing of the transactions referred to in the Purchase and Sale Contract, shall be binding upon and inure to the benefit of the parties hereto, their respective legal representatives, successors and assigns and shall be governed by and construed in accordance with the laws of the State of California and may not be modified or amended except by written agreement signed by both parties.

G-2

IN WITNESS WHEREOF, the parties have executed this agreement on the day and year first above written.

ASSIGNOR:

LMI RIVERBEND LLC,

a Delaware limited liability company

By: Lake Mendota Investments LLC, a Delaware

limited liability company, its Manager

By: ASN Lake Mendota Investments LLC, a Delaware

limited liability company, its manager

By:Archstone Residual JV, LLC, a Delaware

limited liability company, its sole member

By:AVB Development Transactions, Inc., a

Maryland corporation, its Designated Manager

By:                     (SEAL)

Name:

Title:

ASSIGNEE:

G-3

SCHEDULE “CONTRACTS”

G-4

EXHIBIT H

CERTIFICATION OF NON-FOREIGN STATUS

ENTITY TRANSFEROR

Section 1445 of the Internal Revenue Code provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. For U.S. tax purposes (including section 1445), the owner of a disregarded entity (which has legal title to a U.S. real property interest under local law) will be the transferor of the property and not the disregarded entity. To inform the transferee that withholding of tax is not required upon the disposition of a U.S. real property interest by [name of transferor] (“Transferor”), the undersigned hereby certifies the following on behalf of Transferor:

1.Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations);

2.Transferor is not a disregarded entity as defined in §1.1445-2(b)(2)(iii) [or Transferor is a disregarded entity and __________ is its sole member];

3.Transferor’s U.S. employer identification number is _________________; and

4.Transferor’s office address is __________________________________________________.

Transferor understands that this certification may be disclosed to the Internal Revenue Service by transferee and that any false statement contained herein could be punished by fine, imprisonment or both.

Under penalties of perjury, I declare that I have examined this certification, and to the best of my knowledge and belief it is true, correct, and complete, and I further declare that I have authority to sign this document on behalf of Transferor.

H-1

Date: _____________________

LMI RIVERBEND LLC,

a Delaware limited liability company

By: Lake Mendota Investments LLC, a Delaware

limited liability company, its Manager

By: ASN Lake Mendota Investments LLC, a Delaware

limited liability company, its manager

By:Archstone Residual JV, LLC, a Delaware

limited liability company, its sole member

By:AVB Development Transactions, Inc., a

Maryland corporation, its Designated Manager

By:                 (SEAL)

Name:

Title:

H-2

EXHIBIT I

SCHEDULE OF OPERATING CONTRACTS

Operating Contracts that MUST be assumed by Buyer

Operating Contracts that MAY be assumed by Buyer

I-1

EXHIBIT J

SCHEDULE OF LITIGATION

J-2

EXHIBIT K

ASSIGNMENT AND ASSUMPTION AGREEMENT (RE: OWNER PARTICIPATION AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS)

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is made as of this _____ day of _______________, 2015, with an effective date of [insert actual transfer date] (the “Effective Date”) by and between __________________

________________________, a ________________________, ("Assignor") and ________________________, a ________________________ ("Assignee"), and consented and agreed to by the City of Yorba Linda (“City”).

WITNESSETH:

WHEREAS, Assignee has as of the Effective Date purchased from Assignor certain real property and buildings, structures and other improvements located thereon (the "Premises"), known as ______________ in ____________________, all more particularly described on Exhibit A attached hereto made a part hereof, and

WHEREAS, under the terms and conditions of the Purchase and Sale Contract pursuant to which the Premises were purchased, it was contemplated that Assignor and Assignee would enter into this Assignment;

NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto do hereby agree as follows:

1.Assignor hereby transfers and assigns to Assignee all right, title and interest of Assignor, if any, in and to the following: Owner Participation Agreement and Declaration of Restrictive Covenants by and between the Yorba Linda Redevelopment Agency and Yorba Linda Associates dated August 12, 1985 and recorded December 17, 1985 as Instrument No. 85-505113 of the Official Records of Orange County, California (the “Official Records”), as affected by (a) that certain Assignment and Assumption of Owner Participation Agreement and Declaration of Restrictive Covenants” dated November 30, 2006 and recorded December 1, 2006 as Instrument No. 2006-000805653 of the Official Records, (b) that certain Consent to Transfer of Property between Yorba Linda Associates and Seller dated November 13, 2006 and recorded December 1, 2006 as Instrument No. 2006-000805655 of the Official Records, and (c) that certain First Amendment to Owner Participation Agreement and Declaration of Restrictive Covenants, dated as of April 1, 2015, by and between Assignor and City and recorded ___________ as Instrument No. _____________ of the Official Records (collectively, the “Declaration”).

Assignor shall indemnify and defend Assignee against, and hold Assignee harmless from, any and all claims, liabilities and costs arising out of or relating to Assignor’s failure to perform any duty or obligation of Assignor under the Declaration or with respect to the Declaration attributable to the acts or omissions of Assignor and arising prior to the Effective Date.

K-1

TO HAVE AND TO HOLD all of the foregoing unto the Assignee, its successors and assigns, from and after the Effective Date, subject to the terms, covenants, conditions and provisions contained herein.

2.Assignee hereby accepts the foregoing assignment of the Declaration and does hereby covenant that with respect thereto Assignee hereby assumes all the duties and obligations of Assignor accruing from and after the Effective Date under the Declaration.

Assignee shall indemnify and defend Assignor against, and hold Assignor harmless from, any and all claims, liabilities and costs arising out of or relating to Assignee’s failure to perform any duty or obligation of Assignee under the Declaration or with respect to the Declaration attributable to the acts or omissions of Assignee and arising after the date the Effective Date.

3. This Agreement and the obligations of the parties hereunder shall survive the closing of the transactions referred to in the Purchase and Sale Contract, shall be binding upon and inure to the benefit of the parties hereto, their respective legal representatives, successors and assigns and shall be governed by and construed in accordance with the laws of the State of California and may not be modified or amended except by written agreement signed by both parties.

4. All notices to be given to the Assignee shall be addressed as follows:

Resource Real Estate, Inc.

1845 Walnut Street, 18th Floor

Philadelphia, PA 19103

Attention: Pamela Arms

Telephone: 215-640-6607

Fax No.: 215-761-0491

Email: parms@resourcerei.com

with a copy to:

Resource Real Estate, Inc.

1845 Walnut Street, 18th Floor

Philadelphia, PA 19103

Attention: Aldie Jennings Loubier, Esq.

Telephone: 215-209-4424

Fax No.: 215-553-8426

Email: aloubier@resourcerei.com

K-2

IN WITNESS WHEREOF, the parties have executed this agreement on the day and year first above written.

ASSIGNOR:

LMI RIVERBEND LLC,

a Delaware limited liability company

By: Lake Mendota Investments LLC, a Delaware

limited liability company, its Manager

By: ASN Lake Mendota Investments LLC, a Delaware

limited liability company, its manager

By:Archstone Residual JV, LLC, a Delaware

limited liability company, its sole member

By:AVB Development Transactions, Inc., a

Maryland corporation, its Designated Manager

By:                     (SEAL)

Name:

Title:

ASSIGNEE:

RESOURCE REAL ESTATE OPPORTUNITY OP, LP,

a Delaware limited partnership

By:Resource Real Estate Opportunity REIT, Inc.,

a Maryland corporation, its general partner

By:__________________________

Name: Alan F. Feldman

Title: Chief Executive Officer

K-3

City hereby consents to the foregoing assignment and assumption, and releases Assignor from any obligations arising under the Declaration from and after the Effective Date.

City of Yorba Linda

By:

Name:

Title:

K-4

Exhibit L

OWNER PARTICIPATION AGREEMENT AND DECLARATION

OF RESTRICTIVE COVENANTS ESTOPPEL

TO: Resource Real Estate Opportunity OP, LP, and its lenders, successors and assigns (collectively, “Resource Parties”)

RE: Owner Participation Agreement and Declaration of Restrictive Covenants by and between the Yorba Linda Redevelopment Agency and Yorba Linda Associates dated August 12, 1985 and recorded December 17, 1985 as Instrument No. 85-505113 of the Official Records of Orange County, California (the “Official Records”), as affected by that certain Assignment and Assumption of Owner Participation Agreement and Declaration of Restrictive Covenants dated November 30, 2006 and recorded December 1, 2006 as Instrument No. 2006-000805653 of the Official Records and that certain Consent to Transfer of Property between Yorba Linda Associates and LMI Riverbend LLC (“Seller”) dated November 13, 2006 and recorded December 1, 2006 as Instrument No. 2006-000805655 of the Official Records (collectively, the “Declaration”) encumbering, among other real property, certain real property and the improvements thereon commonly known as Archstone Yorba Linda located in the City of Yorba Linda, County of Orange, State of California, as more particularly described on Exhibit “A” attached hereto (the “Property”)

Resource Real Estate Opportunity OP, LP, a Delaware limited partnership (“Buyer”), has entered into that certain Purchase and Sale Contract and Joint Escrow Instructions dated __________ with Seller to purchase the Property. Buyer is requiring Seller to provide this Estoppel Certificate as a condition to the closing of the sale. The City of Yorba Linda (the “City”) is the successor to the Yorba Linda Redevelopment Agency.

With full knowledge that the Resource Parties are relying on this Estoppel Certificate, the City hereby certifies as follows:

(1) Attached hereto as Exhibit “B” is a true, correct and complete copy of the Declaration, which has not been modified or amended except as set forth on Exhibit “B”.

(2) Neither Seller, nor the Property, is in default of any covenant, term, condition or restriction contained in the Declaration.

(3) There are no conditions or circumstances with regard to Seller or the Property that have constituted or would constitute a default of any of the terms, covenants, conditions and/or restrictions contained in the Declaration.

(4) The Resource Parties may rely upon the truth and accuracy of the certifications contained herein, and said certifications shall be binding upon the City and shall inure to the benefit of Resource Parties and their successors and/or assigns.

L-1

(5) The undersigned is duly authorized to execute this Estoppel Certificate on behalf of the City.

Dated this ____ day of _____________, 2015.

CITY:

CITY OF YORBA LINDA

By: ____________________

Name: __________________

Title: ___________________

L-2

EXHIBIT A

LEGAL DESCRIPTION

L-3

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Alan F. Feldman, certify that:

1) I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2015 of Resource Real Estate Opportunity REIT, Inc.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

	RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.
August 13, 2015	By:	/s/ Alan F. Feldman
		Alan F. Feldman
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Steven R. Saltzman, certify that:

1) I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2015 of Resource Real Estate Opportunity REIT, Inc.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

	RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.
August 13, 2015	By:	/s/ Steven R. Saltzman
		Steven R. Saltzman
		Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Resource Real Estate Opportunity REIT, Inc. (“the Company”) on Form 10-Q for the quarter ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Alan F. Feldman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.
August 13, 2015	By:	/s/ Alan F. Feldman
		Alan F. Feldman
		Chief Executive Officer
		(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Resource Real Estate Opportunity REIT, Inc. (“the Company”) on Form 10-Q for the quarter ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Steven R. Saltzman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.
August 13, 2015	By:	/s/ Steven R. Saltzman
		Steven R. Saltzman
		Chief Financial Officer
		(Principal Financial Officer)

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EQUITY (Tables)

6 Months Ended

Jun. 30, 2015

Equity [Abstract]

Schedule of Shares Issued

As of June 30, 2015, the Company had issued shares of its $0.01 par value common stock as follows (dollars in thousands):

	Shares Issued		Gross Proceeds
Shares issued through private offering	1,263,727		$	12,582
Shares issued through primary public offering (1)	62,485,461		622,077
Shares issued through stock distributions	2,132,266		—
Shares issued through distribution reinvestment plan	5,064,974		48,366
Shares issued in conjunction with the Advisor's initial investment, net of 4,500 share conversion	15,500		155
Total	70,961,928		$	683,180
Shares redeemed	(414,918	)
Total shares outstanding as of June 30, 2015	70,547,010

(1)    Includes 276,056 shares issued to the Advisor.

Schedule of Distributions

For the six months ended June 30, 2015, the Company paid aggregate distributions of $20.9 million, including $6.5 million of distributions paid in cash and $14.4 million of distributions reinvested in shares of common stock through the Company's distribution reinvestment plan, as follows (in thousands):

Record Date	Per Common Share	Distribution Date	Distributions Invested in Shares of Common Stock		Aggregate Cash Distribution		Total Aggregate Distribution
January 29, 2015	$0.05	January 30, 2015	$	2,391	$	1,070	$	3,461
February 26, 2015	0.05	February 27, 2015	2,392		1,081		3,473
March 30, 2015	0.05	March 31, 2015	2,400		1,080		3,480
April 29, 2015	0.05	April 30, 2015	2,408		1,084		3,492
May 28, 2015	0.05	May 29, 2015	2,418		1,088		3,506
June 29, 2015	0.05	June 30, 2015	2,423		1,093		3,516
			$	14,432	$	6,496	$	20,928

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ACQUISITIONS AND FORECLOSURES - Acquisitions (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2015 USD ($) Property	Jun. 30, 2015 USD ($) Property	Jun. 30, 2014 USD ($)
Business Acquisition [Line Items]
Number of acquired properties | Property	2	4
Valuation period		12 months
Total Revenues	$ 28,412	$ 56,146	$ 45,800
Net Loss	(12,476)	4,563	$ (26,661)
Woodmoor [Member]
Business Acquisition [Line Items]
Total Revenues	664	881
Net Loss	339	799
Acquisition Costs	0	692
The Springs at Gilbert Meadows [Member]
Business Acquisition [Line Items]
Total Revenues	959	1,089
Net Loss	430	1,271
Acquisition Costs	0	1,005
Archstone Yorba Linda [Member]
Business Acquisition [Line Items]
Total Revenues	623	623
Net Loss	1,059	1,059
Acquisition Costs	2,761	2,761
Villages at Bonita Glen [Member]
Business Acquisition [Line Items]
Total Revenues	185	185
Net Loss	771	771
Acquisition Costs	1,351	1,351
Multifamily Community [Member]
Business Acquisition [Line Items]
Total Revenues	2,431	2,778
Net Loss	2,599	3,900
Acquisition Costs	$ 4,112	$ 5,809

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LOANS HELD FOR INVESTMENT AND PREFERRED EQUITY INVESTMENT, NET - Narrative (Details)			1 Months Ended	3 Months Ended		6 Months Ended
	Nov. 12, 2014 USD ($) Unit	Mar. 15, 2011 USD ($) Loan	May. 31, 2015 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Dec. 31, 2014 USD ($)	Apr. 18, 2013 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of nonperforming promissory notes | Loan		2
Number of performing promissory notes | Loan		2
Purchase price of promissory note		$ 3,100,000
Loan made to purchaser				$ 4,491,000		$ 4,491,000		$ 5,270,000	$ 800,000
Proceeds from loans			$ 583,000
Applied escrow balance			$ 58,000
Impairment loss				(130,000)
Charge-offs				130,000	$ 0	130,000	$ 0
Spring Hills Investors Limited Partner, LLC [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan made to purchaser				$ 3,500,000		$ 3,500,000		$ 3,500,000
Payments to acquire preferred equity investment	$ 3,500,000
Contractual obligation	1,500,000
Contractual obligation, incremental payment	$ 150,000
Dividend receivable rate, percentage	12.00%
Monthly dividend receivable rate, percentage	7.00%
Spring Hills Investors Limited Partner, LLC [Member] | Multifamily Community [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of units | Unit	606

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EQUITY - Common Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Class of Stock [Line Items]
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Shares Issued	70,961,928	69,469,001
Gross Proceeds	$ 683,180
Shares redeemed	(414,918)
Total shares outstanding at end of period	70,547,010
Private Placement [Member]
Class of Stock [Line Items]
Shares Issued	1,263,727
Gross Proceeds	$ 12,582
Public Placement [Member]
Class of Stock [Line Items]
Shares Issued	62,485,461
Gross Proceeds	$ 622,077
Public Placement [Member] | Common Stock [Member] | Advisor [Member]
Class of Stock [Line Items]
Shares issued	276,056
Stock Dividends [Member]
Class of Stock [Line Items]
Shares Issued	2,132,266
Gross Proceeds	$ 0
Distribution Reinvestment Plan [Member]
Class of Stock [Line Items]
Shares Issued	5,064,974
Gross Proceeds, distribution reinvestment plan	$ 48,366
Advisor [Member]
Class of Stock [Line Items]
Shares Issued	15,500
Gross Proceeds	$ 155
Shares converted	4,500

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SUBSEQUENT EVENTS - Narrative (Details) $ in Millions	Jul. 20, 2015 USD ($)
The Reserve at Mount Moriah [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Sale price	$ 5.5

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SUPPLEMENTAL CASH FLOW INFORMATION (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Non-cash financing and investing activities:
Stock issued from the distribution reinvestment plan	$ 14,432	$ 9,441
Stock distributions issued	0	3,333
Cash distributions on common stock declared but not yet paid	0	2,263
Deferred financing costs and escrow deposits funded directly by mortgage note and revolving credit facility	10,709	505
Assets and liabilities assumed in acquisitions:
Other assets assumed	0	3,231
Debt assumed	40,185	133,882
Other liabilities assumed	99	2,646
Noncontrolling interests	0	18,901
Rental properties, net	40,284	152,198
Cash paid during the period for:
Interest	$ 9,388	$ 4,598

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IDENTIFIED INTANGIBLE ASSETS, NET (Tables)

6 Months Ended

Jun. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Rental and Antennae Leases

Expected amortization for the rental and antennae leases for the next five 12-month periods ending June 30, and thereafter, is as follows (in thousands): 

2016	$	3,608
2017	16
2018	16
2019	16
2020	16
Thereafter	89
	$	3,761

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EQUITY - Distributions (Details) $ / shares in Units, $ in Thousands								6 Months Ended
	Jun. 30, 2015 USD ($) $ / shares	May. 31, 2015 $ / shares	May. 29, 2015 USD ($)	Apr. 30, 2015 USD ($) $ / shares	Mar. 31, 2015 USD ($) $ / shares	Feb. 27, 2015 USD ($) $ / shares	Jan. 30, 2015 USD ($) $ / shares	Jun. 30, 2015 USD ($) Distribution shares
Securities Financing Transaction [Line Items]
Total Aggregate Distribution								$ 20,928
Aggregate Cash Distribution								6,496
Distributions Invested in Shares of Common Stock								$ 14,432
Number of stock distributions | Distribution								12
Increase in accumulated deficit from stock distributions								$ 21,300
Record Date of January 29, 2015 [Member]
Securities Financing Transaction [Line Items]
Total Aggregate Distribution							$ 3,461
Aggregate Cash Distribution							1,070
Distributions Invested in Shares of Common Stock							$ 2,391
Per Common Share | $ / shares							$ 0.05
Record Date of February 26, 2015 [Member]
Securities Financing Transaction [Line Items]
Total Aggregate Distribution						$ 3,473
Aggregate Cash Distribution						1,081
Distributions Invested in Shares of Common Stock						$ 2,392
Per Common Share | $ / shares						$ 0.05
Record Date of March 30, 2015 [Member]
Securities Financing Transaction [Line Items]
Total Aggregate Distribution					$ 3,480
Aggregate Cash Distribution					1,080
Distributions Invested in Shares of Common Stock					$ 2,400
Per Common Share | $ / shares					$ 0.05
Record Date April 29, 2015 [Member]
Securities Financing Transaction [Line Items]
Total Aggregate Distribution				$ 3,492
Aggregate Cash Distribution				1,084
Distributions Invested in Shares of Common Stock				$ 2,408
Per Common Share | $ / shares				$ 0.05
Record Date of May 28, 2015 [Member]
Securities Financing Transaction [Line Items]
Total Aggregate Distribution			$ 3,506
Aggregate Cash Distribution			1,088
Distributions Invested in Shares of Common Stock			$ 2,418
Per Common Share | $ / shares		$ 0.05
Record Date of June 29, 2015 [Member]
Securities Financing Transaction [Line Items]
Total Aggregate Distribution	$ 3,516
Aggregate Cash Distribution	1,093
Distributions Invested in Shares of Common Stock	$ 2,423
Per Common Share | $ / shares	$ 0.05
Dividend Distribution One [Member]
Securities Financing Transaction [Line Items]
Number of stock distributions | Distribution								7
Common stock distributions (in shares) | shares								0.015
Dividend Distribution Two [Member]
Securities Financing Transaction [Line Items]
Number of stock distributions | Distribution								2
Common stock distributions (in shares) | shares								0.0075
Dividend Distribution Three [Member]
Securities Financing Transaction [Line Items]
Number of stock distributions | Distribution								1
Common stock distributions (in shares) | shares								0.00585
Dividend Distribution Four [Member]
Securities Financing Transaction [Line Items]
Number of stock distributions | Distribution								2
Common stock distributions (in shares) | shares								0.005

