10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________

FORM 10-Q

______________________________________________________

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the quarterly period ended June 30, 2017

OR

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

For the transition period from to

Commission file number 000-54673

______________________________________________________

KBS LEGACY PARTNERS APARTMENT REIT, INC.

(Exact Name of Registrant as Specified in Its Charter)

______________________________________________________

Maryland	27-0668930
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
800 Newport Center Drive, Suite 700 Newport Beach, California	92660
(Address of Principal Executive Offices)	(Zip Code)

(949) 417-6500

(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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  xNo  ¨

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

Large Accelerated Filer	¨		Accelerated Filer	¨
Non-Accelerated Filer	¨	(Do not check if a smaller reporting company)	Smaller reporting company	x
			Emerging growth company	¨

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

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

 As of August 4, 2017, there were 21,028,095 outstanding shares of common stock of the registrant.

KBS LEGACY PARTNERS APARTMENT REIT, INC.

FORM 10-Q

June 30, 2017

INDEX

PART I.	FINANCIAL INFORMATION		2
	Item 1.	Financial Statements	2
		Consolidated Balance Sheets as of June 30, 2017 (unaudited) and December 31, 2016	2
		Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended June 30, 2017 and 2016	3
		Consolidated Statements of Stockholders’ Equity for the Year Ended December 31, 2016 and the Six Months Ended June 30, 2017 (unaudited)	4
		Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2017 and 2016	5
		Condensed Notes to Consolidated Financial Statements as of June 30, 2017 (unaudited)	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32
	Item 4.	Controls and Procedures	32
PART II.	OTHER INFORMATION		33
	Item 1.	Legal Proceedings	33
	Item 1A.	Risk Factors	33
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
	Item 3.	Defaults upon Senior Securities	35
	Item 4.	Mine Safety Disclosures	35
	Item 5.	Other Information	35
	Item 6.	Exhibits	36
SIGNATURES			37

1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

	June 30, 2017			December 31, 2016
	(unaudited)
Assets
Real estate held for investment:
Land	$	41,771		$	41,771
Buildings and improvements	326,700			327,619
Total real estate held for investment, cost	368,471			369,390
Less accumulated depreciation and amortization	(46,984		)	(42,622		)
Total real estate held for investment, net	321,487			326,768
Real estate held for sale, net	—			39,926
Total real estate, net	321,487			366,694
Cash and cash equivalents	21,213			15,998
Restricted cash	5,090			5,099
Prepaid expenses and other assets	4,013			4,146
Total assets	$	351,803		$	391,937
Liabilities and stockholders’ equity
Notes payable:
Notes payable, net	$	249,901		$	252,326
Notes payable related to real estate held for sale, net	—			26,820
Total notes payable, net	249,901			279,146
Accounts payable and accrued liabilities	4,680			5,566
Due to affiliates	148			157
Distributions payable	934			1,154
Other liabilities	2,640			2,778
Total liabilities	258,303			288,801
Commitments and contingencies (Note 7)
Redeemable common stock	545			350
Stockholders’ equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding	—			—
Common stock, $.01 par value; 1,000,000,000 shares authorized, 20,937,850 and 20,896,268 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively	209			209
Additional paid-in capital	180,391			180,196
Cumulative distributions and net losses	(87,645		)	(77,619		)
Total stockholders’ equity	92,955			102,786
Total liabilities and stockholders’ equity	$	351,803		$	391,937

See accompanying condensed notes to consolidated financial statements.

2

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share amounts)

	Three Months Ended June 30,					Six Months Ended June 30,
	2017		2016			2017		2016
Revenues:
Rental income	$	10,381	$	11,367		$	21,347	$	22,521
Total revenues	10,381		11,367			21,347		22,521
Expenses:
Operating, maintenance, and management	1,523		1,559			2,907		3,185
Real estate taxes and insurance	1,823		1,811			3,635		3,451
Asset management fees to affiliate	—		44			234		238
Property management fees and expenses to affiliate	1,378		1,498			2,990		2,853
General and administrative expenses	551		849			1,108		1,474
Depreciation and amortization	2,758		3,065			5,763		6,116
Interest expense	2,346		2,579			5,128		5,170
Total expenses	10,379		11,405			21,765		22,487
Other income:
Interest and other income	49		14			75		28
Gain on sale of real estate, net	—		—			16,470		—
Total other income	49		14			16,545		28
Net income (loss)	$	51	$	(24	)	$	16,127	$	62
Net income per common share, basic and diluted	$	—	$	—		$	0.77	$	—
Weighted-average number of common shares outstanding, basic and diluted	20,920,275		20,585,367			20,897,493		20,543,217

See accompanying condensed notes to consolidated financial statements.

3

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Year Ended December 31, 2016 and the Six Months Ended June 30, 2017 (unaudited)

(dollars in thousands)

						Additional Paid-in Capital			Cumulative Distributions and Net Income (Loss)			Total Stockholders’ Equity
	Common Stock
	Shares		Amounts
Balance, December 31, 2015	20,508,397		$	205		$	176,476		$	(69,310	)	$	107,371
Issuance of common stock	586,585		6			5,731			—			5,737
Redemptions of common stock	(198,714	)	(2		)	(2,017		)	—			(2,019		)
Distributions declared	—		—			—			(13,430		)	(13,430		)
Other offering costs	—		—			6			—			6
Net income	—		—			—			5,121			5,121
Balance, December 31, 2016	20,896,268		209			180,196			(77,619		)	102,786
Issuance of common stock	253,129		2			2,204			—			2,206
Redemptions of common stock	(211,547	)	(2		)	(1,953		)	—			(1,955		)
Transfers to redeemable common stock	—		—			(46		)	—			(46		)
Distributions declared	—		—			—			(26,153		)	(26,153		)
Other offering costs	—		—			(10		)	—			(10		)
Net income	—		—			—			16,127			16,127
Balance, June 30, 2017	20,937,850		$	209		$	180,391		$	(87,645	)	$	92,955

See accompanying condensed notes to consolidated financial statements.

4

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	Six Months Ended June 30,
	2017			2016
Cash Flows from Operating Activities:
Net income	$	16,127		$	62
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,763			6,116
Bad debt expense	217			213
Loss due to property damages	764			145
Loss due to extinguishment of debt	267			—
Amortization of discount on notes payable	44			44
Amortization of deferred financing costs	226			207
Gain on sale of real estate, net	(16,470		)	—
Changes in operating assets and liabilities:
Prepaid expenses and other assets	(176		)	630
Accounts payable and accrued liabilities	(1,016		)	(750		)
Due to affiliates	(9		)	404
Other liabilities	11			31
Net cash provided by operating activities	5,748			7,102
Cash Flows from Investing Activities:
Proceeds from sale of real estate	56,191			—
Improvements to real estate	(819		)	(1,180		)
Insurance proceeds received for property damage	—			133
Net cash provided by (used in) investing activities	55,372			(1,047		)
Cash Flows from Financing Activities:
Principal payments on mortgage notes payable	(29,515		)	(2,898		)
Prepayment fees related to the extinguishment of debt	(267		)	—
Payments to redeem common stock	(1,955		)	(1,769		)
Payments of other offering costs	(10		)	(11		)
Distributions paid	(24,167		)	(3,776		)
Net cash used in financing activities	(55,914		)	(8,454		)
Net increase (decrease) in cash, cash equivalents and restricted cash	5,206			(2,399		)
Cash, cash equivalents and restricted cash, beginning of period	21,097			24,869
Cash, cash equivalents and restricted cash, end of period	$	26,303		$	22,470
Supplemental Disclosure of Cash Flow Information:
Interest paid	$	4,674		$	4,947
Supplemental Disclosure of Noncash Transactions:
Distributions paid to common stockholders through common stock issuances pursuant to the dividend reinvestment plan	$	2,206		$	2,876
Increase in redeemable common stock payable	$	—		$	205
Increase in accrued improvements to real estate	$	130		$	—

See accompanying condensed notes to consolidated financial statements.

5

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2017

(unaudited)

1. ORGANIZATION

KBS Legacy Partners Apartment REIT, Inc. (the “Company”) was formed on July 31, 2009 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2010. Substantially all of the Company’s business is conducted through KBS Legacy Partners Limited Partnership (the “Operating Partnership”), a Delaware limited partnership formed on August 4, 2009. The Company is the sole general partner of and owns a 0.1% partnership interest in the Operating Partnership. KBS Legacy Partners Holdings LLC (“REIT Holdings”), a Delaware limited liability company formed on August 4, 2009, owns the remaining 99.9% interest in the Operating Partnership and is its sole limited partner. The Company is the sole member and manager of REIT Holdings.

Subject to certain restrictions and limitations, the business of the Company is externally managed by KBS Capital Advisors LLC (the “Advisor”), an affiliate of the Company, pursuant to an advisory agreement the Company renewed with the Advisor on January 25, 2017 (the “Advisory Agreement”).

On August 7, 2009, the Company issued 20,000 shares of its common stock to KBS-Legacy Apartment Community REIT Venture, LLC (the “Sub-Advisor”), an affiliate of the Company, at a purchase price of $10.00 per share. As of June 30, 2017, the Sub-Advisor owned 20,000 shares of common stock of the Company.

The Company invested in and manages a portfolio of high quality apartment complexes located throughout the United States. The Company’s portfolio consists of “core” apartment complexes that were already well-positioned and producing rental income at acquisition. As of June 30, 2017, the Company owned 10 apartment complexes.

On August 19, 2009, the Company filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to offer a minimum of 250,000 shares and a maximum of 280,000,000 shares of common stock for sale to the public (the “Initial Offering”), of which 80,000,000 shares would be offered pursuant to the Company’s dividend reinvestment plan.

The SEC declared the Company’s registration statement for the Initial Offering effective on March 12, 2010, and the Company retained KBS Capital Markets Group LLC (the “Dealer Manager”), an affiliate of the Company, to serve as the dealer manager for the Initial Offering pursuant to a dealer manager agreement dated March 12, 2010 (the “Initial Dealer Manager Agreement”). Under the Initial Dealer Manager Agreement, the Dealer Manager was responsible for marketing the Company’s shares being offered pursuant to the Initial Offering.

On May 31, 2012, the Company filed a registration statement on Form S-11 with the SEC to register a follow-on public offering (the “Follow-on Offering” and together with the Initial Offering, the “Offerings”). Pursuant to the registration statement, as amended, the Company registered up to an additional $2,000,000,000 of shares of common stock for sale to the public and up to an additional $760,000,000 of shares of common stock pursuant to the dividend reinvestment plan. The SEC declared the Company’s registration statement for the Follow-on Offering effective on March 8, 2013.

The Company retained the Dealer Manager to serve as the dealer manager for the Follow-on Offering pursuant to a dealer manager agreement dated March 8, 2013 (the “Follow-on Dealer Manager Agreement” and together with the Initial Dealer Manager Agreement, the “Dealer Manager Agreements”). On March 12, 2013, the Company ceased offering shares pursuant to the Initial Offering and on March 13, 2013, the Company commenced offering shares to the public pursuant to the Follow-on Offering.

In the Initial Offering, the Company sold 18,088,084 shares of common stock for gross offering proceeds of $179.2 million, including 368,872 shares of common stock under the dividend reinvestment plan for gross offering proceeds of $3.5 million. The Company ceased offering shares in the primary Follow-on Offering on March 31, 2014 and completed subscription processing procedures on April 30, 2014. The Company sold 1,496,198 shares of common stock in the primary Follow-on Offering for gross offering proceeds of $15.9 million.