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IDENTIFIED INTANGIBLE ASSETS, NET - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, net	$ 3,761		$ 3,761		$ 2,081
Weighted average remaining life			6 months		5 months
Amortization expense	1,500	$ 5,600	$ 3,000	$ 10,600
Acquired in-place leases [Member]
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, net	3,800		3,800		$ 2,100
Accumulated amortization	25,400		25,400		$ 26,500
Antennae Leases [Member]
Finite-Lived Intangible Assets [Line Items]
Annual expected amortization expense through 2025	$ 16		$ 16

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DERIVATIVES AND HEDGING ACTIVITIES (Details) $ in Thousands	Jun. 30, 2015 USD ($) derivative	Dec. 31, 2014 USD ($) derivative	Dec. 31, 2013 derivative
Interest Rate Cap [Member]
Derivatives, Fair Value [Line Items]
Asset Derivatives, Fair Value | $	$ 80	$ 114
Cash flow hedges [Member]
Derivatives, Fair Value [Line Items]
Number of Instruments	6	6	6
Cash flow hedges [Member] | Interest Rate Cap [Member]
Derivatives, Fair Value [Line Items]
Number of Instruments	6
Notional Amount | $	$ 102,013

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OPERATING EXPENSE LIMITATION WAIVER (Details) - Jun. 30, 2015 - Quarter	Total
OPERATING EXPENSE LIMITATION WAIVER [Abstract]
Percent of average invested assets	2.00%
Net income of operating expense, percent	25.00%
Number of most recently completed fiscal quarters for which Company must limit its operating expenses	4

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EQUITY - Convertible Stock (Details) - $ / shares	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Equity [Abstract]
Convertible stock shares outstanding (in shares)	50,000	50,000
Convertible stock, par value (in dollars per share)	$ 0.01	$ 0.01
Convertible stock held by advisor and affiliated persons (in shares)	49,063
Convertible stock held by outside investors (in shares)	937
Percentage on original share price (in hundredths)	100.00%
Percentage non-compounded annual return, option one	10.00%
Aggregate percentage return (in hundredths)	10.00%
Conversion ratio	0.00002
Common Stock, Convertible, Triggering Event, If Lesser of, Option One	25.00%
Common Stock, Convertible, Triggering Event, If Lesser of, Option Two	15.00%
Percentage non-compounded annual return, option two	6.00%

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2015

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 19 - SUBSEQUENT EVENTS

On July 20, 2015, the Company entered into an agreement to sell its interest in The Reserve at Mount Moriah, located in Memphis, Tennessee, for $5.5 million with an expected closing date in the third quarter of 2015. The Company expects to recognize a gain on the sale in the three months ended September 30, 2015.

The Company has evaluated subsequent events and determined that no events have occurred, other than those disclosed above, which would require an adjustment to or additional disclosure in the consolidated financial statements.

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LOANS HELD FOR INVESTMENT AND PREFERRED EQUITY INVESTMENT, NET - Aging Schedule of Investments (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Loans Held for Investment [Line Items]
Loans held for investment	$ 752	$ 1,523
Preferred equity investment, net	3,471	3,462
Loans held for investment and preferred equity investments, net	4,223	4,985
Current [Member]
Loans Held for Investment [Line Items]
Loans held for investment	752	1,523
30-89 Days [Member]
Loans Held for Investment [Line Items]
Loans held for investment	0	0
90-180 Days [Member]
Loans Held for Investment [Line Items]
Loans held for investment	0	0
Greater than 180 Days [Member]
Loans Held for Investment [Line Items]
Loans held for investment	$ 0	$ 0

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NATURE OF BUSINESS AND OPERATIONS - Narrative (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended	51 Months Ended
	Jun. 30, 2015	Dec. 31, 2014	Dec. 13, 2013
Securities Financing Transaction [Line Items]
Entity organized date	Jun. 03, 2009
Common stock issued through distribution reinvestment plan	$ 14,432
Public Placement [Member]
Securities Financing Transaction [Line Items]
Common stock issued through distribution reinvestment plan (in shares)	1,492,928	2,410,424	1,161,623
Common stock issued through distribution reinvestment plan	$ 14,432	$ 22,900
Public Placement [Member] | Common Stock [Member]
Securities Financing Transaction [Line Items]
Proceeds from issuance of stock under private offering			$ 645,800
Issuance of common stock (in shares)			64,926,311
Public Placement [Member] | Common Stock [Member] | Advisor [Member]
Securities Financing Transaction [Line Items]
Issuance of common stock (in shares)			276,056

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FAIR VALUE MEASURES AND DISCLOSURES - Schedule of Carrying and Fair Values (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Carrying Amount [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment and preferred equity investments, net	$ 4,223	$ 4,985
Mortgage notes payable	(577,279)	(444,168)
Credit facilities	(56,394)	(45,586)
Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment and preferred equity investments, net	4,663	4,985
Mortgage notes payable	(576,901)	(450,269)
Credit facilities	$ (56,394)	$ (45,586)

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ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables)

6 Months Ended

Jun. 30, 2015

Equity [Abstract]

Components of Accumulated Other Comprehensive Loss

The following table presents the changes in each component of accumulated other comprehensive loss for the six months ended June 30, 2015 (in thousands):

	Net unrealized loss on derivatives
January 1, 2015	$	(266	)
Unrealized loss on designated derivatives	(125		)
June 30, 2015	$	(391	)

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LOANS HELD FOR INVESTMENT AND PREFERRED EQUITY INVESTMENT, NET - Terms of Loans Held for Investment (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014	Apr. 18, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Unpaid Principal Balance	$ 4,491	$ 5,270	$ 800
Unamortized Discount	(247)	(261)
Deferred (fees) expenses, net	(21)	(24)
Net book value	4,223	4,985
Spring Hills Investors Limited Partner, LLC [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Unpaid Principal Balance	3,500	3,500
Unamortized Discount	0	0
Deferred (fees) expenses, net	(29)	(38)
Net book value	$ 3,471	3,462
Interest rate	12.00%
Average monthly payment	$ 35
Trail Ridge Note [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Unpaid Principal Balance	991	994
Unamortized Discount	(247)	(261)
Deferred (fees) expenses, net	8	14
Net book value	$ 752	747
Interest rate	7.50%
Average monthly payment	$ 8
Heatherwood Note [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Unpaid Principal Balance		776
Unamortized Discount		0
Deferred (fees) expenses, net		0
Net book value		$ 776

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS - Narrative (Details) - Jun. 30, 2015 - USD ($)	Total
Related Party Transaction [Line Items]
Insurance pool, amount of general liability losses covered	$ 25,000
RAI [Member]
Related Party Transaction [Line Items]
Insurance pool, amount of property losses covered	2,500,000.0
Catastrophic insurance, amount of losses covered	$ 140,000,000.0
Advisor [Member]
Related Party Transaction [Line Items]
Agreement term (in years)	1 year
Percentage acquisition fee paid to advisor (in hundredths)	2.00%
Monthly asset management fee, percent	0.08%
Disposition fee	50.00%
Debt disposition fee, as a percentage of the contract sales price (in hundredths)	2.75%
Debt financing fee, percent	0.50%
Maximum reimbursement limit on gross offering proceeds, percent	2.50%
Resource Real Estate Opportunity Manager LLC [Member]
Related Party Transaction [Line Items]
Property management fee, percent	4.50%
Occupancy, percent	75.00%
Term for which Manager receives minimum property management fee if properties are less than 75% occupied	12 months
Construction management fee, percent	5.00%
Debt servicing fee, percent	2.75%

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MORTGAGE NOTES PAYABLE - Narrative (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Guarantor Obligations [Line Items]
Restricted cash related to escrow deposits	$ 7,100,000		$ 7,100,000		$ 6,900,000
Payment guarantee
Guarantor Obligations [Line Items]
Guaranty for completion and payment of costs of completion (no less than)	7,000,000.0		7,000,000.0
Acquisitions of Rental Property [Member] | Interest Expense [Member]
Guarantor Obligations [Line Items]
Increase (decrease) in interest expense due to fair value adjustments	(184,000)	$ 49,000	(374,000)	$ (305,000)
Covenants included in Mortgage for Archstone Yorba Linda [Member]
Guarantor Obligations [Line Items]
Earn-out holdback allowed when criteria are met	$ 7,500,000		$ 7,500,000

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RENTAL PROPERTIES, NET (Details) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2015 USD ($)	Dec. 31, 2014 USD ($) Property	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($) Property	Jun. 30, 2014 USD ($)
Investments in rental properties [Abstract]
Land	$ 191,392	$ 122,137		$ 191,392
Building and improvements	822,147	666,912		822,147
Furniture, fixtures and equipment	25,297	21,495		25,297
Construction in progress	3,440	3,005		3,440
Rental properties, gross	1,042,276	813,549		1,042,276
Less: accumulated depreciation	(55,918)	(38,295)		(55,918)
Rental properties, net	986,358	$ 775,254		986,358
Depreciation expense	10,600		$ 7,400	19,400	$ 14,300
Gain (loss) on disposal of assets	$ (1,372)		$ (21)	$ (2,481)	$ (1,648)
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of Properties Held for Sale | Property				0
The Alcove, Cityside Crossing and The Redford [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of Properties Held for Sale | Property		3
Sale price		$ 36,800

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SUPPLEMENTAL CASH FLOW INFORMATION

6 Months Ended

Jun. 30, 2015

Supplemental Cash Flow Elements [Abstract]

SUPPLEMENTAL CASH FLOW INFORMATION

NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION

The following table presents supplemental cash flow information (in thousands):

	Six Months Ended
	June 30,
	2015		2014
Non-cash financing and investing activities:
Stock issued from the distribution reinvestment plan	$	14,432	$	9,441
Stock distributions issued	—		3,333
Cash distributions on common stock declared but not yet paid	—		2,263
Deferred financing costs and escrow deposits funded directly by mortgage note and revolving credit facility	10,709		505
Assets and liabilities assumed in acquisitions:
Other assets assumed	—		3,231
Debt assumed	40,185		133,882
Other liabilities assumed	99		2,646
Noncontrolling interests	—		18,901
Rental properties, net	40,284		152,198
Cash paid during the period for:
Interest	$	9,388	$	4,598

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CREDIT FACILITIES - Summary of Revolving Credit Facilities (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Line of Credit Facility [Line Items]
Credit facilities	$ 56,394		$ 56,394		$ 45,586
Line of Credit Facility, Current Availability	6,732		$ 6,732
Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility [Line Items]
Basis spread on variable rate			0.1865%
Revolving Credit Facility [Member] | Bank of America [Member]
Line of Credit Facility [Line Items]
Credit facilities	20,894		$ 20,894		10,086
Line of Credit Facility, Current Availability	$ 6,732		$ 6,732
Line of Credit Facility, Current Interest Rate	3.19%		3.19%
Line of Credit Facility, Weighted Average Interest Rate	3.19%	3.15%	3.21%	3.15%
Basis spread on variable rate			3.1865%
Revolving Credit Facility [Member] | U.S. Bank [Member]
Line of Credit Facility [Line Items]
Credit facilities	$ 23,000		$ 23,000		23,000
Line of Credit Facility, Current Interest Rate	2.14%		2.14%
Line of Credit Facility, Weighted Average Interest Rate	2.14%	2.14%	2.13%	2.14%
Basis spread on variable rate			2.1365%
Revolving Credit Facility [Member] | PNC Bank [Member]
Line of Credit Facility [Line Items]
Credit facilities	$ 12,500		$ 12,500		$ 12,500
Line of Credit Facility, Current Interest Rate	2.19%		2.19%
Line of Credit Facility, Weighted Average Interest Rate	2.18%	2.15%	2.18%	2.16%
Basis spread on variable rate			2.1865%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details)	3 Months Ended			6 Months Ended
	Jun. 30, 2015 USD ($)	Dec. 31, 2014 USD ($) Property	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($) Distribution Property shares	Jun. 30, 2014 USD ($)
Real Estate Assets Held for Development and Sale [Abstract]
Number of Properties Held for Sale | Property				0
Asset Impairment Charges [Abstract]
Impairment charges	$ 0		$ 0	$ 0	$ 0
Allocation of Purchase Price of Acquired Assets [Abstract]
Initial purchase price allocation subject to change, period				1 year
Revenue Recognition [Abstract]
Future minimum rental payments, thereafter	0			$ 0
Tenant Receivable [Abstract]
Allowance for uncollectable receivables	29,687	$ 57,300		$ 29,687
Income Taxes [Abstract]
Number of years entity may be precluded from REIT qualifications				4 years
Earnings Per Share [Abstract]
Antidilutive securities not included in the diluted earnings per share calculations | shares				50,000
Number of stock distributions | Distribution				12
Dividend Distribution One [Member]
Earnings Per Share [Abstract]
Number of stock distributions | Distribution				7
Dividend Distribution Two [Member]
Earnings Per Share [Abstract]
Number of stock distributions | Distribution				2
Dividend Distribution Three [Member]
Earnings Per Share [Abstract]
Number of stock distributions | Distribution				1
Dividend Distribution Four [Member]
Earnings Per Share [Abstract]
Number of stock distributions | Distribution				2
Common Stock [Member] | Dividend Distribution One [Member]
Earnings Per Share [Abstract]
Number of stock distributions | Distribution				7
Common stock dividend rate				1.50%
Common Stock [Member] | Dividend Distribution Two [Member]
Earnings Per Share [Abstract]
Number of stock distributions | Distribution				2
Common stock dividend rate				0.75%
Common Stock [Member] | Dividend Distribution Three [Member]
Earnings Per Share [Abstract]
Number of stock distributions | Distribution				1
Common stock dividend rate				0.585%
Common Stock [Member] | Dividend Distribution Four [Member]
Earnings Per Share [Abstract]
Number of stock distributions | Distribution				2
Common stock dividend rate				0.50%
Operating Leases (Excluding Commercial and Antenna Rentals) [Member]
Revenue Recognition [Abstract]
Future minimum rental, current	53,900,000			$ 53,900,000
Future minimum rental payments, in two years	314,000			314,000
Commercial Rental Properties and Antenna Rentals [Member]
Revenue Recognition [Abstract]
Future minimum rental, current	245,000			245,000
Future minimum rental payments, in two years	231,000			231,000
Future minimum rental payments, in three years	113,000			113,000
Future minimum rental payments, in four years	40,000			40,000
Future minimum rental payments, in five years	41,000			41,000
Future minimum rental payments, thereafter	$ 0			$ 0
California [Member] | Geographic Concentration Risk [Member]
Risks and Uncertainties [Abstract]
Percentage of real estate investments				17.00%
Texas [Member] | Geographic Concentration Risk [Member]
Risks and Uncertainties [Abstract]
Percentage of real estate investments				25.00%
Georgia [Member] | Geographic Concentration Risk [Member]
Risks and Uncertainties [Abstract]
Percentage of real estate investments				18.00%
The Alcove, Cityside Crossing and The Redford [Member]
Real Estate Assets Held for Development and Sale [Abstract]
Number of Properties Held for Sale | Property		3

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RENTAL PROPERTIES, NET (Tables)

6 Months Ended

Jun. 30, 2015

Real Estate Investments, Net [Abstract]

Summary of Investments in Rental Properties

The Company’s investments in rental properties consisted of the following (in thousands):

	June 30, 2015			December 31, 2014
Land	$	191,392		$	122,137
Building and improvements	822,147			666,912
Furniture, fixtures and equipment	25,297			21,495
Construction in progress	3,440			3,005
	1,042,276			813,549
Less: accumulated depreciation	(55,918		)	(38,295		)
	$	986,358		$	775,254

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SUPPLEMENTAL CASH FLOW INFORMATION (Tables)

6 Months Ended

Jun. 30, 2015

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

The following table presents supplemental cash flow information (in thousands):

	Six Months Ended
	June 30,
	2015		2014
Non-cash financing and investing activities:
Stock issued from the distribution reinvestment plan	$	14,432	$	9,441
Stock distributions issued	—		3,333
Cash distributions on common stock declared but not yet paid	—		2,263
Deferred financing costs and escrow deposits funded directly by mortgage note and revolving credit facility	10,709		505
Assets and liabilities assumed in acquisitions:
Other assets assumed	—		3,231
Debt assumed	40,185		133,882
Other liabilities assumed	99		2,646
Noncontrolling interests	—		18,901
Rental properties, net	40,284		152,198
Cash paid during the period for:
Interest	$	9,388	$	4,598

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DISPOSITION OF PROPERTIES AND DISCONTINUED OPERATIONS (Details) - USD ($)	Jun. 30, 2015	Mar. 02, 2015	Feb. 27, 2015	Jan. 29, 2015	Jan. 26, 2015	Sep. 19, 2014	Jul. 01, 2014	Jun. 16, 2014
Campus Club Apartments [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Sale price								$ 10,500,000
Gain (loss) on dispositions								$ 2,600,000
Hilltop Village [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Sale price							$ 0
Gain (loss) on dispositions							$ (493,000)
Sale of membership interest, percent sold							49.00%
Arcadia at Westheimer [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Sale price						$ 18,100,000
Gain (loss) on dispositions						$ 8,300,000
The Alcove - Houston, TX [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Sale price					$ 11,100,000
Gain (loss) on dispositions					$ 3,800,000
107th Avenue Apartments [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Sale price				$ 250,000
Gain (loss) on dispositions				$ 50,000
Redford Apartments [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Sale price			$ 33,000,000
Gain (loss) on dispositions			$ 15,300,000
Cityside Apartments [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Sale price		$ 24,500,000
Gain (loss) on dispositions		$ 10,000,000
One Hundred Chevy Chase Apartments [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Sale price	$ 13,500,000
Gain (loss) on dispositions	$ 4,400,000

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Principles of Consolidation (Details) - Jun. 30, 2015 - Unit	Total
RRE Iroquois, LP [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	133
RRE Cannery Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	156
RRE Williamsburg Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	976
RRE Park Forest Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	216
RRE Foxwood Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	220
RRE Flagstone Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	292
RRE Deerfield Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	166
RRE Armand Place Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	244
RRE Autumn Wood Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	206
RRE Village Square Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	271
RRE Nob Hill Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	192
RRE Brentdale Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	412
RRE Jefferson Point Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	208
RRE Centennial Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	276
RRE Pinnacle Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	224
RRE Jasmine Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	437
RRE River Oaks Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	314
RRE Nicollet Ridge Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	339
PRIP Addison Place, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	403
PRIP Evergreen at Coursey Place, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	352
PRIP 500, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	146
PRIP 1102, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	160
PRIP 11128, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	342
PRIP Pines, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	248
RRE Chisolm Place Holdings LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	142
RRE Berkley Run Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	194
RRE Berkley Trace Holdings LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	165
RRE Merrywood LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	228
RRE Sunset Ridge Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	324
RRE Parkridge Place Holding, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	536
RRE Woodmoor Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	208
RRE Gilbert Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	459
RRE Bonita Glen Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	295
RRE Yorba Linda Holdings, LLC [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	400
Champion Farms [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	264
Ownership %	70.00%
Fieldstone [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	266
Ownership %	83.00%
Conifer Place [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	420
Ownership %	42.50%
Stone Ridge [Member]
Subsidiary or Equity Method Investee [Line Items]
Number of Units	188
Ownership %	77.70%

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LOANS HELD FOR INVESTMENT AND PREFERRED EQUITY INVESTMENT, NET (Tables)

6 Months Ended

Jun. 30, 2015

Investments, Debt and Equity Securities [Abstract]

Components of Investments

The following table presents the components of loans held for investment and preferred equity investment, net (in thousands):

	June 30, 2015		December 31, 2014
Loans held for investment, net	$	752	$	1,523
Preferred equity investment, net	3,471		3,462
	$	4,223	$	4,985

Aging of Loans Held for Investment and Preferred Equity Method Investment

The following table provides the aging of the Company’s loans held for investment and preferred equity investment(dollars in thousands):

	June 30, 2015						December 31, 2014
	Loans held for investment		Preferred equity investments		Total		Loans held for investment		Preferred equity investments		Total
Current	$	752	$	3,471	$	4,223	$	1,523	$	3,462	$	4,985
Delinquent:
30−89 days	—		—		—		—		—		—
90−180 days	—		—		—		—		—		—
Greater than 180 days	—		—		—		—		—		—
	$	752	$	3,471	$	4,223	$	1,523	$	3,462	$	4,985

Schedule of Credit Quality of Loans Held for Investment, Net, and Preferred Equity Investment

The following table provides information about the credit quality of the Company’s loans held for investment, net and preferred equity investment (in thousands):

	June 30, 2015		December 31, 2014
Performing	$	4,223	$	4,985
Nonperforming	—		—
Total	$	4,223	$	4,985

Terms of Loans Held for Investment

The following table presents details of the balance and terms of the loan held for investment and the preferred equity investment held at June 30, 2015 (in thousands):

	Unpaid Principal Balance		Unamortized Discount			Deferred (fees) expenses, net			Net book value		Maturity Date	Interest Rate	Average monthly payment
Loan- Trail Ridge	$	991	$	(247	)	$	8		$	752	10/28/2021	7.5%	$	8
Preferred equity investment	3,500		—			(29		)	3,471		4/1/2017	12%	$	35
	$	4,491	$	(247	)	$	(21	)	$	4,223

The following table presents details of the balance and terms of loans held for investment and the preferred equity investment held at December 31, 2014 (in thousands):

	Unpaid Principal Balance		Unamortized (Discount)			Deferred (fees) expenses, net			Net book value
Loan- Trail Ridge	$	994	$	(261	)	$	14		$	747
Loan- Heatherwood	776		—			—			776
Preferred equity investment	3,500		—			(38		)	3,462
	$	5,270	$	(261	)	$	(24	)	$	4,985

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ACQUISITIONS AND FORECLOSURES (Tables)

6 Months Ended

Jun. 30, 2015

Business Combinations [Abstract]

Schedule of purchase price allocation

The table below summarizes the Company's wholly-owned acquisitions during the six months ended June 30, 2015 and the respective fair values assigned (dollars in thousands):

Multifamily Community Name	City and State	Date of Acquisition	Purchase Price (1)		Land		Building and Improvements		Furniture, Fixture and Equipment		Intangible Assets		Other Assets		Other Liabilities			Fair Valued Assigned
Villages at Bonita Glen	Chula Vista, CA	6/16/2015	$	49,050	$	17,208	$	32,651	$	506	$	1,130	$	9	$	(30,008	)	$	21,496
Yorba Linda	Yorba Linda, CA	6/1/2015	118,000		39,322		76,124		590		1,964		76		(232		)	117,844
Springs at Gilbert Meadows	Gilbert, AZ	3/19/2015	36,000		8,487		25,867		716		931		—		(152		)	35,849
Woodmoor	Austin, TX	2/26/2015	24,000		5,586		17,493		291		629		—		(12,961		)	11,038

(1) Purchase price excludes closing costs and acquisition expenses.

Schedule of Revenues, Losses and Acquisition Costs

The table below summarizes the total revenues, net losses, and acquisition costs of the Company's acquisitions during the three and six months ended June 30, 2015 (dollars in thousands):

	Three Months Ended June 30, 2015						Six Months Ended June 30, 2015
Multifamily Community	Total Revenues		Net Loss		Acquisition Costs		Total Revenues		Net Loss		Acquisition Costs
Woodmoor	$	664	$	339	$	—	$	881	$	799	$	692
Springs at Gilbert Meadows	959		430		—		1,089		1,271		1,005
Yorba Linda	623		1,059		2,761		623		1,059		2,761
Villages at Bonita Glen	185		771		1,351		185		771		1,351
	$	2,431	$	2,599	$	4,112	$	2,778	$	3,900	$	5,809

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Principles of Consolidation

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

Subsidiary	Apartment Complex	Number of Units	Property Location
RRE Opportunity Holdings, LLC	N/A	N/A	N/A
Resource Real Estate Opportunity OP, LP	N/A	N/A	N/A
RRE Charlemagne Holdings, LLC	N/A	N/A	N/A
RRE 107th Avenue Holdings, LLC (“107th Avenue”)	(c)	N/A	N/A
RRE Westhollow Holdings, LLC (“Westhollow”)	(b)	N/A	N/A

RRE Crestwood Holdings, LLC (“Crestwood”)	(a)(b)	N/A	N/A
RRE Iroquois, LP (“Vista”)	Vista Apartment Homes	133	Philadelphia, PA
RRE Iroquois Holdings, LLC	N/A	N/A	N/A
RRE Campus Club Holdings, LLC (“Campus Club”)	(b)	N/A	N/A
RRE Bristol Holdings, LLC (“Bristol”)	(c)	N/A	N/A
RRE Cannery Holdings, LLC (“Cannery”)	Cannery Lofts	156	Dayton, OH
RRE Williamsburg Holdings, LLC (“Williamsburg”)	Williamsburg	976	Cincinnati, OH
WPL Holdings, LLC	N/A (d)	N/A	Cincinnati, OH
RRE Skyview Holdings, LLC ("Skyview")	(c)	N/A	N/A
RRE Park Forest Holdings, LLC ("Park Forest")	Mosaic	216	Oklahoma City, OK
RRE Foxwood Holdings, LLC ("Foxwood")	The Reserve at Mt. Moriah	220	Memphis, TN
RRE Flagstone Holdings, LLC ("Flagstone")	The Alcove	292	Houston, TX
RRE Deerfield Holdings, LLC ("Deerfield")	Deerfield	166	Hermantown, MN
RRE Kenwick Canterbury Holdings, LLC ("Kenwick & Canterbury")	(c)	N/A	N/A
RRE Armand Place Holdings, LLC ("Armand")	Ivy at Clear Creek	244	Houston, TX
RRE Autumn Wood Holdings, LLC ("Autumn Wood")	Retreat at Rocky Ridge	206	Hoover, AL
RRE Village Square Holdings, LLC ("Village Square")	Trailpoint at the Woodlands	271	Houston, TX
RRE Nob Hill Holdings, LLC ("Nob Hill")	Affinity at Winter Park	192	Winter Park, FL
RRE Brentdale Holdings, LLC ("Brentdale")	The Westside Apartments	412	Plano, TX
RRE Jefferson Point Holdings, LLC ("Jefferson Point")	Tech Center Square	208	Newport News, VA
RRE Centennial Holdings, LLC ("Centennial")	Verona Apartment Homes	276	Littleton, CO
RRE Pinnacle Holdings, LLC ("Pinnacle")	Skyview Apartment Homes	224	Westminster, CO
RRE Jasmine Holdings, LLC ("Jasmine")	The Nesbit Palisades	437	Alpharetta, GA
RRE River Oaks Holdings, LLC ("River Oaks")	Maxwell Townhomes	314	San Antonio, TX
RRE Nicollet Ridge Holdings, LLC ("Nicollet Ridge")	Meridian Pointe	339	Burnsville, MN
RRE Addison Place, LLC ("Addison Place")	The Estates at Johns Creek	403	Alpharetta, GA
PRIP Coursey, LLC ("Evergreen at Coursey Place")	Evergreen at Coursey Place (e)	352	Baton Rouge, LA
PRIP 3700, LLC ("Champion Farms")	N/A (e)	N/A	N/A
PRIP 10637, LLC ("Fieldstone")	N/A (e)	N/A	N/A
PRIP 500, LLC ("Pinehurst")	Pinehurst (e)	146	Kansas City, MO
PRIP 1102, LLC ("Pheasant Run")	Pheasant Run (e)	160	Lee's Summit, MO
PRIP 11128, LLC ("Retreat at Shawnee")	Retreat at Shawnee (e)	342	Shawnee, KS
PRIP 6700, LLC ("Hilltop Village")	(b)(e)	N/A	N/A
PRIP 3383, LLC ("Conifer Place")	N/A (e)	N/A	N/A
PRIP Stone Ridge, LLC ("Stone Ridge")	N/A (e)	N/A	N/A
PRIP Pines, LLC ("Pines of York")	Pines of York (e)	248	Yorktown, VA
PRIP 5060/6310, LLC ("Governor Park")	(b)(e)	N/A	N/A
RRE Chisholm Place Holdings LLC ("Chisholm Place")	Chisholm Place	142	Plano, TX
RRE Berkeley Run Holdings, LLC ("Berkley Run")	Perimeter Circle	194	Atlanta, GA
RRE Berkeley Trace Holdings LLC ("Berkley Trace")	Perimeter 5550	165	Atlanta, GA
RRE Merrywood LLC ("Merrywood")	Aston at Cinco Ranch	228	Katy, TX
RRE Sunset Ridge Holdings, LLC ("Sunset Ridge")	Sunset Ridge	324	San Antonio, TX
RRE Parkridge Place Holdings, LLC ("Parkridge Place")	Calloway at Las Colinas	536	Irving, TX
RRE Spring Hill Holdings, LLC ("Spring Hill")	N/A	N/A	N/A
RRE Woodmoor Holdings, LLC ("Woodmoor")	Woodmoor	208	Austin, TX
RRE Gilbert Holdings, LLC ("Springs at Gilbert")	Springs at Gilbert Meadows	459	Gilbert, AZ

RRE Bonita Glen Holdings, LLC ("Bonita")	Villages at Bonita Glen	295	Chula Vista, CA
RRE Yorba Linda Holdings, LLC ("Yorba Linda")	Yorba Linda	400	Yorba Linda, CA

N/A - Not Applicable

(a) - Discontinued operations

(b) - Sold prior to 2015

(c) - Sold in 2015

(d) - Subsidiary holds a portion of the Williamsburg parking lot    

(e) - Wholly-owned subsidiary of RRE Charlemagne Holdings, LLC

All intercompany accounts and transactions have been eliminated in consolidation.

The consolidated financial statements reflect the Company's accounts and the accounts of the Company's majority-owned and/or controlled subsidiaries. The Company follows the provisions of Accounting Standards Codification (“ASC”) Topic 810, “Consolidation,” and accordingly consolidates entities that are variable interest entities (“VIEs”) where it has determined that it is the primary beneficiary of such entities. Once it has been determined that the Company holds a variable interest in a VIE, management performs a qualitative analysis to determine (i) if the Company has the power to direct the matters that most significantly impact the VIE's financial performance; and (ii) if the Company has the obligation to absorb the losses of the VIE that could potentially be significant to the VIE or the right to receive the benefits of the VIE that could potentially be significant to the VIE. If the Company's interest possesses both of these characteristics, the Company is deemed to be the primary beneficiary and would be required to consolidate the VIE. The Company will continually assess its involvement with VIEs and re-evaluate the requirement to consolidate them. Noncontrolling interests are presented and disclosed as a separate component of stockholders' equity (not as a liability or other item outside of stockholders' equity). Consolidated net (loss) income includes the noncontrolling interests’ share of (loss) income. All changes in the Company’s ownership interest in a subsidiary are accounted for as stockholders' equity transactions if the Company retains its controlling financial interest in the subsidiary. The portions of these entities that the Company does not own are presented as noncontrolling interests as of the dates and for the periods presented in the consolidated financial statements. The consolidated financial statements include the accounts of the Company's majority-owned and/or controlled subsidiaries as follows:

Subsidiary	Ownership %	Apartment Complex	Number of Units	Property Location
Springhurst Housing Partners, LLC	70.0%	Champion Farms	264	Louisville, KY
Glenwood Housing Partners I, LLC	83.0%	Fieldstone	266	Woodlawn, OH
FPA/PRIP Conifer, LLC	42.5%	Conifer Place	420	Norcross, GA
DT Stone Ridge, LLC	77.7%	Stone Ridge	188	Columbia, SC

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Assets Held for Sale

The Company presents the assets and liabilities of any rental properties which have been sold subsequent to the balance sheet date, or otherwise qualify as held for sale, separately in the Consolidated Balance Sheets. Real estate assets held for sale are measured at the lower of carrying amount or fair value less cost to sell. Both the real estate and the corresponding liabilities are presented separately in the Consolidated Balance Sheets. Subsequent to classification of an asset as held for sale, no further depreciation is recorded. At December 31, 2014, the Company had three rental properties included in assets held for sale. At June 30, 2015, there were no rental properties included in assets held for sale.

Rental Properties

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

Buildings	27.5 years
Building improvements	3.0 to 27.5 years
Tenant improvements	Shorter of lease term or expected useful life

Concentration of Risk

At June 30, 2015, the Company's real estate investments in California, Texas and Georgia represented 17%, 25% and 18% of the net book value of the Company's rental properties, respectively. As a result, the geographic concentration of the Company's portfolio makes it particularly susceptible to adverse economic developments in the California, Texas and Georgia real estate markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for multifamily rental properties resulting from the local business climate, could adversely affect the Company's operating results and its ability to make distributions to stockholders.

Impairment of Long Lived Assets

When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for permanent 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.

An impairment loss will be recorded to the extent that the carrying value exceeds the estimated fair value of a property to be held and used.  For properties held for sale, the impairment loss would be the adjustment to fair value less the estimated cost to dispose of the asset.  There were no impairment charges during the three and six months ended June 30, 2015 and 2014.

Loans Held for Investment, Net

The Company records acquired performing loans held for investment at cost and reviews them for potential impairment at each balance sheet date.  The Company considers a loan to be impaired if one of two conditions exists.  The first condition is, if based on current information and events, management believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.  The second condition is if the loan is deemed to be a troubled-debt restructuring (“TDR”) where a concession has been given to a borrower in financial difficulty.  A TDR may not have an associated specific loan loss allowance if the principal and interest amount is considered recoverable based on current market conditions, expected collateral performance and/or guarantees made by the borrowers.

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, as a practical expedient, the fair value of the collateral.  If a loan is deemed to be impaired, the Company records a reserve for loan losses through a charge to income for any shortfall.    

Interest income from performing loans held for investment is recognized based on the contractual terms of the loan agreement.  Fees related to any buy down of the interest rate are deferred as prepaid interest income and amortized over the term of the loan as an adjustment to interest income.  The initial investment made in a purchased performing loan includes the amount paid to the seller plus fees.  The initial investment frequently differs from the related loan’s principal amount at the date of the purchase.  The difference is recognized as an adjustment of the yield over the life of the loan.  Closing costs related to the purchase of a performing loan held for investment are amortized over the term of the loan and accreted as an adjustment to interest income.

The Company may acquire real estate loans at a discount due to the credit quality of such loans and the respective borrowers under such loans.  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 held for investment.  The EIR that is calculated when the loan held for investment is acquired remains constant and is the basis for subsequent impairment testing and income recognition.  However, if the amount and timing of future cash collections are not reasonably estimable, the Company accounts for the real estate receivable on the cost recovery method.  Under the cost recovery method of accounting, no income is recognized until the basis of the loan held for investment has been fully recovered. At June 30, 2015 and December 31, 2014, there are no loans held on the cost recovery method.

Preferred Equity Investment

The Company records preferred equity investments at cost and evaluates the collectibility of both interest and principal at each balance sheet date. A preferred equity investment is considered impaired when, based on current information and events, it is probable that the Company will not be able to collect all amounts due according to existing contractual terms. When an investment is impaired, the amount of the loss accrual is calculated by comparing the carrying amount of the investment to its estimated fair value. Fees paid, net of expenses, are deferred and recognized as an adjustment to interest and dividend income earned over the term of the agreement.

Dividend income is recognized based on the contractual terms of the preferred equity agreement. 

Allocation of the Purchase Price of Acquired and Foreclosed Assets

The cost of rental properties acquired directly as fee interests and through foreclosing on a loan are allocated to net tangible and intangible assets based on their relative fair values.  The Company allocates the purchase price of properties to acquired tangible assets, consisting of land, buildings, fixtures and improvements, and to 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. Fair value estimates are 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.  In addition, the Company may obtain independent appraisal reports. The information in the appraisal reports along with the aforementioned information available to the Company's management is used in allocating the purchase price. The independent appraisers have no involvement in management's allocation decisions other than providing market information.

In allocating the purchase price, management also includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period.  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 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.    

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 it were vacant.  Management’s estimates of value are made using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis).  Factors to be considered by management in its analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions and costs to execute similar leases.

The total amount of other intangible assets acquired is further allocated to 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 relationships 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 average remaining term of the respective leases.  The value of customer relationship intangibles are 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.  Should a tenant terminate its lease, the unamortized portion of the in-place lease value and customer relationship intangibles associated with that tenant would be charged to expense in that period.

The determination of the fair value of 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 purchase price allocations, which could impact the amount of the Company’s reported net income.  Initial purchase price allocations are subject to change until all information is finalized, which is generally within one year of the acquisition date.

Goodwill

The Company records the excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed as goodwill. Goodwill is not amortized but is tested for impairment at a level of reporting referred to as a reporting unit during the fourth quarter of each calendar year, or more frequently if events or changes in circumstances indicate that the asset might be impaired.

Revenue Recognition

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 and includes amounts expected to be received in later years in deferred rents.  The Company records property operating expense reimbursements due from tenants for common area maintenance, real estate taxes and other recoverable costs in the period in which the related expenses are incurred.

The future minimum rental payments to be received from noncancelable operating leases (excluding commercial and antenna rentals) are $53.9 million and $314,000 for the 12 month periods ending June 30, 2016 and 2017, respectively, and none thereafter. The future minimum rental payments to be received from noncancelable operating leases for commercial rental properties and antenna rentals are $245,000, $231,000, $113,000, $40,000, $41,000, and zero for the 12 month periods ending June 30, 2016, 2017, 2018, 2019, 2020, and thereafter, respectively.

Tenant Receivables

Tenant receivables are stated in the 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 June 30, 2015 and December 31, 2014, there were allowances for uncollectible receivables of $29,687 and $57,300, respectively.

Income Taxes

To maintain its REIT qualification for U.S. federal income tax purposes, the Company is generally required to distribute at least 90% of its taxable net income (excluding net capital gains) to its stockholders as well as comply with other requirements, including certain asset, income and stock ownership tests.  As a REIT, the Company is not subject to federal corporate income tax to the extent that it distributes 100% of its REIT taxable income each year.  If the Company fails to qualify as a REIT, and does not qualify for certain statutory relief provisions, it is 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 fails 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.  Generally, taxable income 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 taxable REIT subsidiaries (“TRS”). In general, the Company’s TRSs 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.  As of June 30, 2015 and December 31, 2014, the Company had no TRSs.

The Company evaluates the benefits from tax positions taken or expected to be taken in its tax return. Only the largest amount of benefits from tax positions that will more likely than not be sustainable upon examination are recognized by the Company.  The Company does not have any unrecognized tax benefits, nor interest and penalties, recorded in its consolidated financial statements and does not anticipate significant adjustments to the total amount of unrecognized tax benefits within the next 12 months.

The Company is subject to examination by the U.S. Internal Revenue Service and by the taxing authorities in other states in which the Company has significant business operations.  The Company is not currently undergoing any examinations by taxing authorities.

Earnings Per Share

Basic earnings per share are computed by dividing income available to common stockholders by the weighted-average common shares outstanding during the period.  Diluted earnings 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 15) are included in the diluted earnings per share calculations, as the actual number of shares of common stock that will be issuable upon conversion of the convertible stock, if any, is indeterminable at June 30, 2015 and would be anti-dilutive for the three months ended June 30, 2015 and the three and six months ended June 30, 2014 due to the net loss for the periods. For the purposes of calculating earnings per share, all common shares and per common share information in the financial statements have been adjusted retroactively for the effect of seven1.5% stock distributions, two0.75% stock distributions, one0.585% stock distribution and two0.5% stock distributions issued to stockholders. Common stock shares issued on the Consolidated Balance Sheets have also been adjusted retroactively for the effect of these 12 distributions.    