6

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2017

(unaudited)

As of June 30, 2017, the Company had sold an aggregate of 21,937,089 shares of common stock in the Offerings for gross offering proceeds of $218.1 million, including an aggregate of 2,721,679 shares of common stock under the dividend reinvestment plan for gross offering proceeds of $26.6 million. Also, as of June 30, 2017, the Company had redeemed 1,019,239 shares sold in the Offerings for $9.9 million.

The Company terminated the dividend reinvestment plan effective as of August 20, 2017.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2016. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”).

Principles of Consolidation and Basis of Presentation

The accompanying unaudited consolidated financial statements and condensed notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Operating results for the six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

The consolidated financial statements include the accounts of the Company, REIT Holdings, the Operating Partnership and their direct and indirect wholly owned subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation.

Use of Estimates

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

Segments

The Company owned 10 apartment complexes as of June 30, 2017. Substantially all of the Company’s revenue and net income (loss) is from real estate, and therefore, the Company currently operates in one reportable segment.

Reclassifications

Certain amounts in the Company’s prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods. During the six months ended June 30, 2017, the Company sold one apartment complex. As a result, certain assets and liabilities were reclassified to held for sale on the consolidated balance sheets for all periods presented. Additionally, during the year ended December 31, 2016, the Company elected to early adopt ASU No. 2016-18 (as defined below).  As a result, the Company no longer presents the changes within restricted cash in the consolidated statements of cash flows.  Instead, restricted cash is included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the consolidated statements of cash flows.

7

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2017

(unaudited)

Square Footage, Occupancy and Other Measures

Any references to square footage or occupancy are unaudited and outside the scope of the Company’s independent registered public accounting firm’s review of the Company’s financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.

Per Share Data

Basic net income (loss) per share of common stock is calculated by dividing net income (loss) by the weighted-average number of shares of common stock issued and outstanding during such period. Diluted net income (loss) per share of common stock equals basic net income (loss) per share of common stock as there were no potentially dilutive securities outstanding during the six months ended June 30, 2017 and 2016.

Distributions declared per share of common stock were $1.091 and $1.251 for the three and six months ended June 30, 2017. Distributions declared per share of common stock assumes each share was issued and outstanding each day that was a record date for distributions during this period. These distributions declared consisted of the following:

• The Company’s board of directors declared distributions per common share based on daily record dates for each day during the period from January 1, 2017 to February 28, 2017. Each day during the period was a record date for distributions and distributions were calculated at a rate of $0.00178082 per share per day.

• On March 9, 2017, the Company’s board of directors declared a March 2017 distribution in the amount of $0.05520548 per share of common stock to stockholders of record as of the close of business on March 20, 2017.

• On April 5, 2017, the Company’s board of directors declared a special distribution in the amount of $1.00 per share of common stock to stockholders of record as of the close of business on April 20, 2017.

• On May 9, 2017, the Company’s board of directors declared May 2017 and June 2017 distributions in the amounts of $0.04609658 and $0.04460959, respectively, per share of common stock to stockholders of record as of the close of business on May 19, 2017 and June 20, 2017, respectively.

Distributions declared per share of common stock were $0.162 and $0.322 for the three and six months ended June 30, 2016, respectively. Distributions declared per share of common stock assumes each share was issued and outstanding each day that was a record date for distributions during these periods. For the three and six months ended June 30, 2016, distributions were based on daily record dates and calculated at a rate of $0.00178082 per share per day. Each day during the periods from January 1, 2016 through February 28, 2016 and March 1, 2016 through June 30, 2016 was a record date for distributions.

8

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2017

(unaudited)

Recently Issued Accounting Standards Update

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU No. 2014-09”).  ASU No. 2014-09 requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.  ASU No. 2014-09 supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification.  ASU No. 2014-09 does not apply to lease contracts within the scope of Leases (Topic 840). ASU No. 2014-09 was to be effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and is to be applied retrospectively, with early application not permitted.  In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU No. 2015-14”), which defers the effective date of ASU No. 2014-09 by one year. Early adoption is permitted but not before the original effective date. The primary source of revenue for the Company is generated through leasing arrangements, which are excluded from this standard. The Company’s revenues that may be impacted by this standard primarily include other operating income, sales of real estate and other ancillary income earned at its properties. In 2016, other operating income and other ancillary income were approximately 3% of consolidated revenue. The Company is in process of evaluating how this standard will impact sales of real estate. The Company continues to evaluate the impact that the standard will have on its consolidated financial statements. The Company expects to adopt the standard using the modified retrospective approach, which requires a cumulative effect adjustment as of the date of the adoption.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU No. 2016-01”).  The amendments in ASU No. 2016-01 address certain aspects of recognition, measurement, presentation and disclosure of financial instruments.  ASU No. 2016-01 primarily affects accounting for equity investments and financial liabilities where the fair value option has been elected.  ASU No. 2016-01 also requires entities to present financial assets and financial liabilities separately, grouped by measurement category and form of financial asset in the balance sheet or in the accompanying notes to the financial statements.  ASU No. 2016-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.  Early application of certain provisions of the standard is permitted for financial statements that have not been previously issued.  The Company does not expect the adoption of ASU No. 2016-01 to have a significant impact on its financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”). The amendments in ASU No. 2016-02 change the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of ASU No. 2016-02 as of its issuance is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting the new leases standard on its consolidated financial statements.

9

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2017

(unaudited)

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU No. 2016-15”).  ASU No. 2016-15 is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows.  The amendments in ASU No. 2016-15 provide guidance on eight specific cash flow issues, including the following that are or may be relevant to the Company: (a) Cash payments for debt prepayment or debt extinguishment costs should be classified as cash outflows for financing activities; (b) Cash payments relating to contingent consideration made soon after an acquisition’s consummation date (i.e., approximately three months or less) should be classified as cash outflows for investing activities. Payments made thereafter should be classified as cash outflows for financing activities up to the amount of the original contingent consideration liability. Payments made in excess of the amount of the original contingent consideration liability should be classified as cash outflows for operating activities; (c) Cash payments received from the settlement of insurance claims should be classified on the basis of the nature of the loss (or each component loss, if an entity receives a lump-sum settlement); (d) In the absence of specific guidance, an entity should classify each separately identifiable cash source and use on the basis of the nature of the underlying cash flows. For cash flows with aspects of more than one class that cannot be separated, the classification should be based on the activity that is likely to be the predominant source or use of cash flow.  ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period.  The Company is still evaluating the impact of adopting ASU No. 2016-15 on its financial statements, but does not expect the adoption of ASU No. 2016-15 to have a material impact on its financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU No. 2016-18”). ASU No. 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents.  Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows.  ASU No. 2016-18 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.  The Company elected to early adopt ASU No. 2016-18 for the reporting period ended December 31, 2016 and it was applied retrospectively. As a result of the adoption of ASU No. 2016-18, the Company no longer presents the changes within restricted cash in the consolidated statements of cash flows.  

3. REAL ESTATE

As of June 30, 2017, the Company owned 10 apartment complexes, containing 2,738 units and encompassing 2.8 million rentable square feet, which were 95% occupied. The following table provides summary information regarding the properties owned by the Company as of June 30, 2017 (dollars in thousands):

Property Name	Date Acquired	Location	Total Real Estate, Cost		Accumulated Depreciation and Amortization			Total Real Estate, Net
Legacy at Valley Ranch	10/26/2010	Irving, TX	$	36,609	$	(5,622	)	$	30,987
Poplar Creek	02/09/2012	Schaumburg, IL	27,194		(3,010		)	24,184
The Residence at Waterstone	04/06/2012	Pikesville, MD	65,387		(8,571		)	56,816
Legacy Crescent Park	05/03/2012	Greer, SC	19,717		(2,967		)	16,750
Legacy at Martin’s Point	05/31/2012	Lombard, IL	37,332		(5,896		)	31,436
Watertower Apartments	01/15/2013	Eden Prairie, MN	38,870		(4,890		)	33,980
Crystal Park at Waterford	05/08/2013	Frederick, MD	46,126		(5,877		)	40,249
Millennium Apartment Homes	06/07/2013	Greenville, SC	33,367		(4,165		)	29,202
Legacy Grand at Concord	02/18/2014	Concord, NC	27,949		(2,775		)	25,174
Lofts at the Highlands	02/25/2014	St. Louis, MO	35,920		(3,211		)	32,709
			$	368,471	$	(46,984	)	$	321,487

10

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2017

(unaudited)

Additionally, as of June 30, 2017 and December 31, 2016, the Company had recorded unamortized tax abatement intangible assets, which are included in prepaid expenses and other assets in the accompanying balance sheets, of $2.4 million and $2.5 million, respectively.  During the three and six months ended June 30, 2017, the Company recorded amortization expense of $41,000 and $106,000, respectively, related to tax abatement intangible assets. During the three and six months ended June 30, 2016, the Company recorded amortization expense of $65,000 and $130,000, respectively, related to tax abatement intangible assets.

Recent Disposition

Wesley Village

On November 6, 2012, the Company, through an indirect wholly owned subsidiary, purchased a 301-unit apartment complex on approximately 11.0 acres of land and the adjacent 3.8-acre parcel of undeveloped land located in Charlotte, North Carolina (together, “Wesley Village”) for an aggregate purchase price of $45.8 million. On March 9, 2017, the Company sold Wesley Village to Bluerock Real Estate, LLC (the “Purchaser”) for $57.2 million, resulting in a gain of $16.5 million, which gain was reduced by disposition fees related to the sale paid to the Advisor of $0.4 million and which includes a reduction to the net book value of the property due to historical depreciation and amortization expense.

For the three months ended June 30, 2016, Wesley Village had revenues and expenses of $1.1 million and $0.9 million, respectively. For the six months ended June 30, 2017 and 2016, Wesley Village had revenues of $0.8 million and $2.2 million, respectively and expenses of $1.1 million and $1.7 million, respectively. The results of operations from Wesley Village and related gain on sale are included in continuing operations on the Company’s consolidated statements of operations.

4. NOTES PAYABLE

As of June 30, 2017 and December 31, 2016, the Company’s notes payable consisted of the following (dollars in thousands):

	Book Value as of June 30, 2017			Book Value as of December 31, 2016			Contractual Interest Rate as of June 30, 2017	Payment Type	Maturity Date
Legacy at Valley Ranch Mortgage Loan	$	30,647		$	30,958		3.9%	Principal & Interest	04/01/2019
Poplar Creek Mortgage Loan	19,220			19,414			4.0%	Principal & Interest	03/01/2019	(1)
The Residence at Waterstone Mortgage Loan	45,187			45,653			3.8%	Principal & Interest	05/01/2019	(1)
Legacy Crescent Park Mortgage Loan	13,406			13,560			3.5%	Principal & Interest	06/01/2019	(1)
Legacy at Martin’s Point Mortgage Loan	21,625			21,866			3.3%	Principal & Interest	06/01/2019	(1)
Wesley Village Mortgage Loan (2)	—			26,862			(2)	(2)	(2)
Watertower Mortgage Loan	23,647			23,943			2.5%	Principal & Interest	02/10/2018	(1)
Crystal Park Mortgage Loan	26,656			27,013			2.5%	Principal & Interest	06/01/2018	(1)
Millennium Mortgage Loan	19,934			20,190			2.7%	Principal & Interest	07/01/2018	(1)
Legacy Grand at Concord Mortgage Loan	22,237			22,392			4.1%	Principal & Interest	12/01/2050	(1)
Lofts at the Highlands Mortgage Loan	30,531			30,754			3.4%	Principal & Interest	08/01/2052	(1)
Total notes payable principal outstanding	$	253,090		$	282,605
Discount on note payable, net	(2,600		)	(2,644		)
Deferred financing costs, net	(589		)	(815		)
Total notes payable, net	$	249,901		$	279,146

____________________

⁽¹⁾ The Company has the right to repay the loan subject to certain conditions and prepayment penalties.

⁽²⁾ On March 9, 2017, in connection with the disposition of Wesley Village, the Company paid off the Wesley Village Mortgage Loan.

11

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2017

(unaudited)

During the three and six months ended June 30, 2017, the Company incurred $2.3 million and $5.1 million of interest expense, respectively. During the three and six months ended June 30, 2016, the Company incurred $2.6 million and $5.2 million of interest expense, respectively. Included in interest expense for the three and six months ended June 30, 2017 were $0.1 million and $0.2 million of amortization of deferred financing costs, respectively, and $0.3 million of prepayment fees during the six months ended June 30, 2017. Included in interest expense for the three and six months ended June 30, 2016 were $0.1 million and $0.2 million of amortization of deferred financing costs, respectively. Also included in interest expense for the three and six months ended June 30, 2017 were $22,000 and $44,000 of amortization of discount on a note payable, respectively, and $22,000 and $44,000 of amortization of discount on a note payable for the three and six months ended June 30, 2016, respectively. As of June 30, 2017 and December 31, 2016, the Company recorded interest payable of $0.7 million and $0.8 million, respectively.

The following is a schedule of maturities, including principal payments, for the Company’s notes payable outstanding as of June 30, 2017 (in thousands):

July 1, 2017 through December 31, 2017	$	2,681
2018	72,958
2019	126,682
2020	852
2021	884
Thereafter	49,033
	$	253,090

5. FAIR VALUE DISCLOSURES

Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other non-financial and financial assets at fair value on a non-recurring basis (e.g., carrying value of impaired long-lived assets). Fair value, as defined under GAAP, is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

• Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

• Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

The fair value for certain financial instruments is derived using valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments. Financial instruments for which actively quoted prices or pricing parameters are available and for which markets contain orderly transactions will generally have a higher degree of price transparency than financial instruments for which markets are inactive or consist of non-orderly trades. The Company evaluates several factors when determining if a market is inactive or when market transactions are not orderly. The following is a summary of the methods and assumptions used by management in estimating the fair value of each class of financial instrument for which it is practicable to estimate the fair value:

12

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2017

(unaudited)

Cash and cash equivalents, restricted cash, and accounts payable and accrued liabilities: These balances approximate their fair values due to the short maturities of these items.

Notes payable: The fair value of the Company’s notes payable is estimated using a discounted cash flow analysis based on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities or similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach. The Company classifies these inputs as Level 3 inputs.

The following were the face value, carrying amount and fair value of the Company’s notes payable as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017						December 31, 2016
	Face Value		Carrying Amount		Fair Value		Face Value		Carrying Amount		Fair Value
Financial liabilities:
Notes payable	$	253,090	$	249,901	$	254,486	$	282,605	$	279,146	$	279,258

Disclosure of the fair values of financial instruments is based on pertinent information available to the Company as of the period end and requires a significant amount of judgment. Low levels of transaction volume for certain financial instruments have made the estimation of fair values difficult and, therefore, both the actual results and the Company’s estimate of value at a future date could be materially different.

6. RELATED PARTY TRANSACTIONS

The Company has entered into the Advisory Agreement with the Advisor and the Follow-on Dealer Manager Agreement with the Dealer Manager. These agreements entitled the Advisor and/or the Dealer Manager to specified fees upon the provision of certain services with regard to the Follow-on Offering and entitle the Advisor to specified fees upon the provision of certain services with regard to the management and disposition of the Company’s real estate properties, among other services, as well as reimbursement of organization and offering costs incurred by the Advisor and the Dealer Manager on behalf of the Company, such as expenses related to the dividend reinvestment plan, which the Company terminated effective as of August 20, 2017, and certain costs incurred by the Advisor in providing services to the Company, such as certain operating costs. The Company has also entered into a fee reimbursement agreement with the Dealer Manager pursuant to which the Company agreed to reimburse the Dealer Manager for certain fees and expenses it incurs for administering the Company’s participation in the DTCC Alternative Investment Product Platform with respect to certain accounts of the Company’s investors serviced through the platform. The Advisor and Dealer Manager also serve or served as the advisor and dealer manager, respectively, for KBS Real Estate Investment Trust, Inc., KBS Real Estate Investment Trust II, Inc., KBS Real Estate Investment Trust III, Inc., KBS Strategic Opportunity REIT, Inc., KBS Strategic Opportunity REIT II, Inc. and KBS Growth & Income REIT, Inc.

13

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2017

(unaudited)

On January 6, 2014, the Company, together with KBS Real Estate Investment Trust, Inc. (“KBS REIT I”), KBS Real Estate Investment Trust II, Inc., KBS Real Estate Investment Trust III, Inc., KBS Strategic Opportunity REIT, Inc., KBS Strategic Opportunity REIT II, Inc., the Dealer Manager, the Advisor and other KBS-affiliated entities, entered into an errors and omissions and directors and officers liability insurance program where the lower tiers of such insurance coverage are shared. The cost of these lower tiers is allocated by the Advisor and its insurance broker among each of the various entities covered by the program, and is billed directly to each entity. The allocation of these shared coverage costs is proportionate to the pricing by the insurance marketplace for the first tiers of directors and officers liability coverage purchased individually by each REIT. The Advisor’s and the Dealer Manager’s portion of the shared lower tiers’ cost is proportionate to the respective entities’ prior cost for the errors and omissions insurance. In June 2015, KBS Growth & Income REIT, Inc. was added to the insurance program at terms similar to those described above. In June 2017, the Company renewed its participation in the program, and the program is effective through June 30, 2018. As KBS REIT I is implementing its plan of liquidation, at renewal in June 2017, KBS REIT I elected to cease participation in the program and obtain separate insurance coverage.

During the three and six months ended June 30, 2017 and 2016, no other business transactions occurred between the Company and KBS REIT I, KBS Real Estate Investment Trust II, Inc., KBS Real Estate Investment Trust III, Inc., KBS Strategic Opportunity REIT, Inc., KBS Strategic Opportunity REIT II, Inc. and KBS Growth & Income REIT, Inc.

Pursuant to the terms of these agreements and the property management agreements discussed below, summarized below are the related-party costs incurred by the Company for the three and six months ended June 30, 2017 and 2016, respectively, and any related amounts payable as of June 30, 2017 and December 31, 2016 (in thousands):

	Incurred								Payable as of
	Three Months Ended June 30,				Six Months Ended June 30,				June 30,		December 31,
	2017		2016		2017		2016		2017		2016
Expensed
Asset management fees (1)	$	—	$	44	$	234	$	238	$	—	$	—
Reimbursable operating expenses (2)	55		54		124		120		12		15
Property management fees and expenses (3)	1,378		1,498		2,990		2,853		136		142
Disposition fees (4)	—		—		371		—		—		—
	$	1,433	$	1,596	$	3,719	$	3,211	$	148	$	157

____________________

⁽¹⁾ See “Advisory Agreement – Asset Management Fee” below.

⁽²⁾ Reimbursable operating expenses primarily consist of marketing research costs and property site visit expenses incurred by the Sub-Advisor and internal audit personnel costs, accounting software and cybersecurity related expenses incurred by the Advisor under the Advisory Agreement. Beginning July 1, 2010, the Company has reimbursed the Advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. These amounts totaled $36,000 and $33,000 for the three months ended June 30, 2017 and 2016, respectively, and $72,000 and $75,000 for the six months ended June 30, 2017 and 2016, respectively, and were the only type of employee costs reimbursed under the Advisory Agreement through June 30, 2017. The Company does not reimburse for employee costs in connection with services for which the Advisor earns acquisition or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits the Advisor or its affiliates may pay to the Company’s executive officers. In addition to the amounts above, the Company reimburses the Advisor and Sub-Advisor for certain of the Company’s direct property operating costs incurred from third parties that were initially paid by the Advisor and Sub-Advisor on behalf of the Company.

⁽³⁾ Property management fees and expenses are all paid to Legacy Partners, Inc. (“LPI”), an affiliate of the Sub-Advisor, and consist of (i) reimbursable on-site salary and related benefits expenses for personnel at the managed properties, and (ii) fees for account maintenance and bookkeeping services. See “— Property Management Agreements.”

⁽⁴⁾ Disposition fees with respect to real estate sold are included in the gain on sale of real estate, net, in the accompanying consolidated statements of operations. 

During the six months ended June 30, 2017, the Advisor reimbursed the Company for a $27,000 property insurance rebate.

14

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2017

(unaudited)

In connection with the Follow-on Offering, the Company’s sponsors agreed to provide additional indemnification to one of the participating broker-dealers.  The Company agreed to add supplemental coverage to its directors’ and officers’ insurance coverage to insure the sponsors’ obligations under this indemnification agreement in exchange for reimbursement by the sponsors to the Company for all costs, expenses and premiums related to this supplemental coverage.  During the six months ended June 30, 2017, the Advisor incurred $61,000 for the costs of the supplemental coverage obtained by the Company.

On March 9, 2017, the Company sold Wesley Village to the Purchaser.  Gary T. Kachadurian, one of the Company’s independent directors, is also a director of a real estate investment trust sponsored by the Purchaser (the “Purchaser REIT”) and is Vice Chairman of the manager of the Purchaser REIT and as such, Mr. Kachadurian (i) recused himself from all of the Company’s deliberations relating to the disposition of Wesley Village, and (ii) informed the Company and its board of directors that he recused himself from all of the Purchaser REIT’s and its manager’s deliberations relating to the acquisition of Wesley Village.

Advisory Agreement - Asset Management Fee

Pursuant to the Advisory Agreement, the asset management fee payable by the Company to the Advisor with respect to investments in real estate is a monthly fee equal to the lesser of one-twelfth of (i) 1.0% of the amount paid or allocated to fund the acquisition, development, construction or improvement of the property (whether at or subsequent to acquisition), including acquisition expenses and budgeted capital improvement costs (regardless of the level of debt used to finance the investment), and (ii) 2.0% of the amount paid or allocated to fund the acquisition, development, construction or improvement of the property (whether at or subsequent to acquisition), including acquisition expenses and budgeted capital improvement costs, less any debt used to finance the investment.

The Advisory Agreement defers the Company’s obligation to pay asset management fees, without interest, accruing from February 1, 2013 through July 31, 2013. The Company will only be obligated to pay the Advisor such deferred amounts if and to the extent that the Company’s funds from operations, as such term is defined by the National Association of Real Estate Investment Trusts and interpreted by the Company, as adjusted for the effects of straight-line rents and acquisition costs and expenses (“AFFO”) for the immediately preceding month exceeds the amount of distributions declared for record dates of such prior month (an “AFFO Surplus”). The amount of any AFFO Surplus in a given month shall be applied first to pay to the Advisor asset management fees currently due with respect to such month (including any that would otherwise have been deferred for that month in accordance with the Advisory Agreement) and then to pay asset management fees previously deferred by the Advisor in accordance with the Advisory Agreement that remain unpaid. As of June 30, 2017, the Company had deferred payment of $1.5 million of asset management fees for the period from February 2013 through July 2013, but did not record an accrual on its books as the Company believed that the chance of payment of this amount to the Advisor is remote.