Reclassifications

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

Adoption of New Accounting Standards

Accounting Standards Issued But Not Yet Effective

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”)("ASU No. 2014-09"), “Revenue from Contracts with Customers”, which will replace most existing revenue recognition guidance in GAAP.  The core principle of ASU No. 2014-09 is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive 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. ASU No. 2014-09 will be effective for the Company beginning January 1, 2018, including interim periods in 2018, and allows for both retrospective and prospective methods of adoption. The Company is in the process of determining the method of adoption and assessing the impact of this guidance on the Company’s consolidated financial position, results of operations and cash flows.

In August 2014, FASB issued ASU No. 2014-15, "Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern." Under the new guidance, an entity should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. The guidance is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of the new requirements is not expected to have a material impact on the Company's consolidated financial statements.

In January 2015, FASB issued ASU No. 2015-01, "Income Statement - Extraordinary and Unusual Items (Subtopic 225-20), Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items" (“ASU No. 2015-01”). The amendments in ASU No. 2015-01 eliminate from GAAP the concept of extraordinary items. Although the amendment will eliminate the requirements for reporting entities to consider whether an underlying event or transaction is extraordinary, the presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. ASU No. 2015-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not expect the adoption of ASU No. 2015-01 to have a significant impact on its consolidated financial statements.

In February 2015, FASB issued ASU 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis" (“ASU 2015-02”), which makes certain changes to both the variable interest model and the voting model, including changes to (1) the identification of variable interests (fees paid to a decision maker or service provider), (2) the variable interest entity characteristics for a limited partnership or similar entity and (3) the primary beneficiary determination. ASU 2015-02 is effective for the Company beginning January 1, 2016. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU 2015-02 to have a significant impact on its consolidated financial statements.

In April 2015, FASB issued ASU 2015-03, "Simplifying the Presentation of Debt Issuance Costs" ("ASU 2015-03"), which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected. Upon adoption, the Company will apply the new guidance on a retrospective basis and adjust the balance sheet of each individual period presented to reflect the period-specific effects of applying the new guidance. This guidance is effective for the Company beginning January 1, 2016. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU 2015-03 to have a significant impact on its consolidated financial statements.

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MEASUREMENT PERIOD ADJUSTMENTS (Tables)

6 Months Ended

Jun. 30, 2015

Accounting Changes and Error Corrections [Abstract]

Schedule of Measurement Period Adjustments

Changes in the Paladin and The Estates at Johns Creek acquisitions are reflected in the tables below (in thousands):

Paladin

	January 28, 2014 (As initially reported)			Measurement period adjustment (1)			January 28, 2014 (As adjusted)
Land	$	44,292		$	(19,420	)	$	24,872
Building	149,155			18,364			167,519
Personal property	—			3,530			3,530
Intangible assets	5,861			(96		)	5,765
Other assets	3,231			(9		)	3,222
Goodwill	6,412			(5,148		)	1,264
Liabilities	(140,970		)	4,442			(136,528		)
Total net identifiable net assets	$	67,981		$	1,663		$	69,644

(1) Remaining balance ($1.7 million) of measurement period adjustments adjusted the noncontrolling interest balance.

The Estates at Johns Creek

	March 28, 2014 (As initially reported)		Measurement period adjustment			March 28, 2014 (As adjusted)
Land	$	18,137	$	(11,784	)	$	6,353
Building	51,843		10,406			62,249
Personal property	—		509			509
Intangible assets	520		869			1,389
Total net identifiable net assets	$	70,500	$	—		$	70,500

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FAIR VALUE MEASURES AND DISCLOSURES (Tables)

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Assets Measured at Fair Value on a Recurring Basis

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 as follows (in thousands):

	Level 1		Level 2		Level 3		Total
June 30, 2015
Assets:
Interest rate caps	$	—	$	80	$	—	$	80
	$	—	$	80	$	—	$	80
December 31, 2014
Assets:
Interest rate caps	$	—	$	114	$	—	$	114
	$	—	$	114	$	—	$	114

Carrying and Fair Values of the Company's Loans Held for Investment, Net, Mortgage Note Payable and Revolving Credit Facility

The carrying and fair values of the Company’s loans held for investment and preferred equity investments, net, mortgage note payable and revolving credit facilities were as follows (in thousands):

	June 30, 2015						December 31, 2014
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Loans held for investment and preferred equity investments, net	$	4,223		$	4,663		$	4,985		$	4,985
Mortgage notes payable	$	(577,279	)	$	(576,901	)	$	(444,168	)	$	(450,269	)
Credit facilities	$	(56,394	)	$	(56,394	)	$	(45,586	)	$	(45,586	)

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ACQUISITIONS AND FORECLOSURES - Real Estate Investments (Details) $ in Thousands	Jun. 16, 2015 USD ($)	Jun. 01, 2015 USD ($)	Mar. 19, 2015 USD ($)	Feb. 26, 2015 USD ($)	Jun. 30, 2015 Property
Business Acquisition [Line Items]
Number of properties | Property					37
Villages at Bonita Glen [Member]
Fair value of the net assets acquired:
Purchase Price	$ 49,050
Land	17,208
Building and Improvements	32,651
Furniture, Fixture and Equipment	506
Intangible Assets	1,130
Other Assets	9
Other Liabilities	(30,008)
Fair Valued Assigned	$ 21,496
Archstone Yorba Linda [Member]
Fair value of the net assets acquired:
Purchase Price		$ 118,000
Land		39,322
Building and Improvements		76,124
Furniture, Fixture and Equipment		590
Intangible Assets		1,964
Other Assets		76
Other Liabilities		(232)
Fair Valued Assigned		$ 117,844
The Springs at Gilbert Meadows [Member]
Fair value of the net assets acquired:
Purchase Price			$ 36,000
Land			8,487
Building and Improvements			25,867
Furniture, Fixture and Equipment			716
Intangible Assets			931
Other Assets			0
Other Liabilities			(152)
Fair Valued Assigned			$ 35,849
Woodmoor [Member]
Fair value of the net assets acquired:
Purchase Price				$ 24,000
Land				5,586
Building and Improvements				17,493
Furniture, Fixture and Equipment				291
Intangible Assets				629
Other Assets				0
Other Liabilities				(12,961)
Fair Valued Assigned				$ 11,038

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EQUITY - Redemption of Securities (Details) - Jun. 30, 2015 - shares	Total	Total
Equity [Abstract]
Shares redeemed (in shares)	41,912	200,082
Percentage of weighted-average number of outstanding shares during the 12-month period immediately prior to the effective date of the redemption that company will not redeem in excess of (in excess of 5%)	5.00%	5.00%
Period of time shares are outstanding prior to the effective date of redemption		12 months
Cash available for redemption, percentage of previous fiscal year operating cash flow		1.00%
Number of days' notice required to suspend, terminate or amend share redemption program		30 days

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Investments:
Rental properties, net	$ 986,358	$ 775,254
Loans held for investment and preferred equity investments, net	4,223	4,985
Identified intangible assets, net	3,761	2,081
Assets held for sale - rental properties, net	0	36,764
Investments	994,342	819,084
Cash	100,969	140,129
Restricted cash	7,116	6,930
Due from related parties	2,072	1,148
Tenant receivables, net	358	527
Deposits	271	666
Prepaid expenses and other assets	2,893	2,302
Deferred financing costs, net	7,692	6,392
Goodwill	1,231	1,231
Total assets	1,116,944	978,409
Liabilities:
Mortgage notes payable	577,279	444,168
Credit facilities	56,394	45,586
Accounts payable	1,481	2,689
Accrued expenses and other liabilities	6,286	6,473
Accrued real estate taxes	5,765	5,689
Due to related parties	1,337	1,630
Tenant prepayments	1,139	1,383
Security deposits	2,665	2,437
Total liabilities	652,346	510,055
Stockholders’ equity:
Preferred stock (par value $.01; 10,000,000 shares authorized, none issued)	0	0
Common stock (par value $.01; 1,000,000,000 shares authorized; 70,961,928 and 69,469,001 shares issued, respectively; and 70,547,010 and 69,254,165 shares outstanding, respectively)	705	693
Convertible stock (“promote shares”; par value $.01; 50,000 shares authorized, issued and outstanding)	1	1
Additional paid-in capital	626,531	614,024
Accumulated other comprehensive loss	(391)	(266)
Accumulated deficit	(170,439)	(154,319)
Total stockholders’ equity	456,407	460,133
Noncontrolling interests	8,191	8,221
Total equity	464,598	468,354
Total liabilities and stockholders’ equity	$ 1,116,944	$ 978,409

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Rental Property Useful Lives (Details)	6 Months Ended
	Jun. 30, 2015
Building [Member]
Real Estate Properties [Line Items]
Estimated useful lives	27 years 6 months
Building Improvements [Member] | Minimum [Member]
Real Estate Properties [Line Items]
Estimated useful lives	3 years
Building Improvements [Member] | Maximum [Member]
Real Estate Properties [Line Items]
Estimated useful lives	27 years 6 months

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities:
Net income (loss)	$ 4,563	$ (26,661)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Income from discontinued operations	0	(2)
Loss on disposal of assets	2,481	1,648
Provision for loan loss	130	0
Net gains on dispositions	(33,551)	(2,541)
Depreciation and amortization	22,356	24,899
Amortization of deferred financing costs	906	566
Amortization of fair value adjustment of debt	(374)	(305)
Accretion of discount and direct loan fees and costs	(17)	0
Changes in operating assets and liabilities, net of acquisitions:
Restricted cash	216	708
Tenant receivables, net	168	(52)
Deposits	(38)	(82)
Prepaid expenses and other assets	(17)	(1,040)
Due to related parties, net	(1,101)	(1,764)
Accounts payable and accrued expenses	(1,286)	3,807
Tenant prepayments	(172)	156
Security deposits	55	27
Net cash used in operating activities of continuing operations	(5,681)	(636)
Cash flows from investing activities:
Proceeds from disposal of properties, net of closing costs	55,051	10,070
Property acquisitions	(96,953)	(169,146)
Ownership acquisitions, net of cash received	0	(56,720)
Capital expenditures	(17,465)	(15,634)
Principal payments received on loans	591	195
Net cash used in investing activities of continuing operations	(58,776)	(231,235)
Cash flows from financing activities:
Redemptions of common stock	(1,849)	(1,075)
Payment of deferred financing costs	(402)	(2,770)
Increase in borrowings on mortgages	26,280	114,354
Principal payments on borrowings on mortgages	(2,926)	(1,011)
Proceeds from borrowings on line of credit	30,918	45,520
Payments on line of credit	(20,288)	(6,975)
Distributions paid on common stock	(6,496)	(4,022)
Contributions of noncontrolling interests	151	0
Purchase of interest rate caps	(91)	(65)
Net cash provided by financing activities	25,297	143,956
Net cash used in continuing operations	(39,160)	(87,915)
Cash flows from discontinued operations:
Cash flows from discontinued operations:	0	90
Net cash provided by operating activities	0	90
Net decrease in cash	(39,160)	(87,825)
Cash at beginning of period	140,129	270,323
Cash at end of period	$ 100,969	$ 182,498

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MORTGAGE NOTES PAYABLE - Summary (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	$ 574,108
Fair Value Adjustment	3,171
Net Book Value	$ 577,279	$ 444,168
Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member]
Participating Mortgage Loans [Line Items]
Basis spread on variable rate	0.1865%
Vista Apartment Homes [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	$ 15,751
Fair Value Adjustment	0
Net Book Value	$ 15,751	15,900
Mortgage loan, maturity date	Jan. 01, 2022
Mortgage note, annual interest rate (in hundredths)	2.48%
Mortgage loan, average monthly debt service	$ 63
Cannery Lofts [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	8,190
Fair Value Adjustment	0
Net Book Value	$ 8,190	8,190
Mortgage loan, maturity date	Sep. 01, 2020
Mortgage note, annual interest rate (in hundredths)	3.49%
Mortgage loan, average monthly debt service	$ 36
Deerfield [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	10,530
Fair Value Adjustment	0
Net Book Value	$ 10,530	10,530
Mortgage loan, maturity date	Nov. 01, 2020
Mortgage note, annual interest rate (in hundredths)	4.66%
Mortgage loan, average monthly debt service	$ 53
Ivy at Clear Creek [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	8,503
Fair Value Adjustment	0
Net Book Value	$ 8,503	8,574
Mortgage loan, maturity date	Nov. 01, 2023
Mortgage note, annual interest rate (in hundredths)	2.60%
Mortgage loan, average monthly debt service	$ 29
Trailpoint at the Woodlands [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	19,174
Fair Value Adjustment	0
Net Book Value	$ 19,174	19,335
Mortgage loan, maturity date	Nov. 01, 2023
Mortgage note, annual interest rate (in hundredths)	2.60%
Mortgage loan, average monthly debt service	$ 66
Verona Apartment Homes [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	22,623
Fair Value Adjustment	0
Net Book Value	$ 22,623	22,843
Mortgage loan, maturity date	Jan. 01, 2019
Mortgage note, annual interest rate (in hundredths)	3.60%
Mortgage loan, average monthly debt service	$ 106
Skyview Apartment Homes [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	18,268
Fair Value Adjustment	0
Net Book Value	$ 18,268	18,446
Mortgage loan, maturity date	Jan. 01, 2019
Mortgage note, annual interest rate (in hundredths)	3.60%
Mortgage loan, average monthly debt service	$ 85
Nesbit Palisades [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	20,298
Fair Value Adjustment	0
Net Book Value	$ 20,298	20,298
Mortgage loan, maturity date	Jul. 01, 2024
Mortgage note, annual interest rate (in hundredths)	2.14%
Mortgage loan, average monthly debt service	$ 53
Maxwell Townhomes [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	13,970
Fair Value Adjustment	0
Net Book Value	$ 13,970	14,089
Mortgage loan, maturity date	Jan. 01, 2022
Mortgage note, annual interest rate (in hundredths)	4.32%
Mortgage loan, average monthly debt service	$ 71
Champion Farms [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	16,350
Fair Value Adjustment	186
Net Book Value	$ 16,536	16,634
Mortgage loan, maturity date	Jul. 01, 2016
Mortgage note, annual interest rate (in hundredths)	6.14%
Mortgage loan, average monthly debt service	$ 85
Fieldstone [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	15,568
Fair Value Adjustment	0
Net Book Value	$ 15,568	15,804
Mortgage loan, maturity date	Jun. 26, 2016
Mortgage note, annual interest rate (in hundredths)	2.59%
Mortgage loan, average monthly debt service	$ 73
Pinehurst [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	4,162
Fair Value Adjustment	14
Net Book Value	$ 4,176	4,239
Mortgage loan, maturity date	Jan. 01, 2016
Mortgage note, annual interest rate (in hundredths)	5.58%
Mortgage loan, average monthly debt service	$ 28
Pheasant Run [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	6,250
Fair Value Adjustment	128
Net Book Value	$ 6,378	6,407
Mortgage loan, maturity date	Oct. 01, 2017
Mortgage note, annual interest rate (in hundredths)	5.95%
Mortgage loan, average monthly debt service	$ 32
Retreat at Shawnee [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	13,185
Fair Value Adjustment	204
Net Book Value	$ 13,389	13,522
Mortgage loan, maturity date	Feb. 01, 2018
Mortgage note, annual interest rate (in hundredths)	5.58%
Mortgage loan, average monthly debt service	$ 78
Conifer Crossing [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	27,351
Fair Value Adjustment	50
Net Book Value	$ 27,401	27,762
Mortgage loan, maturity date	Sep. 01, 2015
Mortgage note, annual interest rate (in hundredths)	5.96%
Mortgage loan, average monthly debt service	$ 171
Conifer Crossing [Member] | London Interbank Offered Rate (LIBOR) [Member]
Participating Mortgage Loans [Line Items]
Debt Instrument, Interest Rate, Extension Period	1 year
Coursey Place [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	$ 27,760
Fair Value Adjustment	135
Net Book Value	$ 27,895	28,117
Mortgage loan, maturity date	Aug. 01, 2021
Mortgage note, annual interest rate (in hundredths)	5.07%
Mortgage loan, average monthly debt service	$ 154
Pines of York [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	15,396
Fair Value Adjustment	(396)
Net Book Value	$ 15,000	15,097
Mortgage loan, maturity date	Dec. 01, 2021
Mortgage note, annual interest rate (in hundredths)	4.46%
Mortgage loan, average monthly debt service	$ 80
The Estates at Johns Creek [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	50,000
Fair Value Adjustment	0
Net Book Value	$ 50,000	50,000
Mortgage loan, maturity date	Jul. 01, 2020
Mortgage note, annual interest rate (in hundredths)	3.38%
Mortgage loan, average monthly debt service	$ 204
Chisholm Place [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	11,587
Fair Value Adjustment	0
Net Book Value	$ 11,587	11,587
Mortgage loan, maturity date	Jun. 01, 2024
Mortgage note, annual interest rate (in hundredths)	2.58%
Mortgage loan, average monthly debt service	$ 36
Perimeter 5550 [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	14,074
Fair Value Adjustment	0
Net Book Value	$ 14,074	14,211
Mortgage loan, maturity date	Jul. 01, 2019
Mortgage note, annual interest rate (in hundredths)	3.42%
Mortgage loan, average monthly debt service	$ 64
Perimeter Circle [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	17,833
Fair Value Adjustment	0
Net Book Value	$ 17,833	18,007
Mortgage loan, maturity date	Jul. 01, 2019
Mortgage note, annual interest rate (in hundredths)	3.42%
Mortgage loan, average monthly debt service	$ 81
Aston at Cinco Ranch [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	23,968
Fair Value Adjustment	0
Net Book Value	$ 23,968	24,162
Mortgage loan, maturity date	Oct. 01, 2021
Mortgage note, annual interest rate (in hundredths)	4.34%
Mortgage loan, average monthly debt service	$ 120
Sunset Ridge 1 [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	20,325
Fair Value Adjustment	367
Net Book Value	$ 20,692	20,930
Mortgage loan, maturity date	Oct. 01, 2020
Mortgage note, annual interest rate (in hundredths)	4.58%
Mortgage loan, average monthly debt service	$ 113
Sunset Ridge 2 [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	3,028
Fair Value Adjustment	50
Net Book Value	$ 3,078	3,109
Mortgage loan, maturity date	Oct. 01, 2020
Mortgage note, annual interest rate (in hundredths)	4.54%
Mortgage loan, average monthly debt service	$ 16
Calloway at Las Colinas [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	36,058
Fair Value Adjustment	0
Net Book Value	$ 36,058	36,375
Mortgage loan, maturity date	Dec. 01, 2021
Mortgage note, annual interest rate (in hundredths)	3.87%
Mortgage loan, average monthly debt service	$ 171
Woodmoor [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	12,803
Fair Value Adjustment	0
Net Book Value	$ 12,803	0
Mortgage loan, maturity date	Aug. 01, 2019
Mortgage note, annual interest rate (in hundredths)	3.64%
Mortgage loan, average monthly debt service	$ 59
The Springs at Gilbert Meadows [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	26,280
Fair Value Adjustment	0
Net Book Value	$ 26,280	0
Mortgage loan, maturity date	Apr. 01, 2025
Mortgage note, annual interest rate (in hundredths)	2.07%
Mortgage loan, average monthly debt service	$ 80
Archstone Yorba Linda [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	67,500
Fair Value Adjustment	0
Net Book Value	$ 67,500	0
Mortgage loan, maturity date	Jun. 01, 2020
Mortgage note, annual interest rate (in hundredths)	1.94%
Mortgage loan, average monthly debt service	$ 227
Villages at Bonita Glen [Member]
Participating Mortgage Loans [Line Items]
Outstanding Borrowings	27,323
Fair Value Adjustment	2,433
Net Book Value	$ 29,756	$ 0
Mortgage loan, maturity date	Oct. 01, 2023
Mortgage note, annual interest rate (in hundredths)	5.33%
Mortgage loan, average monthly debt service	$ 151

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CREDIT FACILITIES (Tables)

6 Months Ended

Jun. 30, 2015

Line of Credit Facility [Abstract]

Summary of the Revolving Credit Facilities

The following is a summary of the credit facilities (in thousands, except percentages):

										Weighted Average Interest Rate for the
	Balance Outstanding at		Current Availability at		Balance Outstanding at		Maturity Date	Interest Rate Basis (1)	Current Interest Rate	Three months ended June 30,		Six Months Ended June 30,
Lender	June 30, 2015				December 31, 2014					2015	2014	2015	2014
Bank of America	$	20,894	$	6,732	10,086		5/23/2017	LIBOR plus 3%	3.19%	3.19%	3.15%	3.21%	3.15%
US Bank	23,000		—		23,000		12/27/2017	LIBOR plus 1.95%	2.14%	2.14%	2.14%	2.13%	2.14%
PNC Bank	12,500		—		12,500		12/20/2018	LIBOR plus 2%	2.19%	2.18%	2.15%	2.18%	2.16%
	$	56,394	$	6,732	$	45,586

(1) Variable rate based on one-month LIBOR of 0.1865% (as of June 30, 2015).