In addition, the Advisory Agreement defers without interest under certain circumstances, the Company’s obligation to pay asset management fees accruing from August 1, 2013. Specifically, the Advisory Agreement defers the Company’s obligation to pay an asset management fee for any month in which the Company’s modified funds from operations (“MFFO”) for such month, as such term is defined in the practice guideline issued by the Investment Program Association (“IPA”) in November 2010 and interpreted by the Company, excluding asset management fees, does not exceed the amount of distributions declared by the Company for record dates of that month. The Company remains obligated to pay the Advisor an asset management fee in any month in which the Company’s MFFO, excluding asset management fees, for such month exceeds the amount of distributions declared for the record dates of that month (such excess amount, an “MFFO Surplus”); however, any amount of such asset management fee in excess of the MFFO Surplus is also deferred under the Advisory Agreement. If the MFFO Surplus for any month exceeds the amount of the asset management fee payable for such month, any remaining MFFO Surplus will not be applied to pay asset management fee amounts previously deferred by the Advisor in accordance with the Advisory Agreement. As of June 30, 2017, the Company had deferred payment of $8.0 million of asset management fees for the period from August 2013 through December 2016, but did not record an accrual on its books as the Company believed that the chance of payment of this amount to the Advisor is remote.

15

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2017

(unaudited)

During the six months ended June 30, 2017, the Company incurred $1.4 million of asset management fees. However, the Company only recorded $0.2 million pursuant to the limitations in the Advisory Agreement as noted above. The Company did not accrue the remaining $1.2 million of these asset management fees as it is uncertain whether any of this amount will be paid in the future. During the six months ended June 30, 2016, the Company incurred $1.4 million of asset management fees. However, the Company only recorded $0.2 million pursuant to the limitations in the Advisory Agreement as noted above. The Company did not accrue the remaining $1.2 million of these asset management fees as it is uncertain whether any of this amount will be paid in the future.

However, notwithstanding any of the foregoing, any and all deferred asset management fees shall be immediately due and payable at such time as the Company’s stockholders have received, together as a collective group, aggregate distributions (including distributions that may constitute a return of capital for federal income tax purposes) sufficient to provide (i) a return of their net invested capital, or the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by any amounts to repurchase shares pursuant to the Company’s share redemption plan, and (ii) an 8.0% per year cumulative, non-compounded return on such net invested capital (the “Stockholders’ 8% Return”). The Stockholders’ 8% Return is not based on the return provided to any individual stockholder. Accordingly, it is not necessary for each of the Company’s stockholders to have received any minimum return in order for the Advisor to receive deferred asset management fees.

Property Management Agreements

The Company, through indirect wholly owned subsidiaries (each, a “Property Owner”), has entered into property management agreements with LPI (each, a “Property Management Agreement”), pursuant to which LPI provides, among other services, general property management services, including bookkeeping and accounting services, construction management services and budgeting and business plans for the Company’s properties as follows:

Property Name	Effective Date	Management Fee Percentage
Watertower Apartments	04/07/2015	2.75%
Crystal Park at Waterford	04/14/2015	3.00%
The Residence at Waterstone	04/28/2015	3.00%
Lofts at the Highlands	05/05/2015	3.00%
Legacy at Martin’s Point	05/12/2015	3.00%
Poplar Creek	05/14/2015	3.00%
Wesley Village (1)	05/19/2015	3.00%
Legacy Grand at Concord	05/21/2015	3.00%
Millennium Apartment Homes (2)	05/27/2015	3.00%
Legacy Crescent Park (2)	05/29/2015	3.00%
Legacy at Valley Ranch	06/09/2015	3.00%

____________________

⁽¹⁾ On March 9, 2017, the Company sold Wesley Village. The Property Management Agreement for Wesley Village was terminated effective as of March 9, 2017. For more information, see Note 3, “Real Estate – Recent Disposition – Wesley Village.”

⁽²⁾ Under the Property Management Agreement, the Property Owner will pay LPI the Management Fee Percentage in an amount equal to the greater of (a) 3% of the Gross Monthly Collections (as defined in the Property Management Agreement) or (b) $4,000 per month.

16

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2017

(unaudited)

Under the Property Management Agreements, each Property Owner pays LPI: (i) a monthly fee based on a percentage (as described in the table above, the “Management Fee Percentage”) of the Gross Monthly Collections (as defined in each Property Management Agreement), (ii) a construction supervision fee equal to a percentage of construction costs to the extent overseen by LPI and as further detailed in each Property Management Agreement, (iii) a leasing commission at a rate to be agreed upon between the Property Owner and LPI for retail leases executed that were procured or obtained by LPI, (iv) certain reimbursements if included in an approved capital budget and (v) certain reimbursements if included in the approved operating budget, including the reimbursement of the salaries and benefits for on-site personnel and fees for account maintenance and bookkeeping services. Unless otherwise provided for in an approved operating budget, LPI is responsible for all expenses that it incurs in rendering services pursuant to each Property Management Agreement. Each Property Management Agreement had an initial term of one year and each has continued on a month-to-month basis pursuant to its terms. Either party may terminate a Property Management Agreement provided it gives 30 days’ prior written notice of its desire to terminate such agreement. Notwithstanding the foregoing, the Property Owner may terminate each Property Management Agreement at any time without cause upon 30 days’ prior written notice to LPI. The Property Owner may also terminate the Property Management Agreement with cause immediately upon notice to LPI and the expiration of any applicable cure period. LPI may terminate each Property Management Agreement at any time without cause upon prior written notice to the Property Owner which, depending upon the terms of the particular Property Management Agreement, requires either 30, 60 or 90 days prior written notice. LPI may terminate the Property Management Agreement for cause if a Property Owner commits any material default under the Property Management Agreement and the default continues for a period of 30 days after notice from LPI to a Property Owner for a default or, in the case of Watertower Apartments, Lofts at the Highlands, Legacy Grand at Concord, Millennium Apartment Homes and Legacy Crescent Park, if a monetary default continues for a period of 10 days after notice of such monetary default.

7. COMMITMENTS AND CONTINGENCIES

Economic Dependency

The Company is dependent on the Advisor and the Sub-Advisor for certain services that are essential to the Company, including the management of the daily operations of the Company’s investment portfolio; the disposition of investments; and other general and administrative responsibilities. The Company is also dependent on LPI to provide the property management services under the Property Management Agreements. In the event that these companies are unable to provide any of the respective services, the Company will be required to obtain such services from other sources.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. Although there can be no assurance, the Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s property, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the property could result in future environmental liabilities.

Legal Matters

From time to time, the Company may become party to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on the Company’s results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.

17

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2017

(unaudited)

8. SUBSEQUENT EVENTS

The Company evaluates subsequent events up until the date the consolidated financial statements are issued.

Distributions Paid

On July 5, 2017, the Company paid distributions of $0.9 million, which related to distributions declared for June 2017 in the amount of $0.04460959 per share of common stock to stockholders of record as of the close of business on June 20, 2017. On August 1, 2017, the Company paid distributions of $1.0 million, which related to distributions declared for July 2017 in the amount of $0.04609658 per share of common stock to stockholders of record as of the close of business on July 19, 2017.

Distributions Authorized

On August 9, 2017, the Company’s board of directors authorized an August 2017 distribution in the amount of $0.04609658 per share of common stock to stockholders of record as of the close of business on August 18, 2017, which the Company expects to pay in cash in September 2017, and a September 2017 distribution in the amount of $0.04460959 per share of common stock to stockholders of record as of the close of business on September 20, 2017, which the Company expects to pay in cash in October 2017.

Termination of Dividend Reinvestment Plan

The Company terminated the dividend reinvestment plan effective as of August 20, 2017.

18

PART I. FINANCIAL INFORMATION (CONTINUED)

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 KBS Legacy Partners Apartment REIT, Inc. and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to KBS Legacy Partners Apartment REIT, Inc., a Maryland corporation, and, as required by context, KBS Legacy Partners Limited Partnership, a Delaware limited partnership, which we refer to as the “Operating Partnership,” and to their subsidiaries.

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of KBS Legacy Partners Apartment REIT, Inc. and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.

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

• We are dependent on KBS Capital Advisors LLC (“KBS Capital Advisors”), our advisor, and our sub-advisor to manage our investments and to provide certain other services. We are dependent on Legacy Partners, Inc., formerly known as Legacy Partners Residential, Inc. (“LPI”), an affiliate of our sub-advisor, to provide property management services for our investments.

• All of our executive officers, some of our directors and other key real estate professionals are also officers, managers, directors, key professionals and/or holders of a controlling interest in our advisor, the sub-advisor, our dealer manager and other sponsor-affiliated entities. As a result, they face conflicts of interest, including significant conflicts created by our advisor’s compensation arrangements with us and other programs and investors advised by our sponsors. Fees paid to our advisor in connection with the management of our properties are based on the cost of the property, not on the quality of the services rendered to us. This arrangement could result in unanticipated actions.

• We did not raise the maximum offering amount in our public offerings. Because we raised substantially less than the maximum offering amount, we were not able to invest in as diverse a portfolio of real estate properties as we otherwise would and the value of an investment in us will vary more widely with the performance of specific assets. There is a greater risk that stockholders will lose money in their investment in us, as we have less diversity in our portfolio.

• We pay substantial fees to and expenses of our advisor and its affiliates and, in connection with our public offerings, we paid substantial fees to participating broker-dealers. These payments increase the risk that our stockholders will not earn a profit on their investment in us and increase the risk of loss to our stockholders.

• From time to time during our operational stage, we have used proceeds from financings to fund distributions. Our organizational documents permit us to pay distributions from any source, including offering proceeds, which may constitute a return of capital. We have not established a limit on the amount of distributions that we may fund from sources other than from cash flows from operations. In addition, if we sell any additional properties, we will likely further adjust the distribution rate and our distribution policy subsequent to such sales.

• We may incur debt until our total liabilities would exceed 75% of the cost of our tangible assets (before deducting depreciation and other non-cash reserves), and we may exceed this limit with the approval of the conflicts committee of our board of directors. To the extent financing in excess of this limit is available on attractive terms, our conflicts committee may approve debt such that our total liabilities would exceed this limit. High debt levels could limit the amount of cash we have available to distribute and could result in a decline in the value of an investment in us.

• Disruptions in the financial markets and uncertain economic conditions could adversely affect our ability to implement our business strategy and generate returns to stockholders.

• We depend on tenants for our revenue. Revenues from our real property investments could decrease due to a reduction in tenants (caused by factors including, but not limited to, tenant defaults or early termination or non-renewal of existing tenant leases) and/or lower rental rates, limiting our ability to pay distributions to our stockholders.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

• During any calendar year, once we have redeemed $1.5 million of shares under our share redemption program, including shares redeemed in connection with a stockholder’s death, “qualifying disability,” or “determination of incompetence” (both as defined in the share redemption program and together with redemptions in connection with a stockholder’s death, “Special Redemptions”), the remaining $0.5 million of the $2.0 million annual limit shall be reserved exclusively for Special Redemptions. In January 2017, we exhausted the $1.5 million of funds available for all redemptions for 2017. Because of the limitations on the dollar value of shares that may be redeemed under our share redemption program, we will only be able to process Special Redemptions for the remainder of 2017. As of June 30, 2017, we may redeem up to $45,000 of shares for the remainder of 2017 in connection with Special Redemptions and had $3.0 million of outstanding and unfulfilled ordinary redemption requests.

• Our Special Committee (defined below) has completed its analysis of potential strategic alternatives and as a result, we anticipate that we will continue to pursue asset sales and will likely further adjust the distribution rate and our distribution policy subsequent to such sales. We may use a portion of the net proceeds from additional asset sales, after paying off the notes payable related to such assets and after paying sale-related expenses to: (i) make renovations at certain remaining real estate properties, which we believe could increase property-level net operating income (“NOI”) and create additional stockholder value; (ii) pay special distributions to our stockholders; and/or (iii) potentially provide additional availability under our share redemption program. However, there is no assurance that this process will result in stockholder liquidity or provide a return to stockholders that equals or exceeds our estimated value per share, or that any additional liquidity provided under our share redemption program would be sufficient to redeem the shares of any stockholders that previously have requested that their shares be redeemed pursuant to the terms of the share redemption program and have not withdrawn such request.

All forward-looking statements should be read in light of the risks identified herein and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission (the “SEC”).

Overview

We were formed on July 31, 2009 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2010 and intend to continue to operate in such a manner. We conduct our business primarily through our Operating Partnership, of which we are the sole general partner.

We invested in and manage a portfolio of high quality apartment complexes located throughout the United States. Our portfolio consists of “core” apartment complexes that were already well-positioned and producing rental income at acquisition. As of June 30, 2017, we owned 10 apartment complexes.

As our advisor, KBS Capital Advisors is responsible for managing our day-to-day operations and our portfolio of real estate assets. Subject to the terms of the advisory agreement between KBS Capital Advisors and us, KBS Capital Advisors delegates certain advisory duties to a sub-advisor, KBS-Legacy Apartment Community REIT Venture, LLC (the “Sub-Advisor”), which is a joint venture between KBS Capital Advisors and Legacy Partners Residential Realty LLC (“LPRR LLC”). Notwithstanding such delegation to the Sub-Advisor, KBS Capital Advisors retains ultimate responsibility for the performance of all the matters entrusted to it under the advisory agreement. KBS Capital Advisors made recommendations on all investments to our board of directors. A majority of our board of directors, including a majority of our independent directors acting through the conflicts committee, approved our investments. KBS Capital Advisors, either directly or through the Sub-Advisor, also provides asset-management, marketing, investor-relations and other administrative services on our behalf. LPI is the property manager for our real estate property investments. Our Sub-Advisor owns 20,000 shares of our common stock. We have no paid employees.

On March 12, 2010, we commenced our initial public offering of 280,000,000 shares of common stock for sale to the public, of which 80,000,000 shares were offered pursuant to our dividend reinvestment plan (the “Initial Offering”). We retained KBS Capital Markets Group LLC (“KBS Capital Markets Group”), an affiliate of our advisor, to serve as the dealer manager for the Initial Offering pursuant to a dealer manager agreement dated March 12, 2010 (the “Initial Dealer Manager Agreement”).

On May 31, 2012, we filed a registration statement on Form S-11 with the SEC to register a follow-on public offering (the “Follow-on Offering” and together with the Initial Offering, the “Offerings”). Pursuant to the Follow-on Offering registration statement, as amended, we registered up to an additional $2,000,000,000 of shares of common stock for sale to the public and up to an additional $760,000,000 of shares pursuant to our dividend reinvestment plan. The SEC declared our registration statement for the Follow-on Offering effective on March 8, 2013.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

We retained KBS Capital Markets Group to serve as the dealer manager for the Follow-on Offering pursuant to a dealer manager agreement dated March 8, 2013 (the “Follow-on Dealer Manager Agreement” and together with the Initial Dealer Manager Agreement, the “Dealer Manager Agreements”). On March 12, 2013, we ceased offering shares pursuant to the Initial Offering and on March 13, 2013, we commenced offering shares to the public pursuant to the Follow-on Offering. We ceased offering shares of common stock in the primary Follow-on Offering on March 31, 2014 and completed subscription processing procedures on April 30, 2014. We terminated our dividend reinvestment plan effective as of August 20, 2017.

Through its completion on March 12, 2013, we sold 18,088,084 shares of common stock in the Initial Offering for gross offering proceeds of $179.2 million, including 368,872 shares of common stock under our dividend reinvestment plan for gross offering proceeds of $3.5 million. We sold 1,496,198 shares of common stock in our primary Follow-on Offering for gross offering proceeds of $15.9 million.

As of June 30, 2017, we had sold an aggregate of 21,937,089 shares of common stock in the Offerings for gross offering proceeds of $218.1 million, including an aggregate of 2,721,679 shares of common stock under our dividend reinvestment plan for gross offering proceeds of $26.6 million. We terminated our dividend reinvestment plan effective as of August 20, 2017. Also, as of June 30, 2017, we had redeemed 1,019,239 shares sold in the Offerings for $9.9 million. We have used substantially all of the net proceeds from the primary Offerings to invest in and manage a portfolio of high quality apartment communities located throughout the United States as described above.

Market Outlook ─ Multifamily Real Estate and Finance Markets

Strong demand and trailing supply have been dominant themes for professionally managed, multifamily rental real estate (“Multifamily”) in the United States since the recession of 2008-2009. Although the U.S. Multifamily outlook remains positive, supply and affordability are becoming concerns in a growing number of urban core markets, most notably, New York City, San Francisco, Los Angeles, Miami and other prominent coastal cities. The beneficiaries of these “urban-core concerns” have increasingly been suburban markets. With more renters opting for the suburbs, vacancy has been declining and rents increasing in suburban markets. This trend is likely to continue, assuming the economy continues to grow and suburban markets remain affordable compared to their urban counterparts. These factors bode well for our portfolio, which is predominantly located in suburban markets.

It is approaching eight years since the recession of 2008-2009.  Since that time, the U.S. economy has experienced modest, but sustained, real GDP and job growth. The pace of growth eased in 2016 however, as compared to 2014 and 2015. Real GDP growth in 2014 and 2015 was 2.4% and 2.6%, respectively, versus 1.6% for 2016. It is noteworthy that the easing of economic growth in 2016 occurred predominantly in the first half of the year. Following annualized real GDP growth of 0.8% and 1.4% in the first and second quarters of 2016, real GDP growth spiked in the third quarter to 3.5% and again eased to 2.1% in the fourth quarter. In the first quarter of 2017, annualized real GDP growth was 1.4%. In terms of job growth, the United States added 3.0 and 2.7 million jobs in 2014 and 2015, respectively, versus 2.2 million jobs gained in 2016. In the first half of 2017, the United States added an estimated 1.1 million jobs, which is on par with the jobs gained in 2016.

U.S. construction of new multifamily units was at historical lows following the recession, as demand was anemic stemming from the loss of approximately 8.6 million jobs. A historical high of prime-age renters (20-34 year olds) were living with their parents waiting for the job market to recover at the time. In anticipation of the economic recovery and a release of this pent-up demand, multifamily developers began increasing the number of new construction units, rebounding from 98,000 in 2009 to over 350,000 units in 2015. In 2016, Multifamily starts remained in the 350,000 units range, outpacing demand, albeit only slighly, for the first time since the recession.

As with many Multifamily experts, we see the 2016 supply imbalance as a temporary phenomenon and unrelated to our portfolio. Supply concerns are predominantly focused in a limited number of urban core markets, and our portfolio is suburban weighted. Also, the majority of the new construction pipeline in 2017 is focused in urban core markets. Moreover, Multifamily supply is projected to slow towards historic norms over the next 1-2 years, as banks have been gradually tightening their construction lending standards and equity investors have been becoming more selective about the developments they pursue.

Demand remains strong and is projected to sustain Multifamily fundamentals for the next few years. Vacancy was 4.8% and 4.6% in 2014 and 2015, respectfully, and remained at 4.6% in 2016. Vacancy was 4.5% at the end of the first quarter of 2017 and is projected to continue to decrease slightly through 2019, as demand continues to absorb new unit deliveries and the rate of new construction eases. Such vacancy levels compare favorably to the historical equilibrium vacancy rate of 5.6%. With more supply generally in recent years, Multifamily rent growth eased somewhat in 2016. Rent growth was 3.4% for the year, as compared to 4.2% and 5.0% in 2014 and 2015, respectively. Rent growth is expected to ease slightly to 3.3% in 2017; however, with persistent demand and easing supply as noted, rent growth is projected to return to the low 4% range in 2019.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

With Multifamily supply and affordability concerns centered primarily in urban core markets, particularly with regard to large coastal cities, more and more renters are opting for the suburbs. According to CBRE Research, the least affordable Multifamily markets in the U.S. in 2011 have become even more unaffordable in the years since then. Furthermore, according to the latest data available from the U.S. Census Bureau, 1.8 million more people moved to the suburbs than to urban cores. This shift of demand towards the suburbs is projected to continue and well located, relatively affordable (as compared to their urban core counterparts) suburban apartments are likely to continue to perform well in the short-term (2-3 years).

In the medium- and long-term, we believe the prospects for Multifamily real estate investment continue to be promising. We expect several positive demographic trends, as noted below, will drive the demand for Multifamily housing for the remainder of this decade and well into the next.

• U.S. population growth - The U.S. Census Bureau projects that the U.S. population will increase by approximately 38 million (12%) between 2015 and 2030. Note that, currently, about 36% of people choose to rent as opposed to own a home.

• Baby Boomers downsizing - The population age 65 and over is increasing, driven by Baby Boomers, from approximately 48 million in 2015 to about 74 million in 2030. Despite generally having enough income to purchase a home, many Baby Boomers are downsizing, opting for the convenience and amenities of Multifamily properties.

• Echo Boom - The children of the Baby Boom generation, dubbed the Echo Boomers, will have increased the prime rental age group, 20 to 34 year olds, by 2 million (69 million total) from 2015 to 2020. This age cohort is expected to remain at this elevated level, up 4 million from 2010, through 2030 according to the U.S. Census Bureau.

Finally, with regard to the Multifamily investment market, although interest rates increased in 2016 and again in the first half of 2017, Multifamily capitalization rates have changed very little and values have remained stable. Increasing interest rates have historically had a negative effect on Multifamily values. However, three key factors are buoying values. First, Multifamily market fundamentals, as described above, are strong and their forecast promising. Secondly, the spread between 10-year U.S. Treasuries and capitalization rates has been atypically wide in recent years and can therefore absorb modest interest rate hikes without increasing capitalization rates. Lastly, U.S. commercial real estate, including Multifamily, is a favored investment for foreign capital due to the lack of attractive risk-adjusted returns in the foreseeable future elsewhere.

Liquidity and Capital Resources

Our principal demands for funds during the short and long-term are and will be for the payment of operating expenses, capital expenditures and general and administrative expenses; payments under debt obligations; redemptions of common stock; and payments of distributions to stockholders. To date, we have had the following sources of capital for meeting our cash requirements:

• Proceeds from our now terminated primary Offerings; 

• Proceeds from our dividend reinvestment plan;

• Proceeds from asset sales;

• Debt financings; and

• Cash flow generated by our real estate investments.