Schedule of Principal Payments

Annual principal payments on the credit facilities for each of the next five 12-month periods ending June 30 and thereafter are as follows (in thousands):

2016	$	—
2017	21,790
2018	23,032
2019	11,572
2020	—
Thereafter	—
	$	56,394

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DEFERRED FINANCING COSTS (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Amortization of deferred financing costs	$ 492	$ 378	$ 906	$ 566
Accumulated amortization, deferred finance costs	2,200		2,200		$ 1,500
Amortization of Financing Costs and Discounts [Abstract]
2016	1,865		1,865
2017	1,623		1,623
2018	1,286		1,286
2019	1,080		1,080
2020	814		814
Thereafter	1,024		1,024
Deferred financing costs, net	$ 7,692		$ 7,692		$ 6,392

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FAIR VALUE MEASURES AND DISCLOSURES

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

FAIR VALUE MEASURES AND DISCLOSURES

NOTE 16 - FAIR VALUE MEASURES AND DISCLOSURES

In analyzing the fair value of its 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.

Rental properties obtained through a foreclosed note are measured at fair value on a non-recurring basis.  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.

Derivatives (interest rate caps) which are reported at fair value in the consolidated balance sheets 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 as follows (in thousands):

	Level 1		Level 2		Level 3		Total
June 30, 2015
Assets:
Interest rate caps	$	—	$	80	$	—	$	80
	$	—	$	80	$	—	$	80
December 31, 2014
Assets:
Interest rate caps	$	—	$	114	$	—	$	114
	$	—	$	114	$	—	$	114

The carrying and fair values of the Company’s loans held for investment and preferred equity investments, net, mortgage note payable and revolving credit facilities were as follows (in thousands):

	June 30, 2015						December 31, 2014
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Loans held for investment and preferred equity investments, net	$	4,223		$	4,663		$	4,985		$	4,985
Mortgage notes payable	$	(577,279	)	$	(576,901	)	$	(444,168	)	$	(450,269	)
Credit facilities	$	(56,394	)	$	(56,394	)	$	(45,586	)	$	(45,586	)

The fair value of the loans held for investment and preferred equity investments, net, was estimated using rates available to the Company for debt with similar terms and remaining maturities. (Level 3)

The fair value of the mortgage notes payable was estimated using rates available to the Company for debt with similar terms and remaining maturities. (Level 3)

The fair values of the two credit facilities equal the carrying amounts because the interest rate of each of the credit facilities is variable. (Level 3)

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DEFERRED FINANCING COSTS (Tables)

6 Months Ended

Jun. 30, 2015

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Estimated Amortization of Deferred Financing Costs

Estimated amortization of the existing deferred financing costs for the next five 12-month periods ending June 30, and thereafter, is as follows (in thousands):

2016	$	1,865
2017	1,623
2018	1,286
2019	1,080
2020	814
Thereafter	1,024
	$	7,692

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OPERATING EXPENSE LIMITATION

6 Months Ended

Jun. 30, 2015

OPERATING EXPENSE LIMITATION WAIVER [Abstract]

OPERATING EXPENSE LIMITATION

NOTE 18 - OPERATING EXPENSE LIMITATION

Under its charter, the Company must limit its total operating expenses to the lesser 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 quarters ended June 30, 2015 were in compliance with the charter imposed limitation.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS - Schedule of Transactions (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Related Party Transaction [Line Items]
Receivables from related parties	$ 2,072		$ 2,072		$ 1,148
Payables to related parties	1,337		1,337		1,630
Resource America, Inc. and Affiliates [Member] | Insurance fund held in escrow [Member]
Related Party Transaction [Line Items]
Receivables from related parties	2,072		2,072		1,148
Advisor [Member] | Expense Reimbursements [Member]
Related Party Transaction [Line Items]
Payables to related parties	363		363		327
Advisor [Member] | Acquisition Fees [Member]
Related Party Transaction [Line Items]
Fees earned / expenses paid to related parties	3,687	$ 2,262	5,169	$ 5,604
Advisor [Member] | Asset Management Fees [Member]
Related Party Transaction [Line Items]
Fees earned / expenses paid to related parties	2,461	1,790	4,709	3,040
Advisor [Member] | Disposition Fees [Member]
Related Party Transaction [Line Items]
Fees earned / expenses paid to related parties	270	150	1,031	150
Advisor [Member] | Debt Financing Fees [Member]
Related Party Transaction [Line Items]
Fees earned / expenses paid to related parties	474	572	670	1,147
Advisor [Member] | Overhead Allocation [Member]
Related Party Transaction [Line Items]
Fees earned / expenses paid to related parties	934	564	1,822	915
Resource Real Estate Opportunity Manager LLC [Member] | Expense Reimbursements [Member]
Related Party Transaction [Line Items]
Payables to related parties	566		566		743
Resource Real Estate Opportunity Manager LLC [Member] | Property Management Fees [Member]
Related Party Transaction [Line Items]
Payables to related parties	403		403		436
Fees earned / expenses paid to related parties	1,131	848	2,238	1,544
Resource Real Estate Opportunity Manager LLC [Member] | Construction Management Fees [Member]
Related Party Transaction [Line Items]
Fees earned / expenses paid to related parties	483	481	839	676
Resource Real Estate Opportunity Manager LLC [Member] | Debt Servicing Fees [Member]
Related Party Transaction [Line Items]
Fees earned / expenses paid to related parties	20	2	25	5
Other Related Party [Member]
Related Party Transaction [Line Items]
Payables to related parties	5		5		$ 124
Ledgewood P.C. [Member]
Related Party Transaction [Line Items]
Fees earned / expenses paid to related parties	83	71	144	101
Graphic Images LLC [Member]
Related Party Transaction [Line Items]
Fees earned / expenses paid to related parties	$ 19	$ 0	$ 22	$ 33

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NATURE OF BUSINESS AND OPERATIONS

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

NATURE OF BUSINESS AND OPERATIONS

NOTE 1 - NATURE OF BUSINESS AND OPERATIONS

Resource Real Estate Opportunity REIT, Inc. (the “Company”) was organized in Maryland on June 3, 2009 to purchase a diversified portfolio of discounted U.S. commercial real estate and real estate-related assets in order to generate gains to stockholders from the potential appreciation in the value of the assets and to generate current income for stockholders by distributing cash flow from the Company’s investments. Resource Real Estate Opportunity Advisor, LLC (the “Advisor”), an indirect wholly-owned subsidiary of Resource America, Inc. (“RAI”), a publicly traded company (NASDAQ: REXI) operating in the real estate, financial fund management and commercial finance sectors, manages the day-to-day operations of the Company. 

Through its private and public offerings, which concluded on December 13, 2013, the Company raised aggregate gross offering proceeds of $645.8 million from the issuance of 64,926,311 shares of common stock, including 276,056 shares purchased by the Advisor and 1,161,623 shares sold in the distribution reinvestment plan. During 2014, the Company sold 2,410,424 shares for $22.9 million pursuant to its distribution reinvestment plan. During the six months ended June 30, 2015, the Company additionally sold 1,492,928 shares for $14.4 million pursuant to its distribution reinvestment plan. The Company's distribution reinvestment plan offering is ongoing.

The Company has acquired, and intends to continue to acquire, real estate-related debt and equity that has been discounted due to the effects of economic events and high levels of leverage, as well as stabilized properties that may benefit from extensive renovations that may increase their long-term values.  The Company has a particular focus on acquiring and operating multifamily assets, and it has targeted, and intends to continue to target, this asset class while also acquiring interests in other types of commercial property assets consistent with its investment objectives.  The Company’s targeted portfolio consists of commercial real estate assets, principally (i) multifamily rental properties purchased as non-performing or distressed loans or as real estate that was foreclosed upon and sold by financial institutions and (ii) multifamily rental properties to which the Company can add value with a capital infusion (referred to as “value add properties”).  However, the Company is not limited in the types of real estate assets in which it may invest and, accordingly, it may invest in other real estate-related assets either directly or together with a co-investor or joint venture partner.

The Company is organized and conducts its operations in a manner intended to allow it to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes under Subchapter M of the Internal Revenue Code of 1986, as amended.  The Company also operates its business in a manner intended to maintain its exemption from registration under the Investment Company Act of 1940, as amended.

The consolidated financial statements and the information and tables contained in the notes to the consolidated financial statements are unaudited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). However, in the opinion of management, these interim financial statements include all the necessary adjustments to fairly present the results of the interim periods presented. The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The results of operations for the six months ended June 30, 2015 may not necessarily be indicative of the results of operations for the full year ending December 31, 2015.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized (in shares)	10,000,000	10,000,000
Preferred stock, issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized (in shares)	1,000,000,000	1,000,000,000
Common stock, issued (in shares)	70,961,928	69,469,001
Common stock, outstanding (in shares)	70,547,010	69,254,165
Convertible stock ('promote shares'), par value (in dollars per share)	$ 0.01	$ 0.01
Convertible stock ('promote shares'), authorized (in shares)	50,000	50,000
Convertible stock ('promote shares'), issued (in shares)	50,000	50,000
Convertible stock ('promote shares'), outstanding (in shares)	50,000	50,000

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CREDIT FACILITIES

6 Months Ended

Jun. 30, 2015

Line of Credit Facility [Abstract]

CREDIT FACILITIES

NOTE 11 - CREDIT FACILITIES

The following is a summary of the credit facilities (in thousands, except percentages):

										Weighted Average Interest Rate for the
	Balance Outstanding at		Current Availability at		Balance Outstanding at		Maturity Date	Interest Rate Basis (1)	Current Interest Rate	Three months ended June 30,		Six Months Ended June 30,
Lender	June 30, 2015				December 31, 2014					2015	2014	2015	2014
Bank of America	$	20,894	$	6,732	10,086		5/23/2017	LIBOR plus 3%	3.19%	3.19%	3.15%	3.21%	3.15%
US Bank	23,000		—		23,000		12/27/2017	LIBOR plus 1.95%	2.14%	2.14%	2.14%	2.13%	2.14%
PNC Bank	12,500		—		12,500		12/20/2018	LIBOR plus 2%	2.19%	2.18%	2.15%	2.18%	2.16%
	$	56,394	$	6,732	$	45,586

(1) Variable rate based on one-month LIBOR of 0.1865% (as of June 30, 2015).

Draws under the secured revolving credit facility (the “Bank of America Credit Facility”) with Bank of America, N.A. (“Bank of America”) are secured by certain of the Company's properties with an aggregate value of $55.5 million as of June 30, 2015 and are guaranteed by the Company.  

      The Bank of America Credit Facility, as amended, matures on May 23, 2017, and may be extended to May 23, 2019 subject to satisfaction of certain conditions and payment of an extension fee equal to 0.25% of the amount committed under the Bank of America Credit Facility.  The Company is required to make monthly interest-only payments.  The Company also may prepay the Bank of America Credit Facility in whole or in part at any time without premium or penalty.

The operating partnership's obligations with respect to the Bank of America Credit Facility are guaranteed by the Company, pursuant to the terms of a guaranty dated as of December 2, 2011, or the Guaranty.  The Bank of America Credit Facility and the Guaranty contain restrictive covenants for maintaining a certain tangible net worth and a certain level of liquid assets, and for restricting the securing of additional debt as follows:

• the Company must maintain a minimum tangible net worth equal to at least (i) 200% of the outstanding principal amount of the Bank of America Credit Facility and (ii) $20.0 million;

• the Company must also maintain unencumbered liquid assets with a market value of not less than the greater of (i) $5.0 million or (ii) 20% of the outstanding principal amount of the Bank of America Credit Facility; and

• the Company may not incur any additional secured or unsecured debt without Bank of America's prior written consent and approval, which consent and approval is not to be unreasonably withheld.

The Company was in compliance with all such covenants at June 30, 2015.  

On December 20, 2013, the Company, through a wholly-owned subsidiary, entered into a secured credit facility, ("Jefferson Point Credit Facility") with PNC Bank, National Association for $15 million.  Draws under the Jefferson Point Credit Facility are secured by the assets of Tech Center Square Apartments (formerly known as the Jefferson Point Apartments). The Company provided a repayment guarantee of all interest and scheduled monthly principal payments (excluding the final payment at maturity for the outstanding balance.) The Company paid certain closing costs in connection with the Jefferson Point Credit Facility, including loan fees totaling $75,000.

The Jefferson Point Credit Facility includes both a debt service coverage covenant and a tangible net worth covenant. In November 2014, the Company amended the Jefferson Point Credit Facility. In accordance with the amendment, the debt service coverage covenant is only required to be complied with as of December 31, 2015 and periods thereafter.

The Company was in compliance with all covenants at June 30, 2015.

On December 27, 2013, the Company, through a wholly-owned subsidiary, entered into a secured credit facility ("Brentdale Credit Facility") with U.S. Bank National Association for $29.7 million.  Draws under the Brentdale Credit Facility are secured by the assets of The Westside Apartments (formerly known as the Brentdale Apartments). The Company provided a $6.5 million repayment guarantee. The Brentdale Credit Facility matures on December 27, 2017, and may be extended to December 27, 2019 subject to satisfaction of certain conditions and payment of an extension fee equal to 0.25% of the amount committed under the Brentdale Credit Facility.

The Brentdale Credit Facility includes net worth, liquidity, leverage and debt service coverage covenants. In June 2015, the Company amended the Brentdale Credit Facility to amend the property debt service coverage ratio. The covenant is waived for the three months ended June 30, 2015.

The Company was in compliance with all other covenants at June 30, 2015.

Annual principal payments on the credit facilities for each of the next five 12-month periods ending June 30 and thereafter are as follows (in thousands):

2016	$	—
2017	21,790
2018	23,032
2019	11,572
2020	—
Thereafter	—
	$	56,394

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Aug. 04, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	Resource Real Estate Opportunity REIT, Inc.
Entity Central Index Key	0001466225
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		70,775,884

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DEFERRED FINANCING COSTS

6 Months Ended

Jun. 30, 2015

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

DEFERRED FINANCING COSTS

NOTE 12 - DEFERRED FINANCING COSTS

Deferred financing costs incurred to obtain financing are amortized over the term of the related debt.  During the three months ended June 30, 2015 and June 30, 2014, $492,000 and $378,000, respectively, of amortization of deferred financing costs was included in interest expense. During the six months ended June 30, 2015 and June 30, 2014, amortization of deferred financing costs was $906,000 and $566,000, respectively. Accumulated amortization as of June 30, 2015 and December 31, 2014 was $2.2 million and $1.5 million, respectively.  Estimated amortization of the existing deferred financing costs for the next five 12-month periods ending June 30, and thereafter, is as follows (in thousands):

2016	$	1,865
2017	1,623
2018	1,286
2019	1,080
2020	814
Thereafter	1,024
	$	7,692

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME - USD ($) shares in Thousands, $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015		Jun. 30, 2014
Revenues:
Rental income		$ 28,250		$ 55,821		$ 45,579
Interest and dividend income		162		325		221
Total revenues		28,412		56,146		45,800
Expenses:
Rental operating		14,841		29,473		24,782
Acquisition costs		4,108		5,809		6,535
Management fees		3,719		7,180		4,947
General and administrative		3,787		7,837		6,297
Loss on disposal of assets		1,372	$ 21	2,481		1,648
Provision for loan loss		130		130		0
Depreciation and amortization expense		12,059		22,356		24,899
Total expenses		40,016		75,266		69,108
Loss before other expenses		(11,604)		(19,120)		(23,308)
Other (expense) income:
Net gains on dispositions		4,376		33,551		2,541
Interest expense		(5,408)		(10,275)		(5,896)
Insurance proceeds in excess of cost basis		160		407		0
(Loss) income from continuing operations		(12,476)		4,563		(26,663)
Discontinued operations:
Income from discontinued operations		0		0		2
Income from discontinued operations, net		0		0		2
Net (loss) income		(12,476)		4,563		(26,661)
Net loss attributable to noncontrolling interests		192		181		1,410
Net (loss) income attributable to stockholders		(12,284)		4,744		(25,251)
Amounts attributable to stockholders
(Loss) income from continuing operations		(12,284)		4,744		(25,253)
Discontinued operations		0		0		2
Net (loss) income attributable to stockholders		(12,284)		4,744		(25,251)
Net income (loss)		(12,476)		4,563		(26,661)
Other comprehensive (loss) income:
Designated derivatives, fair value adjustments		(41)		(125)		(207)
Comprehensive (loss) income		(12,517)		4,438		(26,868)
Comprehensive loss attributable to noncontrolling interests		192		181		1,410
Total comprehensive (loss) income attributable to stockholders		$ (12,325)		$ 4,619		$ (25,458)
Weighted average common shares outstanding (in shares)	[1]	70,107		69,798		67,558
Basic and diluted (loss) income per common share
Continuing operations (in dollars per share)	[1]	$ (0.18)		$ 0.07		$ (0.37)
Discontinued operations (in dollars per share)	[1]	0.00		0.00		0.00
Net income (loss) (in dollars per share)		$ (0.18)		$ 0.07	[1]	$ (0.37)	[1]
Remeasured [Member]
Revenues:
Rental income			24,910
Interest and dividend income			58
Total revenues			24,968
Expenses:
Rental operating			12,998
Acquisition costs			4,035
Management fees			2,838
General and administrative			3,760
Loss on disposal of assets			21
Provision for loan loss			0
Depreciation and amortization expense			12,953
Total expenses			36,605
Loss before other expenses			(11,637)
Other (expense) income:
Net gains on dispositions			2,541
Interest expense			(3,509)
Insurance proceeds in excess of cost basis			0
(Loss) income from continuing operations			(12,605)
Discontinued operations:
Income from discontinued operations			0
Income from discontinued operations, net			0
Net (loss) income			(12,605)
Net loss attributable to noncontrolling interests			1,965
Net (loss) income attributable to stockholders			(10,640)
Amounts attributable to stockholders
(Loss) income from continuing operations			(10,640)
Discontinued operations			0
Net (loss) income attributable to stockholders			(10,640)
Net income (loss)			(12,605)
Other comprehensive (loss) income:
Designated derivatives, fair value adjustments			(149)
Comprehensive (loss) income			(12,754)
Comprehensive loss attributable to noncontrolling interests			1,965
Total comprehensive (loss) income attributable to stockholders			$ (10,789)
Weighted average common shares outstanding (in shares)	[1]		67,749
Basic and diluted (loss) income per common share
Continuing operations (in dollars per share)	[1]		$ (0.16)
Discontinued operations (in dollars per share)	[1]		0.00
Net income (loss) (in dollars per share)			$ (0.16)

[1] Excludes any dilution from the potential conversion of convertible stock, as the actual number of shares of common stock, if any, that will be issuable upon conversion of convertible stock is indeterminable at June 30, 2015.

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ACQUISITIONS AND FORECLOSURES

6 Months Ended

Jun. 30, 2015

Business Combinations [Abstract]

ACQUISITIONS AND FORECLOSURES

NOTE 6 - ACQUISITIONS AND FORECLOSURES

Real Estate Investments

As of June 30, 2015, the Company owned interests in 37 properties. The Company estimated the fair values of certain of the acquired assets and liabilities based on preliminary valuations at the date of purchase. The Company has received final appraisals for all recent acquisitions and has completed the purchase price allocations.

The table below summarizes the Company's wholly-owned acquisitions during the six months ended June 30, 2015 and the respective fair values assigned (dollars in thousands):

Multifamily Community Name	City and State	Date of Acquisition	Purchase Price (1)		Land		Building and Improvements		Furniture, Fixture and Equipment		Intangible Assets		Other Assets		Other Liabilities			Fair Valued Assigned
Villages at Bonita Glen	Chula Vista, CA	6/16/2015	$	49,050	$	17,208	$	32,651	$	506	$	1,130	$	9	$	(30,008	)	$	21,496
Yorba Linda	Yorba Linda, CA	6/1/2015	118,000		39,322		76,124		590		1,964		76		(232		)	117,844
Springs at Gilbert Meadows	Gilbert, AZ	3/19/2015	36,000		8,487		25,867		716		931		—		(152		)	35,849
Woodmoor	Austin, TX	2/26/2015	24,000		5,586		17,493		291		629		—		(12,961		)	11,038

(1) Purchase price excludes closing costs and acquisition expenses.

Acquisitions

The Company acquired two and four properties during the three and six months ended June 30, 2015. In order to finalize the fair values of the acquired assets and liabilities, the Company obtained third-party appraisals. The Company has up to 12 months from the date of acquisition to finalize the valuation for each property. All valuations have been finalized as of June 30, 2015.

The table below summarizes the total revenues, net losses, and acquisition costs of the Company's acquisitions during the three and six months ended June 30, 2015 (dollars in thousands):

	Three Months Ended June 30, 2015						Six Months Ended June 30, 2015
Multifamily Community	Total Revenues		Net Loss		Acquisition Costs		Total Revenues		Net Loss		Acquisition Costs
Woodmoor	$	664	$	339	$	—	$	881	$	799	$	692
Springs at Gilbert Meadows	959		430		—		1,089		1,271		1,005
Yorba Linda	623		1,059		2,761		623		1,059		2,761
Villages at Bonita Glen	185		771		1,351		185		771		1,351
	$	2,431	$	2,599	$	4,112	$	2,778	$	3,900	$	5,809

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LOANS HELD FOR INVESTMENT AND PREFERRED EQUITY INVESTMENT, NET

6 Months Ended

Jun. 30, 2015

Investments, Debt and Equity Securities [Abstract]

LOANS HELD FOR INVESTMENT AND PREFERRED EQUITY INVESTMENT, NET

NOTE 5 - LOANS HELD FOR INVESTMENT AND PREFERRED EQUITY INVESTMENT, NET

The following table presents the components of loans held for investment and preferred equity investment, net (in thousands):

	June 30, 2015		December 31, 2014
Loans held for investment, net	$	752	$	1,523
Preferred equity investment, net	3,471		3,462
	$	4,223	$	4,985

Loans held for investment:    

On March 15, 2011, the Company purchased, at a discount, two non-performing promissory notes (the "Oberlin Note” and the "Heatherwood Note”) and two performing promissory notes (the "Peterson Note” and the "Trail Ridge Note”), collectively referred to as the “Notes”, each of which was secured by a first priority mortgage on multifamily rental apartment communities. The contract purchase price for the Notes was a total of $3.1 million, excluding closing costs. Both the Oberlin and Peterson Notes were resolved in prior years.

On August 18, 2011, the Company was the successful bidder at a foreclosure sale of the property collateralizing the Heatherwood Note. Possession of the Heatherwood Apartments was obtained in February 2012 and the property was subsequently sold in April 2013. On April 18, 2013, in connection with the sale of the Heatherwood Apartments, the Company originated an $800,000 mortgage loan (the "Heatherwood Sale Note") to the purchaser of the Heatherwood Apartments on the same date. In May 2015, the Company agreed to receive $583,000 and apply $58,000 of escrow balances in full satisfaction of the loan. As such, the Company recorded a provision for loan loss of $130,000 during the three months ended June 30, 2015 related to this payoff.

Preferred equity investment:

On November 12, 2014, the Company, through its wholly owned subsidiary, RRE Spring Hill Holdings, LLC, made a $3.5 million preferred equity investment in Spring Hill Investors Limited Partner, LLC (the “Investment Vehicle”) and became the Preferred Member. An unaffiliated limited liability company owns the common equity and acts as the managing member of the Investment Vehicle. The Company is obligated to fund up to an additional $1.5 million in increments of $150,000 upon request as long as no triggering event has occurred. Examples of triggering events include loan defaults, failure of the managing member to make payments to the Preferred Member, and unauthorized managing member interest transfers.

The Investment Vehicle is the sole member of Spring Hill Investors GP, LLC, which is the general partner of Spring Hill Investors, LP, the owner of a 606-unit multifamily residential apartment community commonly known as Spring Hill Apartments (“Spring Hill”) and located in Dallas, Texas. The Company’s preferred equity investment will be predominately utilized for capital improvements and deferred maintenance projects.

The Company is to be paid a dividend equal to 12% of the total amount invested, 7% of which must be paid monthly and of which the remaining amount accrues and is to be paid when the property cash flow allows for the repayment. The mandatory redemption date for the investment is the earliest of (i) April 2017, (ii) any earlier date upon which the mortgage loan secured by Spring Hill Apartments becomes due and payable as a result of the acceleration of the loan maturity date by the lender, or (iii) the date on which a defeasance is effected pursuant to the loan documents.

The preferred equity balance is presented net of nonrefundable origination fees and net of origination expenses which are being amortized over the term of the investment as an adjustment to interest and dividend income.

The following table provides the aging of the Company’s loans held for investment and preferred equity investment(dollars in thousands):

	June 30, 2015						December 31, 2014
	Loans held for investment		Preferred equity investments		Total		Loans held for investment		Preferred equity investments		Total
Current	$	752	$	3,471	$	4,223	$	1,523	$	3,462	$	4,985
Delinquent:
30−89 days	—		—		—		—		—		—
90−180 days	—		—		—		—		—		—
Greater than 180 days	—		—		—		—		—		—
	$	752	$	3,471	$	4,223	$	1,523	$	3,462	$	4,985

The following table provides information about the credit quality of the Company’s loans held for investment, net and preferred equity investment (in thousands):

	June 30, 2015		December 31, 2014
Performing	$	4,223	$	4,985
Nonperforming	—		—
Total	$	4,223	$	4,985

The following table presents details of the balance and terms of the loan held for investment and the preferred equity investment held at June 30, 2015 (in thousands):

	Unpaid Principal Balance		Unamortized Discount			Deferred (fees) expenses, net			Net book value		Maturity Date	Interest Rate	Average monthly payment
Loan- Trail Ridge	$	991	$	(247	)	$	8		$	752	10/28/2021	7.5%	$	8
Preferred equity investment	3,500		—			(29		)	3,471		4/1/2017	12%	$	35
	$	4,491	$	(247	)	$	(21	)	$	4,223

The following table presents details of the balance and terms of loans held for investment and the preferred equity investment held at December 31, 2014 (in thousands):

	Unpaid Principal Balance		Unamortized (Discount)			Deferred (fees) expenses, net			Net book value
Loan- Trail Ridge	$	994	$	(261	)	$	14		$	747
Loan- Heatherwood	776		—			—			776
Preferred equity investment	3,500		—			(38		)	3,462
	$	5,270	$	(261	)	$	(24	)	$	4,985

The Company has individually evaluated each loan for impairment and determined that, as of June 30, 2015, the loan held for investment and the preferred equity investment were not impaired. 

There was a $130,000 charge-off during the three and six months ended June 30, 2015 and there were no charge-offs during the three and six months ended June 30, 2014.

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DERIVATIVES AND HEDGING ACTIVITIES

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES AND HEDGING ACTIVITIES

NOTE 17 - DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

The Company is exposed to certain risk 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 served to protect the lender.

Cash Flow Hedges of Interest Rate Risk

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 a total of six interest rate caps that were designated as cash flow hedges during 2013, 2014 and 2015. 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 three and six months ended June 30, 2015 and the year end December 31, 2014, 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 three and six months ended June 30, 2015, the Company did not record any 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.

As of June 30, 2015, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (dollars in thousands):

Interest Rate Derivative	Number of Instruments	Notional Amount		Maturity Dates
Interest Rate Caps	6	$	102,013	January 1, 2018 to July 1, 2019

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

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification in prepaid expenses and other assets on the Balance Sheet as of June 30, 2015 and December 31, 2014 (in thousands):

Asset Derivatives						Liability Derivatives
June 30, 2015			December 31, 2014			June 30, 2015			December 31, 2014
Balance Sheet	Fair Value		Balance Sheet	Fair Value		Balance Sheet	Fair Value		Balance Sheet	Fair Value
Interest rate caps	$	80	Interest rate caps	$	114	—	$	—	—	$	—

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ACCUMULATED OTHER COMPREHENSIVE LOSS

6 Months Ended

Jun. 30, 2015

Equity [Abstract]

ACCUMULATED OTHER COMPREHENSIVE LOSS

NOTE 13 - ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents the changes in each component of accumulated other comprehensive loss for the six months ended June 30, 2015 (in thousands):

	Net unrealized loss on derivatives
January 1, 2015	$	(266	)
Unrealized loss on designated derivatives	(125		)
June 30, 2015	$	(391	)

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IDENTIFIED INTANGIBLE ASSETS, NET

6 Months Ended

Jun. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

IDENTIFIED INTANGIBLE ASSETS, NET

NOTE 9 - IDENTIFIED INTANGIBLE ASSETS, NET

Identified intangible assets, net, consist of rental and antennae leases. The value of the acquired in-place leases totaled $3.8 million and $2.1 million as of June 30, 2015 and December 31, 2014, respectively, net of accumulated amortization of $25.4 million and $26.5 million, respectively.  The weighted-average remaining life of the existing rental leases was six months and five months as of June 30, 2015 and December 31, 2014, respectively.  Expected amortization for the antennae leases at the Vista Apartment Homes is $16,000 annually through 2025.  Amortization of the rental and antennae leases for the three and six months ended June 30, 2015 was $1.5 million and $3.0 million, respectively.  Amortization of the rental and antennae leases for the three and six months ended June 30, 2014 was $5.6 million and $10.6 million, respectively.

Expected amortization for the rental and antennae leases for the next five 12-month periods ending June 30, and thereafter, is as follows (in thousands): 

2016	$	3,608
2017	16
2018	16
2019	16
2020	16
Thereafter	89
	$	3,761

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MORTGAGE NOTES PAYABLE - Annual Principal Payments (Details) $ in Thousands	Jun. 30, 2015 USD ($)
Debt Disclosure [Abstract]
2016	$ 37,572
2017	38,497
2018	26,682
2019	49,490
2020	111,639
Thereafter	310,228
Total	$ 574,108

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MEASUREMENT PERIOD ADJUSTMENTS

6 Months Ended

Jun. 30, 2015

Accounting Changes and Error Corrections [Abstract]

MEASUREMENT PERIOD ADJUSTMENTS

NOTE 7 - MEASUREMENT PERIOD ADJUSTMENTS

The Company obtains third party appraisals for all of its acquisitions. If the appraisals are not finalized in the period in which the property or interest was acquired, a measurement period adjustment is recorded. For the The Estates at Johns Creek (formerly known as Addison Place) acquisition, which was completed in the three months ended March 31, 2014, the measurement period adjustment was finalized during the three months ended June 30, 2014. For the Paladin acquisition, which was completed in the three months ended March 31, 2014, the measurement period adjustments were finalized during the three months ended December 31, 2014.

Changes in the Paladin and The Estates at Johns Creek acquisitions are reflected in the tables below (in thousands):

Paladin

	January 28, 2014 (As initially reported)			Measurement period adjustment (1)			January 28, 2014 (As adjusted)
Land	$	44,292		$	(19,420	)	$	24,872
Building	149,155			18,364			167,519
Personal property	—			3,530			3,530
Intangible assets	5,861			(96		)	5,765
Other assets	3,231			(9		)	3,222
Goodwill	6,412			(5,148		)	1,264
Liabilities	(140,970		)	4,442			(136,528		)
Total net identifiable net assets	$	67,981		$	1,663		$	69,644

(1) Remaining balance ($1.7 million) of measurement period adjustments adjusted the noncontrolling interest balance.

The results of operations for the three months ended March 31, 2014 included an additional $867,000 of depreciation and amortization and net income attributable to noncontrolling interests was decreased by $249,000 to reflect the adjustments that would have been included in the three months ended March 31, 2014, as originally issued, had the final appraisals for the Paladin properties been received and recorded during that period.

The Estates at Johns Creek

	March 28, 2014 (As initially reported)		Measurement period adjustment			March 28, 2014 (As adjusted)
Land	$	18,137	$	(11,784	)	$	6,353
Building	51,843		10,406			62,249
Personal property	—		509			509
Intangible assets	520		869			1,389
Total net identifiable net assets	$	70,500	$	—		$	70,500

The measurement period adjustment for The Estates at Johns Creek had no impact on depreciation and amortization for the three months ended March 31, 2014.

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DISPOSITION OF PROPERTIES AND DISCONTINUED OPERATIONS

6 Months Ended

Jun. 30, 2015

Discontinued Operations and Disposal Groups [Abstract]

DISPOSITION OF PROPERTIES AND DISCONTINUED OPERATIONS

NOTE 8 - DISPOSITION OF PROPERTIES AND DISCONTINUED OPERATIONS

2014 Dispositions

The Company sold the Campus Club Apartments on June 16, 2014 for $10.5 million and recognized a gain of approximately $2.6 million on the disposition.

The Company sold its 49% interest in one of the Paladin joint ventures, Parkhill Partners I, LLC ("Hilltop Village"), on July 1, 2014 to its joint venture partner for no consideration and recognized a loss on the sale of $493,000.

The Company sold the Arcadia at Westheimer Apartments on September 19, 2014 for $18.1 million and recognized a gain of approximately $8.3 million on the disposition.     

2015 Dispositions

On January 26, 2015, the Company sold The Alcove Apartments, located in Houston, Texas, for $11.1 million and recognized a gain of $3.8 million on the disposition.

On January 29, 2015, the Company sold 107th Avenue Apartments, located in Omaha, Nebraska, for $250,000 and recognized a gain of $50,000 on the disposition.

On February 27, 2015, the Company sold the Redford Apartments, located in in Houston, Texas, for $33.0 million and recognized a gain of $15.3 million on the disposition.

On March 2, 2015, the Company sold the Cityside Apartments, located in Houston, Texas, for $24.5 million and recognized a gain of $10.0 million on the disposition.

On June 30, 2015, the Company sold the One Hundred Chevy Chase Apartments, located in Lexington, Kentucky, for $13.5 million and recognized a gain of $4.4 million on the disposition.

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MORTGAGE NOTES PAYABLE

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

MORTGAGE NOTES PAYABLE

NOTE 10 - MORTGAGE NOTES PAYABLE

The following is a summary of the mortgage notes payable (in thousands, except percentages):

	June 30, 2015							December 31, 2014
Collateral	Outstanding Borrowings		Fair Value Adjustment			Net Book Value		Net Book Value		Maturity Date	Annual Interest Rate		Average Monthly Debt Service
Vista Apartment Homes	$	15,751	$	—		$	15,751	$	15,900	1/1/2022	2.48%	(1)(5)	$	63
Cannery Lofts	8,190		—			8,190		8,190		9/1/2020	3.49%	(1)(3)	36
Deerfield	10,530		—			10,530		10,530		11/1/2020	4.66%	(2)(3)	53
Ivy at Clear Creek	8,503		—			8,503		8,574		11/1/2023	2.60%	(1)(4)	29
Trailpoint at the Woodlands	19,174		—			19,174		19,335		11/1/2023	2.60%	(1)(4)	66
Verona Apartment Homes	22,623		—			22,623		22,843		1/1/2019	3.60%	(2)(5)	106
Skyview Apartment Homes	18,268		—			18,268		18,446		1/1/2019	3.60%	(2)(5)	85
The Nesbit Palisades	20,298		—			20,298		20,298		7/1/2024	2.14%	(1)(3)	53
Maxwell Townhomes	13,970		—			13,970		14,089		1/1/2022	4.32%	(2)(5)	71
Champion Farms	16,350		186			16,536		16,634		7/1/2016	6.14%	(2)(3)	85
Fieldstone	15,568		—			15,568		15,804		6/26/2016	2.59%	(1)(4)	73
Pinehurst	4,162		14			4,176		4,239		1/1/2016	5.58%	(2)(5)	28
Pheasant Run	6,250		128			6,378		6,407		10/1/2017	5.95%	(2)(3)	32
Retreat of Shawnee	13,185		204			13,389		13,522		2/1/2018	5.58%	(2)(5)	78
Conifer Crossing	27,351		50			27,401		27,762		9/1/2015	5.96%	(2)(4)(6)	171
Coursey Place	27,760		135			27,895		28,117		8/1/2021	5.07%	(2)(5)	154
Pines of York	15,396		(396		)	15,000		15,097		12/1/2021	4.46%	(2)(5)	80
The Estates at Johns Creek	50,000		—			50,000		50,000		7/1/2020	3.38%	(2)(3)	204
Chisholm Place	11,587		—			11,587		11,587		6/1/2024	2.58%	(1)(3)	36
Perimeter 5550	14,074		—			14,074		14,211		7/1/2019	3.42%	(2)(5)	64
Perimeter Circle	17,833		—			17,833		18,007		7/1/2019	3.42%	(2)(5)	81
Aston at Cinco Ranch	23,968		—			23,968		24,162		10/1/2021	4.34%	(2)(5)	120
Sunset Ridge 1	20,325		367			20,692		20,930		10/1/2020	4.58%	(2)(5)	113
Sunset Ridge 2	3,028		50			3,078		3,109		10/1/2020	4.54%	(2)(5)	16
Calloway at Las Colinas	36,058		—			36,058		36,375		12/1/2021	3.87%	(2)(5)	171
Woodmoor	12,803		—			12,803		—		8/1/2019	3.64%	(2)(5)	59
Springs at Gilbert Meadows	26,280		—			26,280		—		4/1/2025	2.07%	(1)(3)	80
Yorba Linda	67,500		—			67,500		—		6/1/2020	1.94%	(1)(3)	227
Villages at Bonita Glen	27,323		2,433			29,756		—		10/1/2023	5.33%	(2)(3)	151
	$	574,108	$	3,171		$	577,279	$	444,168

(1) Variable rate based on one-month LIBOR of 0.1865% (as of June 30, 2015) plus a fixed margin.

(2) Fixed rate.

(3) Monthly interest-only payment currently required.

(4) Monthly fixed principal plus interest payment required.

(5) Fixed monthly principal and interest payment required.

(6) On October 1, 2015, this loan will automatically extend for one year at a variable rate based on one-month LIBOR plus a fixed margin.

Loans assumed as part of the Villages at Bonita Glen, Woodmoor, Paladin, Sunset Ridge and Maxwell acquisitions were recorded at their fair value. The fair value adjustments are amortized over the remaining term of the loans and included in interest expense. For the three months ended June 30, 2015 and 2014, interest expense was reduced by $184,000 and increased by $49,000, respectively, for the amortization of the fair value adjustments. For the six months ended June 30, 2015 and 2014, interest expense was reduced by $374,000 and $305,000, respectively, for the amortization of the fair value adjustments.     

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

As of June 30, 2015 and December 31, 2014, the Company had $7.1 million and $6.9 million of restricted cash related to escrow deposits held by mortgage lenders for real estate taxes, insurance and capital reserves.

Annual principal payments on the mortgage notes payable, excluding the amortization of the fair value adjustments, for each of the next five 12-month periods ending June 30, and thereafter, are as follows (in thousands):

2016	$	37,572
2017	38,497
2018	26,682
2019	49,490
2020	111,639
Thereafter	310,228
	$	574,108

The mortgage notes payable are recourse only with respect to the properties that secure the notes, subject to certain limited standard exceptions, as defined in each mortgage note. The Company has guaranteed the mortgage notes by executing a guarantee with respect to the properties.  These exceptions are referred to as “carveouts.”  In general, carveouts relate to damages suffered by the lender for a borrower’s failure to pay rents, insurance or condemnation proceeds to lender, failure to pay water, sewer and other public assessments or charges, failure to pay environmental compliance costs or to deliver books and records, in each case as required in the loan documents.  The exceptions also require the Company to guarantee payment of audit costs, lender’s enforcement of its rights under the loan documents and payment of the loan if the borrower voluntarily files for bankruptcy or seeks reorganization, or if a related party of the borrower does so with respect to the subsidiary. The Company has also guaranteed the completion and payment of costs of completion of no less than $7.0 million for renovations to The Estates at Johns Creek by July 1, 2018.