As of June 30, 2017, we had sold an aggregate of 21,937,089 shares of common stock in the Offerings for gross offering proceeds of $218.1 million, including an aggregate of 2,721,679 shares of common stock under our dividend reinvestment plan for gross offering proceeds of $26.6 million. We terminated our dividend reinvestment plan effective as of August 20, 2017. Also as of June 30, 2017, we had redeemed 1,019,239 shares sold in the Offerings for $9.9 million. As of June 30, 2017, we had invested substantially all of the proceeds from our now-terminated primary Offerings in real estate properties. We intend to use our cash on hand, cash flow generated by our real estate operations and proceeds from the sale of real estate properties as our primary sources of immediate and long-term liquidity.

As of June 30, 2017, we owned 10 apartment complexes. Our real estate investments generate cash flow in the form of rental revenues, which are reduced by operating expenditures, debt service payments, the payment of property management and asset management fees and corporate general and administrative expenses. Cash flows from operations from our real estate investments is primarily dependent upon the occupancy level of our properties, the net effective rental rates on our leases, the collectibility of rent and how well we manage our expenditures. Cash flows from operations from our real estate investments will be reduced to the extent that we sell additional properties. As of June 30, 2017, our real estate property investments were 95% occupied.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

As of June 30, 2017, our total debt outstanding was $253.1 million. We limit our total liabilities to 75% of the cost (before deducting depreciation and other non-cash reserves) of our tangible assets; however, we may exceed that limit if a majority of the conflicts committee approves each borrowing in excess of this limitation and we disclose such borrowing to our stockholders in our next quarterly report with an explanation from the conflicts committee of the justification for the excess borrowing. As of June 30, 2017, our borrowings and other liabilities were approximately 64% of the cost (before deducting depreciation and other non-cash reserves) of our tangible assets. As of June 30, 2017, we had a total of $200.3 million of debt obligations scheduled to mature within the next three years.

We paid distributions to our stockholders during the six months ended June 30, 2017 using a combination of cash flows from operations and proceeds from the disposition of one real estate asset, Wesley Village. We believe that our cash flows from operations, cash on hand and proceeds from asset sales are sufficient to meet our liquidity needs for the foreseeable future.

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 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, 2017 did not exceed the charter-imposed limitation.

On January 21, 2016, our board of directors formed the Special Committee composed of all of our independent directors to explore the availability of strategic alternatives involving our company with the goal of providing liquidity options for our stockholders while preserving and maximizing overall returns on our investment portfolio.

We have completed the initial marketing of our real estate properties and received offers for both our entire portfolio and individual properties. Based on feedback received during the marketing process, we anticipate that we will continue to pursue asset sales in an effort to create additional stockholder value, and will likely further adjust the distribution rate and our distribution policy subsequent to such sales.

On March 9, 2017, we completed the sale of Wesley Village. As a result, our cash flows from operations has decreased and will continue to decrease to the extent we have additional dispositions. We have adjusted our distribution policy with respect to the amount of monthly distribution payments to take into account our disposition activity and current real estate investments. We will likely continue to make asset sales as opportunities become available in the market.

On April 5, 2017, our board of directors approved an estimated value per share of our common stock of $8.35, effective April 20, 2017. The estimated value per share is equal to the estimated value per share of our common stock of $9.35 approved by our board of directors on December 9, 2016, reduced for the impact of the special distribution of $1.00 per share paid to our stockholders of record as of the close of business on April 20, 2017, which was paid on May 1, 2017 and funded from the net proceeds from the sale of Wesley Village (the “Special Distribution”). Any future special distributions we pay from the proceeds of future dispositions will further reduce our estimated value per share and this reduction will be reflected in our updated estimated value per share, which we expect to update no later than December 2017.

Cash Flows from Operating Activities

As of June 30, 2017, we owned 10 apartment complexes. During the six months ended June 30, 2017, net cash provided by operating activities was $5.7 million. We expect our cash flows from operating activities to vary over time, but to decrease to the extent we make additional asset sales.

Cash Flows from Investing Activities

Net cash provided by investing activities was $55.4 million for the six months ended June 30, 2017 and primarily consisted of the following:

• $56.2 million of proceeds from the sale of one apartment complex; and

• $0.8 million used for improvements to real estate.

Cash Flows from Financing Activities

Net cash used in financing activities was $55.9 million for the six months ended June 30, 2017 and consisted primarily of the following:

• $29.5 million of principal payments on our mortgage notes payable;

• $24.2 million of net cash distributions, after giving effect to dividends reinvested by stockholders of $2.2 million; and

• $2.0 million of cash used for redemptions of common stock.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

In addition to using our capital resources to meet our debt service obligations, for capital expenditures and for operating costs, we use our capital resources to make certain payments to our advisor. We paid our advisor fees in connection with the management and disposition of our assets and for certain costs incurred by our advisor in providing services to us. Among the fees payable to our advisor is an asset management fee.

Advisory Agreement - Asset Management Fee

Pursuant to the advisory agreement, the asset management fee payable by us to our advisor with respect to investments in real estate is a monthly fee equal to the lesser of one-twelfth of (i) 1.0% of the amount paid or allocated to fund the acquisition, development, construction or improvement of the property (whether at or subsequent to acquisition), including acquisition expenses and budgeted capital improvement costs (regardless of the level of debt used to finance the investment), and (ii) 2.0% of the amount paid or allocated to fund the acquisition, development, construction or improvement of the property (whether at or subsequent to acquisition), including acquisition expenses and budgeted capital improvement costs, less any debt used to finance the investment.

The advisory agreement defers our obligation to pay asset management fees, without interest, accruing from February 1, 2013 through July 31, 2013. We will only be obligated to pay our advisor such deferred amounts if and to the extent that our funds from operations, as such term is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) and interpreted by us, as adjusted for the effects of straight-line rents and acquisition costs and expenses (“AFFO”) for the immediately preceding month exceeds the amount of distributions declared for record dates of such prior month (an “AFFO Surplus”). The amount of any AFFO Surplus in a given month shall be applied first to pay our advisor’s asset management fees currently due with respect to such month (including any that would otherwise have been deferred for that month in accordance with the advisory agreement) and then to pay asset management fees previously deferred by our advisor in accordance with the advisory agreement that remain unpaid. As of June 30, 2017, we had deferred payment of $1.5 million of asset management fees for the period from February 2013 through July 2013, but did not record an accrual on our books as we believed that the chance of payment of this amount to our advisor is remote.

In addition, the advisory agreement defers without interest under certain circumstances, our obligation to pay asset management fees accruing from August 1, 2013. Specifically, the advisory agreement defers our obligation to pay an asset management fee for any month in which our modified funds from operations (“MFFO”) for such month, as such term is defined in the practice guideline issued by the Investment Program Association (“IPA”) in November 2010 and interpreted by us, excluding asset management fees, does not exceed the amount of distributions declared by us for record dates of that month. We remain obligated to pay our advisor an asset management fee in any month in which our MFFO, excluding asset management fees, for such month exceeds the amount of distributions declared for the record dates of that month (such excess amount, an “MFFO Surplus”); however, any amount of such asset management fee in excess of the MFFO Surplus is also deferred under the advisory agreement. If the MFFO Surplus for any month exceeds the amount of the asset management fee payable for such month, any remaining MFFO Surplus will not be applied to pay asset management fee amounts previously deferred by our advisor in accordance with the advisory agreement. As of June 30, 2017, we had deferred payment of $8.0 million of asset management fees for the period from August 2013 through December 2016, but did not record an accrual on our books as we believed that the chance of payment of this amount to our advisor is remote. During the six months ended June 30, 2017, we incurred $1.4 million of asset management fees. However, we only recorded $0.2 million pursuant to the limitations in the advisory agreement as noted above. We did not accrue the remaining $1.2 million of these deferred asset management fees as it is uncertain whether any of this amount will be paid in the future.

However, notwithstanding any of the foregoing, any and all deferred asset management fees shall be immediately due and payable at such time as our stockholders have received, together as a collective group, aggregate distributions (including distributions that may constitute a return of capital for federal income tax purposes) sufficient to provide (i) a return of their net invested capital, or the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by any amounts to repurchase shares pursuant to our share redemption plan, and (ii) an 8.0% per year cumulative, non-compounded return on such net invested capital (the “Stockholders’ 8% Return”). The Stockholders’ 8% Return is not based on the return provided to any individual stockholder. Accordingly, it is not necessary for each of our stockholders to have received any minimum return in order for our advisor to receive deferred asset management fees. During the year ended December 31, 2016, we reversed, as described above, an aggregate of $4.8 million of deferred asset management fees that were previously accrued. We believed the the chance of payment of the deferred asset management fees is remote based on the estimated value per share and management’s current projection of cash flow and distributions to our stockholders.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Contractual Commitments and Contingencies

The following is a summary of our contractual obligations as of June 30, 2017 (in thousands):

			Payments Due During the Years Ending December 31,
Contractual Obligations	Total		Remainder of 2017		2018-2019		2020-2021		Thereafter
Outstanding debt obligations (1)	$	253,090	$	2,681	$	199,640	$	1,736	$	49,033
Interest payments on outstanding debt obligations (2)	51,064		4,334		11,217		3,670		31,843

_____________________

⁽¹⁾ Amounts include principal payments only.

⁽²⁾ Projected interest payments are based on the outstanding principal amounts, maturity dates and interest rates in effect as of June 30, 2017. We incurred interest expense of $4.8 million, excluding amortization of deferred financing costs and discount on notes payable of $0.3 million, for the six months ended June 30, 2017.

Results of Operations

As of June 30, 2016, we owned 11 apartment complexes. Subsequent to June 30, 2016, we sold one apartment complex. As a result, as of June 30, 2017, we owned 10 apartment complexes. The results of operations presented for the three and six months ended June 30, 2017 and 2016 are not directly comparable due to the disposition of one apartment complex subsequent to January 1, 2017.

Comparison of the three months ended June 30, 2017 versus the three months ended June 30, 2016

The following table provides summary information about our results of operations for the three months ended June 30, 2017 and 2016 (dollar amounts in thousands):

	Three Months Ended June 30,				Increase (Decrease)			Percentage     Change		$ Change Due to Disposition (1)			$ Change Due to Properties Held Throughout Both Periods (2)
	2017		2016
Rental income	$	10,381	$	11,367	$	(986	)	(9	)%	$	(1,135	)	$	149
Operating, maintenance, and management costs	1,523		1,559		(36		)	(2	)%	(135		)	99
Real estate taxes and insurance	1,823		1,811		12			1	%	(76		)	88
Asset management fees to affiliate	—		44		(44		)	(100	)%	n/a			n/a
Property management fees and expenses to affiliate	1,378		1,498		(120		)	(8	)%	(137		)	17
General and administrative expenses	551		849		(298		)	(35	)%	n/a			n/a
Depreciation and amortization expense	2,758		3,065		(307		)	(10	)%	(331		)	24
Interest expense	2,346		2,579		(233		)	(9	)%	(189		)	(44		)

_____________________

⁽¹⁾ Represents the dollar amount increase (decrease) for the three months ended June 30, 2017 compared to the three months ended June 30, 2016 related to real estate disposed of on or after April 1, 2016.

⁽²⁾ Represents the dollar amount increase (decrease) for the three months ended June 30, 2017 compared to the three months ended June 30, 2016 related to real estate owned by us throughout both periods presented.

Rental income decreased from $11.4 million for the three months ended June 30, 2016 to $10.4 million for the three months ended June 30, 2017, primarily due to the disposition of one apartment complex on March 9, 2017. We expect rental income on properties we continue to hold to vary in future periods depending on occupancy rates and rental rates of our real estate investments, but to decrease overall as a result of anticipated dispositions of real estate investments.