The mortgage obtained in connection with the acquisition of Yorba Linda in June 2015 includes a $7.5 million earn-out holdback which may be borrowed when certain debt service coverage and loan to value criteria are met. The Yorba Linda loan includes a net worth and liquidity covenant. The Company was in compliance with all covenants at June 30, 2015. The loan also includes an additional debt service coverage covenant that is only required to be met as of and periods after December 31, 2017.

For the Fieldstone mortgage, beginning with the calendar quarter ended December 31, 2014, the property must maintain a certain level of debt service coverage. The Company was in compliance with the debt covenants for the Fieldstone mortgage at June 30, 2015.

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CREDIT FACILITIES - Schedule of Principal Payments (Details) $ in Thousands	Jun. 30, 2015 USD ($)
Line of Credit Facility [Line Items]
Total	$ 574,108
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
2016	0
2017	21,790
2018	23,032
2019	11,572
2020	0
Thereafter	0
Total	$ 56,394

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ACCUMULATED OTHER COMPREHENSIVE LOSS (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2015 USD ($)
Accumulated Other Comprehensive Income [Rollforward]
Beginning balance	$ (266)
Unrealized loss on designated derivatives	(125)
Ending balance	(391)
Net unrealized gain (loss) on derivatives [Member]
Accumulated Other Comprehensive Income [Rollforward]
Beginning balance	(266)
Unrealized loss on designated derivatives	(125)
Ending balance	$ (391)

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CREDIT FACILITIES - Narrative (Details) - USD ($)			6 Months Ended
	Dec. 27, 2013	Dec. 20, 2013	Jun. 30, 2015	Jun. 30, 2014
Line of Credit Facility [Line Items]
Paid closing costs			$ 402,000	$ 2,770,000
Repayment Guarantee [Member]
Line of Credit Facility [Line Items]
Repayment guaranty			7,000,000.0
Revolving Credit Facility [Member] | Bank of America [Member]
Line of Credit Facility [Line Items]
Line of credit facility collateral amount			$ 55,500,000
Line of credit facility, expiration date			May 23, 2017
Line of credit facility extended expiration date			May 23, 2019
Extension fee percentage			0.25%
Minimum tangible net worth to maintain, percent of outstanding principal amount of credit facility			200.00%
Minimum tangible net worth to maintain			$ 20,000,000.0
Minimum unencumbered liquid assets to maintain, market value			$ 5,000,000.0
Minimum unencumbered liquid assets to maintain, market value, percent of outstanding principal amount of credit facility			20.00%
Revolving Credit Facility [Member] | PNC Bank [Member]
Line of Credit Facility [Line Items]
Line of credit facility, maximum borrowing capacity		$ 15,000,000
Paid closing costs		$ 75,000
Revolving Credit Facility [Member] | U.S. Bank [Member]
Line of Credit Facility [Line Items]
Line of credit facility, expiration date	Dec. 27, 2017
Line of credit facility extended expiration date	Dec. 27, 2019
Extension fee percentage	0.25%
Line of credit facility, maximum borrowing capacity	$ 29,700,000
Revolving Credit Facility [Member] | U.S. Bank [Member] | Repayment Guarantee [Member]
Line of Credit Facility [Line Items]
Repayment guaranty	$ 6,500,000

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MORTGAGE NOTES PAYABLE (Tables)

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Summary of Mortgage Notes Payable

The following is a summary of the mortgage notes payable (in thousands, except percentages):

	June 30, 2015							December 31, 2014
Collateral	Outstanding Borrowings		Fair Value Adjustment			Net Book Value		Net Book Value		Maturity Date	Annual Interest Rate		Average Monthly Debt Service
Vista Apartment Homes	$	15,751	$	—		$	15,751	$	15,900	1/1/2022	2.48%	(1)(5)	$	63
Cannery Lofts	8,190		—			8,190		8,190		9/1/2020	3.49%	(1)(3)	36
Deerfield	10,530		—			10,530		10,530		11/1/2020	4.66%	(2)(3)	53
Ivy at Clear Creek	8,503		—			8,503		8,574		11/1/2023	2.60%	(1)(4)	29
Trailpoint at the Woodlands	19,174		—			19,174		19,335		11/1/2023	2.60%	(1)(4)	66
Verona Apartment Homes	22,623		—			22,623		22,843		1/1/2019	3.60%	(2)(5)	106
Skyview Apartment Homes	18,268		—			18,268		18,446		1/1/2019	3.60%	(2)(5)	85
The Nesbit Palisades	20,298		—			20,298		20,298		7/1/2024	2.14%	(1)(3)	53
Maxwell Townhomes	13,970		—			13,970		14,089		1/1/2022	4.32%	(2)(5)	71
Champion Farms	16,350		186			16,536		16,634		7/1/2016	6.14%	(2)(3)	85
Fieldstone	15,568		—			15,568		15,804		6/26/2016	2.59%	(1)(4)	73
Pinehurst	4,162		14			4,176		4,239		1/1/2016	5.58%	(2)(5)	28
Pheasant Run	6,250		128			6,378		6,407		10/1/2017	5.95%	(2)(3)	32
Retreat of Shawnee	13,185		204			13,389		13,522		2/1/2018	5.58%	(2)(5)	78
Conifer Crossing	27,351		50			27,401		27,762		9/1/2015	5.96%	(2)(4)(6)	171
Coursey Place	27,760		135			27,895		28,117		8/1/2021	5.07%	(2)(5)	154
Pines of York	15,396		(396		)	15,000		15,097		12/1/2021	4.46%	(2)(5)	80
The Estates at Johns Creek	50,000		—			50,000		50,000		7/1/2020	3.38%	(2)(3)	204
Chisholm Place	11,587		—			11,587		11,587		6/1/2024	2.58%	(1)(3)	36
Perimeter 5550	14,074		—			14,074		14,211		7/1/2019	3.42%	(2)(5)	64
Perimeter Circle	17,833		—			17,833		18,007		7/1/2019	3.42%	(2)(5)	81
Aston at Cinco Ranch	23,968		—			23,968		24,162		10/1/2021	4.34%	(2)(5)	120
Sunset Ridge 1	20,325		367			20,692		20,930		10/1/2020	4.58%	(2)(5)	113
Sunset Ridge 2	3,028		50			3,078		3,109		10/1/2020	4.54%	(2)(5)	16
Calloway at Las Colinas	36,058		—			36,058		36,375		12/1/2021	3.87%	(2)(5)	171
Woodmoor	12,803		—			12,803		—		8/1/2019	3.64%	(2)(5)	59
Springs at Gilbert Meadows	26,280		—			26,280		—		4/1/2025	2.07%	(1)(3)	80
Yorba Linda	67,500		—			67,500		—		6/1/2020	1.94%	(1)(3)	227
Villages at Bonita Glen	27,323		2,433			29,756		—		10/1/2023	5.33%	(2)(3)	151
	$	574,108	$	3,171		$	577,279	$	444,168

(1) Variable rate based on one-month LIBOR of 0.1865% (as of June 30, 2015) plus a fixed margin.

(2) Fixed rate.

(3) Monthly interest-only payment currently required.

(4) Monthly fixed principal plus interest payment required.

(5) Fixed monthly principal and interest payment required.

(6) On October 1, 2015, this loan will automatically extend for one year at a variable rate based on one-month LIBOR plus a fixed margin.

Annual Principal Payments on the Mortgage Note Payable

Annual principal payments on the mortgage notes payable, excluding the amortization of the fair value adjustments, for each of the next five 12-month periods ending June 30, and thereafter, are as follows (in thousands):

2016	$	37,572
2017	38,497
2018	26,682
2019	49,490
2020	111,639
Thereafter	310,228
	$	574,108

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LOANS HELD FOR INVESTMENT AND PREFERRED EQUITY INVESTMENT, NET - Recorded Investment, Credit Quality Indicator (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment and preferred equity investments, net	$ 4,223	$ 4,985
Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment and preferred equity investments, net	4,223	4,985
Nonperforming [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans held for investment and preferred equity investments, net	$ 0	$ 0

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EQUITY

6 Months Ended

Jun. 30, 2015

Equity [Abstract]

EQUITY

NOTE 15 - EQUITY

Preferred Stock

The Company’s charter authorizes the Company to issue 10.0 million shares of its $0.01 par value preferred stock.  As of June 30, 2015 and December 31, 2014, no shares of preferred stock were issued and outstanding.

Common Stock

As of June 30, 2015, the Company had issued shares of its $0.01 par value common stock as follows (dollars in thousands):

	Shares Issued		Gross Proceeds
Shares issued through private offering	1,263,727		$	12,582
Shares issued through primary public offering (1)	62,485,461		622,077
Shares issued through stock distributions	2,132,266		—
Shares issued through distribution reinvestment plan	5,064,974		48,366
Shares issued in conjunction with the Advisor's initial investment, net of 4,500 share conversion	15,500		155
Total	70,961,928		$	683,180
Shares redeemed	(414,918	)
Total shares outstanding as of June 30, 2015	70,547,010

(1)    Includes 276,056 shares issued to the Advisor.

Convertible Stock

As of June 30, 2015 and December 31, 2014, the Company had 50,000 shares of $0.01 par value convertible stock outstanding of which the Advisor and affiliated persons own 49,063 shares and outside investors own 937 shares.  The convertible stock will convert into shares of the Company’s 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 10% 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 and, on the 31st trading day after listing, the Company’s value based on the average trading price of its common stock since the listing, plus prior distributions, combine to meet the same 10% return threshold.

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:

(A) the lesser of

(i) 25% of the amount, if any, by which

(1) the value of the Company as of the date of the event triggering the conversion plus the total distributions paid to its stockholders through such date on the then-outstanding shares of its common stock exceeds

(2) the sum of the aggregate issue price of those outstanding shares plus a 10% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, or

(ii) 15% of the amount, if any, by which

(1) the value of the Company as of the date of the event triggering the conversion plus the total distributions paid to its stockholders through such date on the then-outstanding shares of its common stock exceeds

(2) the sum of the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, divided by

(B) the value of the Company divided by the number of outstanding shares of common stock, in each case, as of the date of the event triggering the conversion.      

Redemption of Securities

During the three and six months ended June 30, 2015, the Company redeemed 41,912 and 200,082 of its common shares, respectively. The Company will not redeem in excess of 5% of the weighted-average number of shares 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. All redemption requests tendered were honored during the three and six months ended June 30, 2015.

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.

Distributions

For the six months ended June 30, 2015, the Company paid aggregate distributions of $20.9 million, including $6.5 million of distributions paid in cash and $14.4 million of distributions reinvested in shares of common stock through the Company's distribution reinvestment plan, as follows (in thousands):

Record Date	Per Common Share	Distribution Date	Distributions Invested in Shares of Common Stock		Aggregate Cash Distribution		Total Aggregate Distribution
January 29, 2015	$0.05	January 30, 2015	$	2,391	$	1,070	$	3,461
February 26, 2015	0.05	February 27, 2015	2,392		1,081		3,473
March 30, 2015	0.05	March 31, 2015	2,400		1,080		3,480
April 29, 2015	0.05	April 30, 2015	2,408		1,084		3,492
May 28, 2015	0.05	May 29, 2015	2,418		1,088		3,506
June 29, 2015	0.05	June 30, 2015	2,423		1,093		3,516
			$	14,432	$	6,496	$	20,928

Since its formation, the Company's Board of Directors has declared a total of seven quarterly stock distributions of 0.015 shares each, two quarterly stock distributions of 0.0075 shares each, one quarterly stock distribution of 0.00585 shares each, and two quarterly stock distributions of 0.005 shares each of its common stock outstanding. In connection with these stock distributions, the Company had increased its accumulated deficit by $21.3 million as of June 30, 2015.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Principles of Consolidation

All intercompany accounts and transactions have been eliminated in consolidation.

The consolidated financial statements reflect the Company's accounts and the accounts of the Company's majority-owned and/or controlled subsidiaries. The Company follows the provisions of Accounting Standards Codification (“ASC”) Topic 810, “Consolidation,” and accordingly consolidates entities that are variable interest entities (“VIEs”) where it has determined that it is the primary beneficiary of such entities. Once it has been determined that the Company holds a variable interest in a VIE, management performs a qualitative analysis to determine (i) if the Company has the power to direct the matters that most significantly impact the VIE's financial performance; and (ii) if the Company has the obligation to absorb the losses of the VIE that could potentially be significant to the VIE or the right to receive the benefits of the VIE that could potentially be significant to the VIE. If the Company's interest possesses both of these characteristics, the Company is deemed to be the primary beneficiary and would be required to consolidate the VIE. The Company will continually assess its involvement with VIEs and re-evaluate the requirement to consolidate them. Noncontrolling interests are presented and disclosed as a separate component of stockholders' equity (not as a liability or other item outside of stockholders' equity). Consolidated net (loss) income includes the noncontrolling interests’ share of (loss) income. All changes in the Company’s ownership interest in a subsidiary are accounted for as stockholders' equity transactions if the Company retains its controlling financial interest in the subsidiary. The portions of these entities that the Company does not own are presented as noncontrolling interests as of the dates and for the periods presented in the consolidated financial statements.

Use of Estimates

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Assets Held for Sale

Assets Held for Sale

The Company presents the assets and liabilities of any rental properties which have been sold subsequent to the balance sheet date, or otherwise qualify as held for sale, separately in the Consolidated Balance Sheets. Real estate assets held for sale are measured at the lower of carrying amount or fair value less cost to sell. Both the real estate and the corresponding liabilities are presented separately in the Consolidated Balance Sheets. Subsequent to classification of an asset as held for sale, no further depreciation is recorded.

Rental Properties

Rental Properties

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

Buildings	27.5 years
Building improvements	3.0 to 27.5 years
Tenant improvements	Shorter of lease term or expected useful life

Impairment of Long-Lived Assets

Impairment of Long Lived Assets

When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for permanent 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.

An impairment loss will be recorded to the extent that the carrying value exceeds the estimated fair value of a property to be held and used.  For properties held for sale, the impairment loss would be the adjustment to fair value less the estimated cost to dispose of the asset. 

Loans Held for Investment, Net

Loans Held for Investment, Net

The Company records acquired performing loans held for investment at cost and reviews them for potential impairment at each balance sheet date.  The Company considers a loan to be impaired if one of two conditions exists.  The first condition is, if based on current information and events, management believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.  The second condition is if the loan is deemed to be a troubled-debt restructuring (“TDR”) where a concession has been given to a borrower in financial difficulty.  A TDR may not have an associated specific loan loss allowance if the principal and interest amount is considered recoverable based on current market conditions, expected collateral performance and/or guarantees made by the borrowers.

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, as a practical expedient, the fair value of the collateral.  If a loan is deemed to be impaired, the Company records a reserve for loan losses through a charge to income for any shortfall.    

Interest income from performing loans held for investment is recognized based on the contractual terms of the loan agreement.  Fees related to any buy down of the interest rate are deferred as prepaid interest income and amortized over the term of the loan as an adjustment to interest income.  The initial investment made in a purchased performing loan includes the amount paid to the seller plus fees.  The initial investment frequently differs from the related loan’s principal amount at the date of the purchase.  The difference is recognized as an adjustment of the yield over the life of the loan.  Closing costs related to the purchase of a performing loan held for investment are amortized over the term of the loan and accreted as an adjustment to interest income.

The Company may acquire real estate loans at a discount due to the credit quality of such loans and the respective borrowers under such loans.  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 held for investment.  The EIR that is calculated when the loan held for investment is acquired remains constant and is the basis for subsequent impairment testing and income recognition.  However, if the amount and timing of future cash collections are not reasonably estimable, the Company accounts for the real estate receivable on the cost recovery method.  Under the cost recovery method of accounting, no income is recognized until the basis of the loan held for investment has been fully recovered.

Preferred Equity Investment

Preferred Equity Investment

The Company records preferred equity investments at cost and evaluates the collectibility of both interest and principal at each balance sheet date. A preferred equity investment is considered impaired when, based on current information and events, it is probable that the Company will not be able to collect all amounts due according to existing contractual terms. When an investment is impaired, the amount of the loss accrual is calculated by comparing the carrying amount of the investment to its estimated fair value. Fees paid, net of expenses, are deferred and recognized as an adjustment to interest and dividend income earned over the term of the agreement.

Dividend income is recognized based on the contractual terms of the preferred equity agreement. 

Allocation of Purchase Price of Acquired and Foreclosed Assets

Allocation of the Purchase Price of Acquired and Foreclosed Assets

The cost of rental properties acquired directly as fee interests and through foreclosing on a loan are allocated to net tangible and intangible assets based on their relative fair values.  The Company allocates the purchase price of properties to acquired tangible assets, consisting of land, buildings, fixtures and improvements, and to 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. Fair value estimates are 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.  In addition, the Company may obtain independent appraisal reports. The information in the appraisal reports along with the aforementioned information available to the Company's management is used in allocating the purchase price. The independent appraisers have no involvement in management's allocation decisions other than providing market information.

In allocating the purchase price, management also includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period.  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 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.    

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 it were vacant.  Management’s estimates of value are made using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis).  Factors to be considered by management in its analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions and costs to execute similar leases.

The total amount of other intangible assets acquired is further allocated to 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 relationships 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 average remaining term of the respective leases.  The value of customer relationship intangibles are 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.  Should a tenant terminate its lease, the unamortized portion of the in-place lease value and customer relationship intangibles associated with that tenant would be charged to expense in that period.

The determination of the fair value of 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 purchase price allocations, which could impact the amount of the Company’s reported net income.  Initial purchase price allocations are subject to change until all information is finalized, which is generally within one year of the acquisition date.

Goodwill

Goodwill

The Company records the excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed as goodwill. Goodwill is not amortized but is tested for impairment at a level of reporting referred to as a reporting unit during the fourth quarter of each calendar year, or more frequently if events or changes in circumstances indicate that the asset might be impaired.

Revenue Recognition

Revenue Recognition

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 and includes amounts expected to be received in later years in deferred rents.  The Company records property operating expense reimbursements due from tenants for common area maintenance, real estate taxes and other recoverable costs in the period in which the related expenses are incurred.

Tenant Receivables

Tenant Receivables

Tenant receivables are stated in the 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. 

Income Taxes

Income Taxes

To maintain its REIT qualification for U.S. federal income tax purposes, the Company is generally required to distribute at least 90% of its taxable net income (excluding net capital gains) to its stockholders as well as comply with other requirements, including certain asset, income and stock ownership tests.  As a REIT, the Company is not subject to federal corporate income tax to the extent that it distributes 100% of its REIT taxable income each year.  If the Company fails to qualify as a REIT, and does not qualify for certain statutory relief provisions, it is 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 fails 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.  Generally, taxable income 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 taxable REIT subsidiaries (“TRS”). In general, the Company’s TRSs 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.  As of June 30, 2015 and December 31, 2014, the Company had no TRSs.

The Company evaluates the benefits from tax positions taken or expected to be taken in its tax return. Only the largest amount of benefits from tax positions that will more likely than not be sustainable upon examination are recognized by the Company.  The Company does not have any unrecognized tax benefits, nor interest and penalties, recorded in its consolidated financial statements and does not anticipate significant adjustments to the total amount of unrecognized tax benefits within the next 12 months.

The Company is subject to examination by the U.S. Internal Revenue Service and by the taxing authorities in other states in which the Company has significant business operations.  The Company is not currently undergoing any examinations by taxing authorities.

Earnings Per Share

Earnings Per Share

Basic earnings per share are computed by dividing income available to common stockholders by the weighted-average common shares outstanding during the period.  Diluted earnings 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.

Reclassifications

Reclassifications

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

Adoption of New Accounting Standards

Adoption of New Accounting Standards

Accounting Standards Issued But Not Yet Effective

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”)("ASU No. 2014-09"), “Revenue from Contracts with Customers”, which will replace most existing revenue recognition guidance in GAAP.  The core principle of ASU No. 2014-09 is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive 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. ASU No. 2014-09 will be effective for the Company beginning January 1, 2018, including interim periods in 2018, and allows for both retrospective and prospective methods of adoption. The Company is in the process of determining the method of adoption and assessing the impact of this guidance on the Company’s consolidated financial position, results of operations and cash flows.

In August 2014, FASB issued ASU No. 2014-15, "Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern." Under the new guidance, an entity should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. The guidance is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of the new requirements is not expected to have a material impact on the Company's consolidated financial statements.