Operating, maintenance and management costs and real estate taxes and insurance decreased from $3.4 million for the three months ended June 30, 2016 to $3.3 million for the three months ended June 30, 2017 primarily due to the disposition of one apartment complex on March 9, 2017, partially offset by an increase due to repair and maintenance costs and property tax reassessments. We expect operating, maintenance and management costs and real estate taxes and insurance on properties we continue to hold to increase in future periods, as compared to historical periods as a result of inflation, but to decrease overall as a result of anticipated dispositions of real estate investments.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Asset management fees to affiliate with respect to our real estate investments was $44,000 for the three months ended June 30, 2016. During the three months ended June 30, 2016, we incurred $0.7 million of asset management fees, of which $44,000 was recorded based on certain payment limitations in the advisory agreement. The remaining $0.6 million of asset management fees were deferred but not accrued as it is uncertain whether any of this amount will be paid in the future. During the three months ended June 30, 2017, we incurred $0.7 million of asset management fees, none of which was recorded based on certain payment limitations in the advisory agreement. The entire $0.7 million of asset management fees were deferred but not accrued as it is uncertain whether any of this amount will be paid in the future. For a discussion of the asset management fee payable by us to our advisor and the deferrals of the asset management fee, see “Liquidity and Capital Resources — Advisory Agreement — Asset Management Fee” herein.

Property management fees and expenses to affiliate decreased from $1.5 million for the three months ended June 30, 2016 to $1.4 million for the three months ended June 30, 2017 primarily due to the disposition of one apartment complex on March 9, 2017. We expect our property management fees and expenses to affiliate on properties we continue to hold to increase in future periods as a result of inflation, but to decrease overall as a result of anticipated dispositions of real estate investments.

General and administrative expenses decreased from $0.8 million for the three months ended June 30, 2016 to $0.6 million for the three months ended June 30, 2017. This decrease was primarily due to legal fees and other professional fees incurred related to the Special Committee’s engagement of Stanger to act as our financial advisor during the three months ended June 30, 2016. We did not incur such legal fees and other professional fees during the three months ended June 30, 2017. See “—Liquidity and Capital Resources” for our discussion on the engagement of Stanger.

Depreciation and amortization expense decreased from $3.1 million for the three months ended June 30, 2016 to $2.8 million for the three months ended June 30, 2017 primarily due to the disposition of one apartment complex on March 9, 2017. Overall, we expect depreciation and amortization expense to decrease in future periods as a result of anticipated dispositions of real estate investments.

Interest expense decreased from $2.6 million for the three months ended June 30, 2016 to $2.3 million for the three months ended June 30, 2017 primarily due to the disposition of one apartment complex on March 9, 2017. In general, we expect our interest expense to decrease in future periods as a result of anticipated dispositions of real estate investments, which may be offset by certain fees and costs that may be incurred due to the prepayment of certain loans.

Comparison of the six months ended June 30, 2017 versus the six months ended June 30, 2016

The following table provides summary information about our results of operations for the six months ended June 30, 2017 and 2016 (dollar amounts in thousands):

	Six Months Ended June 30,				Increase (Decrease)			Percentage     Change		$ Change Due to Disposition (1)			$ Change Due to Properties Held Throughout Both Periods (2)
	2017		2016
Rental income	$	21,347	$	22,521	$	(1,174	)	(5	)%	$	(1,413	)	$	239
Operating, maintenance, and management costs	2,907		3,185		(278		)	(9	)%	(186		)	(92		)
Real estate taxes and insurance	3,635		3,451		184			5	%	(94		)	278
Asset management fees to affiliate	234		238		(4		)	(2	)%	n/a			n/a
Property management fees and expenses to affiliate	2,990		2,853		137			5	%	(44		)	181
General and administrative expenses	1,108		1,474		(366		)	(25	)%	n/a			n/a
Depreciation and amortization expense	5,763		6,116		(353		)	(6	)%	(429		)	76
Interest expense	5,128		5,170		(42		)	(1	)%	62			(104		)
Gain on sale of real estate, net	16,470		—		16,470			100	%	16,470			—

_____________________

⁽¹⁾ Represents the dollar amount increase (decrease) for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 related to real estate disposed of on or after January 1, 2016.

⁽²⁾ Represents the dollar amount increase (decrease) for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 related to real estate owned by us throughout both periods presented.

26

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Rental income decreased from $22.5 million for the six months ended June 30, 2016 to $21.3 million for the six months ended June 30, 2017, primarily due to the disposition of one apartment complex during the six months ended June 30, 2017. We expect rental income on properties we continue to hold to vary in future periods depending on occupancy rates and rental rates of our real estate investments, but to decrease overall as a result of anticipated dispositions of real estate investments.

Operating, maintenance and management costs and real estate taxes and insurance decreased from $6.6 million for the six months ended June 30, 2016 to $6.5 million for the six months ended June 30, 2017 primarily due to the disposition of one apartment complex during the six months ended June 30, 2017 and a decrease in reimbursable on-site office expenses, partially offset by an increase due to property tax reassessments. We expect operating, maintenance and management costs and real estate taxes and insurance on properties we continue to hold to increase in future periods, as compared to historical periods as a result of inflation, but to decrease overall as a result of anticipated dispositions of real estate investments.

Asset management fees to affiliate with respect to our real estate investments remained consistent at approximately $0.2 million for the six months ended June 30, 2016 and 2017, respectively. We incurred $1.4 million of asset management fees, of which $0.2 million was recorded based on certain payment limitations in the advisory agreement during the six months ended June 30, 2016 and 2017, respectively. The remaining $1.2 million of asset management fees incurred during the six months ended June 30, 2016 and 2017, respectively, were deferred but not accrued as it is uncertain whether any of this amount will be paid in the future. For a discussion of the asset management fee payable by us to our advisor and the deferrals of the asset management fee, see “Liquidity and Capital Resources — Advisory Agreement — Asset Management Fee” herein.

Property management fees and expenses to affiliate increased from $2.9 million for the six months ended June 30, 2016 to $3.0 million for the six months ended June 30, 2017 due to bonuses paid by LPI to its employees at our properties during the first quarter of 2017 related to LPI’s property-level employee retention strategy necessary as we are pursuing additional asset sales, which bonus payments we reimbursed to LPI pursuant to the property management agreements between LPI and us. We expect our property management fees and expenses to affiliate on properties we continue to hold to increase in future periods as a result of inflation, but to decrease overall as a result of anticipated dispositions of real estate investments.

General and administrative expenses decreased from $1.5 million for the six months ended June 30, 2016 to $1.1 million for the six months ended June 30, 2017. This decrease was primarily due to legal fees and other professional fees incurred related to the Special Committee’s engagement of Stanger to act as our financial advisor during the six months ended June 30, 2016. We did not incur such legal fees and other professional fees during the six months ended June 30, 2017. See “—Liquidity and Capital Resources” for our discussion on the engagement of Stanger.

Depreciation and amortization expense decreased from $6.1 million for the six months ended June 30, 2016 to $5.8 million for the six months ended June 30, 2017 primarily due to the disposition of one apartment complex during the six months ended June 30, 2017. Overall, we expect depreciation and amortization expense to decrease in future periods as a result of anticipated dispositions of real estate investments.

Interest expense decreased from $5.2 million for the six months ended June 30, 2016 to $5.1 million for the six months ended June 30, 2017. The decrease in interest expense is primarily due to an overall decrease in our total debt outstanding due to a loan repayment in connection with the disposition of one apartment complex during the six months ended June 30, 2017, partially offset by prepayment fees as a result of the early repayment of debt. In general, we expect our interest expense to decrease in future periods as a result of anticipated dispositions of real estate investments, which may be offset by certain fees and costs that may be incurred due to the prepayment of certain loans.

We recognized a gain on sale of real estate of $16.5 million, net of disposition fees of $0.4 million paid to our advisor, related to the disposition of one apartment complex during the six months ended June 30, 2017. We did not sell any real estate properties during the six months ended June 30, 2016.

27

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Funds from Operations and Modified Funds from Operations

We believe that funds from operations (“FFO”) is a beneficial indicator of the performance of an equity REIT. We compute FFO in accordance with the current NAREIT definition. FFO represents net income, excluding gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), impairment losses on real estate assets, depreciation and amortization of real estate assets, and adjustments for unconsolidated partnerships and joint ventures. We believe FFO facilitates comparisons of operating performance between periods and among other REITs. However, our computation of FFO may not be comparable to other REITs that do not define FFO in accordance with the NAREIT definition or that interpret the current NAREIT definition differently than we do. Our management believes that historical cost accounting for real estate assets in accordance with U.S. generally accepted accounting principles (“GAAP”) implicitly assumes that the value of real estate assets 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 to be insufficient by themselves. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and provides a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities, and when compared year over year, FFO reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses and interest costs, which may not be immediately apparent from net income or loss.

Changes in accounting rules have resulted in a substantial increase in the number of non-operating and non-cash items included in the calculation of FFO. As a result, our management also uses MFFO as an indicator of our ongoing performance as well as our dividend sustainability. MFFO excludes from FFO: acquisition fees and expenses; adjustments related to contingent purchase price obligations; amounts relating to straight-line rents and amortization of above and below market intangible lease assets and liabilities; accretion of discounts and amortization of premiums on debt investments; amortization of closing costs relating to debt investments; impairments of real estate-related investments; mark-to-market adjustments included in net income; and gains or losses included in net income for the extinguishment or sale of debt or hedges. We compute MFFO in accordance with the definition of MFFO included in the practice guideline issued by the IPA in November 2010 as interpreted by management. Our computation of MFFO may not be comparable to other REITs that do not compute MFFO in accordance with the current IPA definition or that interpret the current IPA definition differently than we do.

We believe that MFFO is helpful as a measure of ongoing operating performance because it excludes non-operating items included in FFO.  Additionally, we believe that MFFO provides investors with supplemental performance information that is consistent with the performance indicators and analysis used by management, in addition to net income and cash flows from operating activities as defined by GAAP, to evaluate the sustainability of our operating performance.  MFFO provides comparability in evaluating the operating performance of our portfolio with other non-traded REITs which typically have limited lives with short and defined acquisition periods and targeted exit strategies.  MFFO, or an equivalent measure, is routinely reported by non-traded REITs, and we believe often used by analysts and investors for comparison purposes.  

FFO and MFFO are non-GAAP financial measures and do not represent net income as defined by GAAP. Net income as defined by GAAP is the most relevant measure in determining our operating performance because FFO and MFFO include adjustments that investors may deem subjective, such as adding back expenses such as depreciation and amortization and the other items described above. Accordingly, FFO and MFFO should not be considered as alternatives to net income as an indicator of our current and historical operating performance. In addition, FFO and MFFO do not represent cash flows from operating activities determined in accordance with GAAP and should not be considered an indication of our liquidity. We believe FFO and MFFO, in addition to net income and cash flows from operations as defined by GAAP, are meaningful supplemental performance measures. During periods of significant disposition activity, FFO and MFFO are much more limited as measures of future performance.