In January 2015, FASB issued ASU No. 2015-01, "Income Statement - Extraordinary and Unusual Items (Subtopic 225-20), Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items" (“ASU No. 2015-01”). The amendments in ASU No. 2015-01 eliminate from GAAP the concept of extraordinary items. Although the amendment will eliminate the requirements for reporting entities to consider whether an underlying event or transaction is extraordinary, the presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. ASU No. 2015-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not expect the adoption of ASU No. 2015-01 to have a significant impact on its consolidated financial statements.

In February 2015, FASB issued ASU 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis" (“ASU 2015-02”), which makes certain changes to both the variable interest model and the voting model, including changes to (1) the identification of variable interests (fees paid to a decision maker or service provider), (2) the variable interest entity characteristics for a limited partnership or similar entity and (3) the primary beneficiary determination. ASU 2015-02 is effective for the Company beginning January 1, 2016. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU 2015-02 to have a significant impact on its consolidated financial statements.

In April 2015, FASB issued ASU 2015-03, "Simplifying the Presentation of Debt Issuance Costs" ("ASU 2015-03"), which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected. Upon adoption, the Company will apply the new guidance on a retrospective basis and adjust the balance sheet of each individual period presented to reflect the period-specific effects of applying the new guidance. This guidance is effective for the Company beginning January 1, 2016. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU 2015-03 to have a significant impact on its consolidated financial statements.

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LOANS HELD FOR INVESTMENT AND PREFERRED EQUITY INVESTMENT, NET - Components of Investments (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Investments, Debt and Equity Securities [Abstract]
Loans held for investment, net	$ 752	$ 1,523
Preferred equity investment, net	3,471	3,462
Loans held for investment and preferred equity investments, net	$ 4,223	$ 4,985

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DERIVATIVES AND HEDGING ACTIVITIES (Tables)

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Outstanding Interest Rate Derivatives

As of June 30, 2015, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (dollars in thousands):

Interest Rate Derivative	Number of Instruments	Notional Amount		Maturity Dates
Interest Rate Caps	6	$	102,013	January 1, 2018 to July 1, 2019

Fair Value and Balance Sheet Location of Derivatives

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification in prepaid expenses and other assets on the Balance Sheet as of June 30, 2015 and December 31, 2014 (in thousands):

Asset Derivatives						Liability Derivatives
June 30, 2015			December 31, 2014			June 30, 2015			December 31, 2014
Balance Sheet	Fair Value		Balance Sheet	Fair Value		Balance Sheet	Fair Value		Balance Sheet	Fair Value
Interest rate caps	$	80	Interest rate caps	$	114	—	$	—	—	$	—

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CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - 6 months ended Jun. 30, 2015 - USD ($) $ in Thousands	Total	Total Stockholders' Equity [Member]	Common Stock [Member]	Convertible Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Loss [Member]	Accumulated Deficit [Member]	Noncontrolling Interests [Member]
Beginning balance at Dec. 31, 2014	$ 468,354	$ 460,133	$ 693	$ 1	$ 614,024	$ (266)	$ (154,319)	$ 8,221
Beginning balance (in shares) at Dec. 31, 2014	69,254,165		69,254,000	50,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issued through distribution reinvestment plan	$ 14,432	14,432	$ 14		14,418
Common stock issued through distribution reinvestment plan (in shares)			1,493,000
Distributions on common stock	(20,928)	(20,928)					(20,928)
Share redemptions	$ (1,849)	(1,849)	$ (2)		(1,911)		64
Share redemptions (in shares)	(200,082)		(200,000)
Other comprehensive loss	$ (125)	(125)				(125)
Contributions of noncontrolling interests	151							151
Net income (loss)	4,563	4,744					4,744	(181)
Ending balance at Jun. 30, 2015	$ 464,598	$ 456,407	$ 705	$ 1	$ 626,531	$ (391)	$ (170,439)	$ 8,191
Ending balance (in shares) at Jun. 30, 2015	70,547,010		70,547,000	50,000

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RENTAL PROPERTIES, NET

6 Months Ended

Jun. 30, 2015

Real Estate Investments, Net [Abstract]

RENTAL PROPERTIES, NET

NOTE 4 - RENTAL PROPERTIES, NET

The Company’s investments in rental properties consisted of the following (in thousands):

	June 30, 2015			December 31, 2014
Land	$	191,392		$	122,137
Building and improvements	822,147			666,912
Furniture, fixtures and equipment	25,297			21,495
Construction in progress	3,440			3,005
	1,042,276			813,549
Less: accumulated depreciation	(55,918		)	(38,295		)
	$	986,358		$	775,254

Depreciation expense for the three and six months ended June 30, 2015 was $10.6 million and $19.4 million, respectively, and for the three and six months ended June 30, 2014 was $7.4 million and $14.3 million, respectively.

During the three months ended December 31, 2014, the Company entered into agreements to sell three rental properties, The Alcove, Cityside Crossing and The Redford, with a total net book value of $36.8 million. The Company confirmed the intent and ability to sell all three properties in their present condition and all three properties qualified for held for sale accounting treatment upon meeting all applicable criteria on or prior to December 31, 2014, at which time depreciation ceased. As such, the assets associated with these properties are separately classified and included as assets held for sale on the Company's consolidated balance sheets at December 31, 2014. However, the anticipated sale of these properties did not qualify for discontinued operations, and, therefore, the operations for all periods presented continue to be classified within continuing operations on the Company's consolidated statements of operations. The Company completed the sales of The Alcove, Cityside Crossing and The Redford on January 26, 2015, February 27, 2015 and March 2, 2015, respectively (see Note 8).

Loss on disposal of assets. During the three and six months ended June 30, 2015, the Company had a $1.4 million and $2.5 million loss on the disposal of assets, respectively, and during the three and six months June 30, 2014 had a $21,000 and $1.6 million loss on the disposal of assets, respectively, due to the replacement of appliances at its rental properties in conjunction with unit upgrades.

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IDENTIFIED INTANGIBLE ASSETS, NET - Rental and Antennae Leases (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Goodwill and Intangible Assets Disclosure [Abstract]
2016	$ 3,608
2017	16
2018	16
2019	16
2020	16
Thereafter	89
Total	$ 3,761	$ 2,081

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EQUITY - Preferred Stock (Details) - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Equity [Abstract]
Preferred stock, authorized (in shares)	10,000,000	10,000,000
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Wholly Owned Subsidiaries Information

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

Subsidiary	Apartment Complex	Number of Units	Property Location
RRE Opportunity Holdings, LLC	N/A	N/A	N/A
Resource Real Estate Opportunity OP, LP	N/A	N/A	N/A
RRE Charlemagne Holdings, LLC	N/A	N/A	N/A
RRE 107th Avenue Holdings, LLC (“107th Avenue”)	(c)	N/A	N/A
RRE Westhollow Holdings, LLC (“Westhollow”)	(b)	N/A	N/A

RRE Crestwood Holdings, LLC (“Crestwood”)	(a)(b)	N/A	N/A
RRE Iroquois, LP (“Vista”)	Vista Apartment Homes	133	Philadelphia, PA
RRE Iroquois Holdings, LLC	N/A	N/A	N/A
RRE Campus Club Holdings, LLC (“Campus Club”)	(b)	N/A	N/A
RRE Bristol Holdings, LLC (“Bristol”)	(c)	N/A	N/A
RRE Cannery Holdings, LLC (“Cannery”)	Cannery Lofts	156	Dayton, OH
RRE Williamsburg Holdings, LLC (“Williamsburg”)	Williamsburg	976	Cincinnati, OH
WPL Holdings, LLC	N/A (d)	N/A	Cincinnati, OH
RRE Skyview Holdings, LLC ("Skyview")	(c)	N/A	N/A
RRE Park Forest Holdings, LLC ("Park Forest")	Mosaic	216	Oklahoma City, OK
RRE Foxwood Holdings, LLC ("Foxwood")	The Reserve at Mt. Moriah	220	Memphis, TN
RRE Flagstone Holdings, LLC ("Flagstone")	The Alcove	292	Houston, TX
RRE Deerfield Holdings, LLC ("Deerfield")	Deerfield	166	Hermantown, MN
RRE Kenwick Canterbury Holdings, LLC ("Kenwick & Canterbury")	(c)	N/A	N/A
RRE Armand Place Holdings, LLC ("Armand")	Ivy at Clear Creek	244	Houston, TX
RRE Autumn Wood Holdings, LLC ("Autumn Wood")	Retreat at Rocky Ridge	206	Hoover, AL
RRE Village Square Holdings, LLC ("Village Square")	Trailpoint at the Woodlands	271	Houston, TX
RRE Nob Hill Holdings, LLC ("Nob Hill")	Affinity at Winter Park	192	Winter Park, FL
RRE Brentdale Holdings, LLC ("Brentdale")	The Westside Apartments	412	Plano, TX
RRE Jefferson Point Holdings, LLC ("Jefferson Point")	Tech Center Square	208	Newport News, VA
RRE Centennial Holdings, LLC ("Centennial")	Verona Apartment Homes	276	Littleton, CO
RRE Pinnacle Holdings, LLC ("Pinnacle")	Skyview Apartment Homes	224	Westminster, CO
RRE Jasmine Holdings, LLC ("Jasmine")	The Nesbit Palisades	437	Alpharetta, GA
RRE River Oaks Holdings, LLC ("River Oaks")	Maxwell Townhomes	314	San Antonio, TX
RRE Nicollet Ridge Holdings, LLC ("Nicollet Ridge")	Meridian Pointe	339	Burnsville, MN
RRE Addison Place, LLC ("Addison Place")	The Estates at Johns Creek	403	Alpharetta, GA
PRIP Coursey, LLC ("Evergreen at Coursey Place")	Evergreen at Coursey Place (e)	352	Baton Rouge, LA
PRIP 3700, LLC ("Champion Farms")	N/A (e)	N/A	N/A
PRIP 10637, LLC ("Fieldstone")	N/A (e)	N/A	N/A
PRIP 500, LLC ("Pinehurst")	Pinehurst (e)	146	Kansas City, MO
PRIP 1102, LLC ("Pheasant Run")	Pheasant Run (e)	160	Lee's Summit, MO
PRIP 11128, LLC ("Retreat at Shawnee")	Retreat at Shawnee (e)	342	Shawnee, KS
PRIP 6700, LLC ("Hilltop Village")	(b)(e)	N/A	N/A
PRIP 3383, LLC ("Conifer Place")	N/A (e)	N/A	N/A
PRIP Stone Ridge, LLC ("Stone Ridge")	N/A (e)	N/A	N/A
PRIP Pines, LLC ("Pines of York")	Pines of York (e)	248	Yorktown, VA
PRIP 5060/6310, LLC ("Governor Park")	(b)(e)	N/A	N/A
RRE Chisholm Place Holdings LLC ("Chisholm Place")	Chisholm Place	142	Plano, TX
RRE Berkeley Run Holdings, LLC ("Berkley Run")	Perimeter Circle	194	Atlanta, GA
RRE Berkeley Trace Holdings LLC ("Berkley Trace")	Perimeter 5550	165	Atlanta, GA
RRE Merrywood LLC ("Merrywood")	Aston at Cinco Ranch	228	Katy, TX
RRE Sunset Ridge Holdings, LLC ("Sunset Ridge")	Sunset Ridge	324	San Antonio, TX
RRE Parkridge Place Holdings, LLC ("Parkridge Place")	Calloway at Las Colinas	536	Irving, TX
RRE Spring Hill Holdings, LLC ("Spring Hill")	N/A	N/A	N/A
RRE Woodmoor Holdings, LLC ("Woodmoor")	Woodmoor	208	Austin, TX
RRE Gilbert Holdings, LLC ("Springs at Gilbert")	Springs at Gilbert Meadows	459	Gilbert, AZ

RRE Bonita Glen Holdings, LLC ("Bonita")	Villages at Bonita Glen	295	Chula Vista, CA
RRE Yorba Linda Holdings, LLC ("Yorba Linda")	Yorba Linda	400	Yorba Linda, CA

N/A - Not Applicable

(a) - Discontinued operations

(b) - Sold prior to 2015

(c) - Sold in 2015

(d) - Subsidiary holds a portion of the Williamsburg parking lot    

(e) - Wholly-owned subsidiary of RRE Charlemagne Holdings, LLC

The consolidated financial statements include the accounts of the Company's majority-owned and/or controlled subsidiaries as follows:

Subsidiary	Ownership %	Apartment Complex	Number of Units	Property Location
Springhurst Housing Partners, LLC	70.0%	Champion Farms	264	Louisville, KY
Glenwood Housing Partners I, LLC	83.0%	Fieldstone	266	Woodlawn, OH
FPA/PRIP Conifer, LLC	42.5%	Conifer Place	420	Norcross, GA
DT Stone Ridge, LLC	77.7%	Stone Ridge	188	Columbia, SC

Estimated Useful Lives of Assets

The Company anticipates the estimated useful lives of its assets by class as follows:

Buildings	27.5 years
Building improvements	3.0 to 27.5 years
Tenant improvements	Shorter of lease term or expected useful life

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FAIR VALUE MEASURES AND DISCLOSURES - Assets Measured at Fair Value on a Recurring Basis (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate caps	$ 80	$ 114
Assets, fair value	80	114
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate caps	0	0
Assets, fair value	0	0
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate caps	80	114
Assets, fair value	80	114
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate caps	0	0
Assets, fair value	$ 0	$ 0

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS (Tables)

6 Months Ended

Jun. 30, 2015

Related Party Transactions [Abstract]

Fees Earned From/Expenses Paid to Related Parties

The amounts payable and the fees earned/expenses paid to such related parties are summarized in the following tables (in thousands):

	June 30, 2015		December 31, 2014
Receivables from related parties:
RAI and affiliates	$	2,072	$	1,148
Payables to related parties:
Advisor:
Operating expense reimbursements	$	363	$	327
Resource Real Estate Opportunity Manager, LLC:
Property management fees	403		436
Operating expense reimbursements	566		743
Other	5		124
	$	1,337	$	1,630

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Fees earned / expenses paid to related parties:
Advisor:
Acquisition fees (1)	$	3,687	$	2,262	$	5,169	$	5,604
Asset management fees (2)	$	2,461	$	1,790	$	4,709	$	3,040
Disposition fees (3)	$	270	$	150	$	1,031	$	150
Debt financing fees (4)	$	474	$	572	$	670	$	1,147
Overhead allocation (5)	$	934	$	564	$	1,822	$	915
Resource Real Estate Opportunity Manager LLC:
Property management fees (2)	$	1,131	$	848	$	2,238	$	1,544
Construction management fees (6)	$	483	$	481	$	839	$	676
Debt servicing fees (2)	$	20	$	2	$	25	$	5
Other:
Ledgewood	$	83	$	71	$	144	$	101
Graphic Images	$	19	$	—	$	22	$	33

(1) Included in Acquisition costs on the consolidated statements of operations and comprehensive (loss) income.

(2) Included in Management fees on the consolidated statements of operations and comprehensive (loss) income.

(3) Included in Net gain on dispositions on the consolidated statements of operations and comprehensive (loss) income.

(4) Included in Deferred financing costs, net, on the consolidated balance sheets.

(5) Included in General and administrative costs on the consolidated statements of operations and comprehensive (loss) income.

(6) Included in Rental Properties, net, on the consolidated balance sheets.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2015

Related Party Transactions [Abstract]

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

NOTE 14 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

In the ordinary course of its business operations, the Company has ongoing relationships with several related parties. 

Relationship with RAI

Self-insurance funds held in escrow. Substantially all of the receivables from related parties represents escrow funds held by RAI for self insurance. The Company's properties participate in insurance pools with other properties directly and indirectly managed by RAI for both property insurance and general liability. RAI holds the escrow funds related to the insurance pools on its books. The insurance pool for the property insurance covers losses up to $2.5 million and the insurance pool for the general liability covers losses up to the first $25,000 per incident. Catastrophic insurance would cover property losses in excess of the insurance pool up to $140.0 million. 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.

Internal audit fees. RAI performs internal audit services for the Company.

Relationship with the Advisor

In September 2009, the Company entered into an advisory agreement (the “Advisory Agreement”) pursuant to which the Advisor provides the Company with investment management, administrative and related services.  The Advisory Agreement was amended in January 2010 and further amended in January 2011 and March 2015.  The Advisory Agreement has a one-year term and renews for an unlimited number of successive one-year terms upon the approval of the conflicts committee of the Company's board of directors.  The Company renewed the Advisory Agreement for another year on September 15, 2014. Under the Advisory Agreement, the Advisor receives fees and is reimbursed for its expenses as set forth below:

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

Asset management fees. The Company pays the Advisor a monthly asset management fee equal to one-twelfth of 1.0% of the higher of the cost or the independently appraised value of each asset, 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 or a majority of an asset and does not manage or control the asset.  

Disposition fees. The Advisor earns 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, 2.75% of the contract sales price.

Debt financing fees. The Advisor earns a debt financing fee equal to 0.5% of the amount available under any debt financing obtained for which it provided substantial services.

Expense reimbursements. The Company also pays directly or reimburses 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 ongoing distribution reinvestment plan offering.  This includes all organization and offering costs of up to 2.5% of gross offering proceeds.

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.

Relationship with Resource Real Estate Opportunity Manager

Resource Real Estate Opportunity Manager, LLC (the “Manager”), an affiliate of the Advisor, manages the Company's 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 4.5% of the gross receipts from our properties, provided that for properties that are less than 75% occupied, the manager receives a minimum fee for the first 12 months of ownership for performing certain property management and leasing activities. 

Construction management fees. The Manager earns a construction management fee of 5.0% of actual aggregate costs to construct improvements, or to repair, rehab or reconstruct a property.

Debt servicing fees. The Manager earns a debt servicing fee of 2.75% on payments received from loans held by the Company for investment.  

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. 

Relationship with Other Related Parties

The Company has also made payment for legal services to the law firm of Ledgewood P.C. (“Ledgewood”).  Until 1996, the Chairman of RAI was of counsel to Ledgewood.  In connection with the termination of his affiliation with Ledgewood and its redemption of his interest, the Chairman continues to receive certain payments from Ledgewood.  Until March 2006, a current executive of RAI was the managing member of Ledgewood.  This executive remained of counsel to Ledgewood through June 2007, at which time he became an Executive Vice President of RAI.  In connection with his separation, this executive was entitled to receive payments from Ledgewood through 2013. 

The Company utilizes the services of a printing company, Graphic Images, LLC (“Graphic Images”), whose principal owner is the father of RAI’s Chief Financial Officer.  

The amounts payable and the fees earned/expenses paid to such related parties are summarized in the following tables (in thousands):

	June 30, 2015		December 31, 2014
Receivables from related parties:
RAI and affiliates	$	2,072	$	1,148
Payables to related parties:
Advisor:
Operating expense reimbursements	$	363	$	327
Resource Real Estate Opportunity Manager, LLC:
Property management fees	403		436
Operating expense reimbursements	566		743
Other	5		124
	$	1,337	$	1,630

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Fees earned / expenses paid to related parties:
Advisor:
Acquisition fees (1)	$	3,687	$	2,262	$	5,169	$	5,604
Asset management fees (2)	$	2,461	$	1,790	$	4,709	$	3,040
Disposition fees (3)	$	270	$	150	$	1,031	$	150
Debt financing fees (4)	$	474	$	572	$	670	$	1,147
Overhead allocation (5)	$	934	$	564	$	1,822	$	915
Resource Real Estate Opportunity Manager LLC:
Property management fees (2)	$	1,131	$	848	$	2,238	$	1,544
Construction management fees (6)	$	483	$	481	$	839	$	676
Debt servicing fees (2)	$	20	$	2	$	25	$	5
Other:
Ledgewood	$	83	$	71	$	144	$	101
Graphic Images	$	19	$	—	$	22	$	33

(1) Included in Acquisition costs on the consolidated statements of operations and comprehensive (loss) income.

(2) Included in Management fees on the consolidated statements of operations and comprehensive (loss) income.

(3) Included in Net gain on dispositions on the consolidated statements of operations and comprehensive (loss) income.

(4) Included in Deferred financing costs, net, on the consolidated balance sheets.

(5) Included in General and administrative costs on the consolidated statements of operations and comprehensive (loss) income.

(6) Included in Rental Properties, net, on the consolidated balance sheets.