28

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

For the periods presented, MFFO adjustments consist of the exclusion of the amortization of a discount on a note payable and the exclusion of prepayment fees related to the extinguishment of debt. We have excluded these items based on the following economic considerations:

• Amortization of a discount on a note payable.  Discounts on debt are amortized over the term of the loan as an adjustment to interest expense.  This application results in interest expense recognition that is different than the underlying contractual terms of the debt.  We have excluded the amortization of a discount in our calculation of MFFO to more appropriately reflect the economic impact of our debt as the amortization of a discount has no ongoing economic impact on our operations.  We believe excluding this item provides investors with a useful supplemental metric that directly addresses core operating performance; and

• Prepayment fees related to the extinguishment of debt. Prepayment fees related to the extinguishment of debt are generally included in interest expense. Although these amounts reduce net income, we exclude them from MFFO to more appropriately present the ongoing operating performance of our real estate investments on a comparative basis.

Our calculation of FFO, which we believe is consistent with the calculation of FFO as defined by NAREIT, is presented in the following table, along with our calculation of MFFO, for the three and six months ended June 30, 2017 and 2016, respectively (in thousands). No conclusions or comparisons should be made from the presentation of these periods.

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2017		2016			2017			2016
Net income (loss)	$	51	$	(24	)	$	16,127		$	62
Depreciation of real estate assets	2,757		3,064			5,761			6,114
Amortization of lease-related costs	1		1			2			2
Gain on sale of real estate, net	—		—			(16,470		)	—
FFO	2,809		3,041			5,420			6,178
Amortization of discount on note payable	22		22			44			44
Prepayment fees related to the extinguishment of debt	—		—			267			—
MFFO	$	2,831	$	3,063		$	5,731		$	6,222

FFO and MFFO may also be used to fund all or a portion of certain capitalizable items that are excluded from FFO and MFFO, such as tenant improvements, building improvements and deferred leasing costs.

29

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Distributions

From time to time during our operational stage, we may not be able to pay distributions solely from our cash flows from operations or FFO, in which case distributions may be paid in whole or in part from cash on hand, proceeds from asset sales and/or from proceeds from our dividend reinvestment plan. We terminated our dividend reinvestment plan effective as of August 20, 2017. Distributions declared, distributions paid and cash flows from operations were as follows for the first and second quarters of 2017 (in thousands, except per share amounts):

Period	Distributions Declared (1)		Distribution Declared Per Share (1) (2)		Distributions Paid (3)						Cash Flows from Operations
					Cash		Reinvested		Total
First Quarter 2017	$	3,346	$	0.160	$	1,983	$	1,365	$	3,348	$	1,753
Second Quarter 2017	22,807		1.091		22,184		841		23,025		3,995
	$	26,153	$	1.251	$	24,167	$	2,206	$	26,373	$	5,748

_____________________

⁽¹⁾ “Distributions declared” and “Distributions Declared Per Share” consist of the following:

• Our board of directors declared distributions per common share based on daily record dates for each day during the period from January 1, 2017 through February 28, 2017. Each day during the period was a record date for distributions and distributions were calculated at a rate of $0.00178082 per share per day. These distributions totaled approximately $2.2 million.

• On March 9, 2017, our board of directors declared a March 2017 distribution in the amount of $0.05520548 per share of common stock to stockholders of record as of the close of business on March 20, 2017. This distribution totaled approximately $1.2 million.

• On April 5, 2017, our board of directors declared a special distribution in the amount of $1.00 per share of common stock to stockholders of record as of the close of business on April 20, 2017. This special distribution totaled approximately $20.9 million.

• On May 9, 2017, our board of directors declared May 2017 and June 2017 distributions in the amounts of $0.04609658 and $0.04460959, respectively, per share of common stock to stockholders of record as of the close of business on May 19, 2017 and June 20, 2017, respectively. These distributions totaled approximately $1.0 million and $0.9 million, respectively.

⁽²⁾ Assumes each share was issued and outstanding each day that was a record date for distributions during the period presented.

⁽³⁾ Other than special distributions, distributions are paid on a monthly basis. In general, distributions for all record dates of a given month are paid on or about the first business day of the following month.

For the six months ended June 30, 2017, we paid aggregate distributions of $26.4 million, including $24.2 million of distributions paid in cash and $2.2 million of distributions reinvested through our dividend reinvestment plan. FFO for the six months ended June 30, 2017 was $5.4 million and cash flows from operations was $5.7 million. We funded our total distributions paid, which includes net cash distributions and distributions reinvested by stockholders, with $20.9 million from the proceeds from the sale of real estate and $5.5 million of cash flows from operations and cash on hand. For the purposes of determining the source of our distributions paid, we assume first that we use cash flows from operations from the relevant periods to fund distribution payments. All non-operating expenses (including general and administrative expenses to the extent not covered by cash flows from operations), debt service and other obligations are assumed to be paid from our dividend reinvestment plan as permitted by our offering documents and loan agreements. We terminated our dividend reinvestment plan effective as of August 20, 2017. See the reconciliation of FFO to net income above.

From inception through June 30, 2017, we paid aggregate distributions of $83.1 million, and our cumulative net loss for the same period was $3.6 million. To the extent that we pay distributions from sources other than our cash flows from operations, the overall return to our stockholders may be reduced.

If we sell any additional properties, we will likely further adjust the distribution rate and our distribution policy subsequent to such sales. On April 5, 2017, our board of directors approved an estimated value per share of our common stock of $8.35, effective April 20, 2017. The estimated value per share is equal to the estimated value per share of our common stock of $9.35 approved by our board of directors on December 9, 2016, reduced for the impact of the Special Distribution. In addition, any future special distributions we pay from the proceeds of future dispositions will reduce our estimated value per share and this reduction will be reflected in our updated estimated value per share, which we expect to update no later than December 2017.

30

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

In addition, our operating performance cannot be accurately predicted and may deteriorate in the future due to numerous factors, including those discussed under “Forward - Looking Statements,” “Market Outlook — MultiFamily Real Estate and Finance Markets,” “Liquidity and Capital Resources” and “Results of Operations” herein, and the risks discussed in Part II, Item 1A “Risk Factors” herein and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC. Those factors include: the future operating performance of our investments in the existing real estate and financial environment, our ability to refinance existing indebtedness at comparable terms and our ability to successfully dispose of some of our assets pursuant to our execution of our strategic alternatives. In the event our FFO and/or cash flows from operations decrease further in the future as a result of the disposition of additional real estate investments, the level of our distributions may also decrease. In addition, future distributions declared and paid may exceed FFO and/or cash flows from operations.

Critical Accounting Policies

Our consolidated interim financial statements and condensed notes thereto have been prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. A discussion of the accounting policies that management considers critical in that they involve significant management judgments, assumptions and estimates is included in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC. There have been no significant changes to our policies during 2017.

Subsequent Events

We evaluate subsequent events up until the date the consolidated financial statements are issued.

Distributions Paid

On July 5, 2017, we paid distributions of $0.9 million, which related to distributions declared for June 2017 in the amount of $0.04460959 per share of common stock to stockholders of record as of the close of business on June 20, 2017. On August 1, 2017, we paid distributions of $1.0 million, which related to distributions declared for July 2017 in the amount of $0.04609658 per share of common stock to stockholders of record as of the close of business on July 19, 2017.

Distributions Authorized

On August 9, 2017, our board of directors authorized an August 2017 distribution in the amount of $0.04609658 per share of common stock to stockholders of record as of the close of business on August 18, 2017, which we expect to pay in cash in September 2017, and a September 2017 distribution in the amount of $0.04460959 per share of common stock to stockholders of record as of the close of business on September 20, 2017, which we expect to pay in cash in October 2017.

Termination of Dividend Reinvestment Plan

As a result of prior and anticipated future property dispositions and our analysis of strategic alternatives, we terminated our dividend reinvestment plan effective as of August 20, 2017.

31

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity to fund the renovation and refinancing of our real estate investment portfolio and to fund our operations. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We may manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that floating rate exposure is kept at an acceptable level. In addition, we may utilize a variety of financial instruments, including interest rate caps, floors, and swap agreements, in order to limit the effects of changes in interest rates on our operations. If we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for the payment of distributions to our stockholders and that the losses may exceed the amount we invested in the instruments.

Interest rate fluctuations will generally not affect our future earnings or cash flows related to our fixed rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. As of June 30, 2017, the fair value estimate of our fixed rate debt was $254.5 million and the outstanding principal balance of our fixed rate debt was $253.1 million. The fair value estimate of our fixed rate debt was estimated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated as of June 30, 2017. With respect to our fixed rate instruments, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instruments, would have a significant impact on our ongoing operations.

Conversely, to the extent we have any variable rate debt, movements in interest rates on variable rate debt would change our future earnings and cash flows, but generally not significantly affect the fair value of those instruments. However, changes in required risk premiums would result in changes in the fair value of variable rate instruments. As of June 30, 2017, we did not have any variable rate debt outstanding.

The weighted-average interest rate of our fixed rate debt as of June 30, 2017 was 3.4%. The weighted-average interest rate represents the actual interest rate in effect as of June 30, 2017.

For a discussion of the interest rate risks related to the current capital and credit markets, see the risks discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC.

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, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of, the 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 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 as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act 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.

Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

32

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

Please see the risks discussed below and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016.

We expect that in the future we may not pay distributions solely from our cash flows from operations. To the extent that we pay distributions from sources other than our cash flows from operations, the overall return to our stockholders may be reduced.

Our organizational documents permit us to pay distributions from any source, including offering proceeds or borrowings (both of which may constitute a return of capital). We expect that in the future we may not pay distributions solely from our cash flows from operations. We have funded distributions from the sale of assets. If we sell any additional properties, we will likely further adjust the distribution rate and our distribution policy subsequent to such sales. To the extent that we pay distributions from sources other than our cash flows from operations, the overall return to our stockholders may be reduced. In addition, to the extent distributions exceed cash flows from operations, a stockholder’s basis in our stock will be reduced and, to the extent distributions exceed a stockholder’s basis, the stockholder may recognize capital gain. There is no limit on the amount of distributions we may fund from sources other than from cash flows from operations.

For the year ended December 31, 2016, we paid aggregate distributions of $13.4 million, including $7.7 million of distributions paid in cash and $5.7 million of distributions reinvested through our dividend reinvestment plan. FFO for the year ended December 31, 2016 was $17.4 million and cash flows from operations was $13.9 million. We funded our total distributions paid for the year ended December 31, 2016, which includes cash distributions and distributions reinvested by stockholders, with cash flows from operations. For the year ended December 31, 2016, FFO represented 130% of total distributions paid.

For the six months ended June 30, 2017, we paid aggregate distributions of $26.4 million, including $24.2 million of distributions paid in cash and $2.2 million of distributions reinvested through our dividend reinvestment plan. We terminated our dividend reinvestment plan effective as of August 20, 2017. FFO for the six months ended June 30, 2017 was $5.4 million and cash flows from operations was $5.7 million. We funded our total distributions paid for the six months ended June 30, 2017 with $20.9 million from the proceeds from the sale of real estate and $5.5 million of cash flows from operations and cash on hand. For the six months ended June 30, 2017, FFO represented 20% of total distributions paid.

See Part I, Item II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Funds from Operations and Modified Funds from Operations” and “Distributions” herein and in Part II, Item VII, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Funds from Operations and Modified Funds from Operations” of our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC.

In January 2017, we exhausted funds available for all redemptions for the remainder of 2017 and may only redeem up to $45,000 of shares in connection with Special Redemptions for the remainder of 2017.

Because of limitations on the dollar value of shares that may be redeemed under our share redemption program as described below, in January 2017, we exhausted funds available for all redemptions for the remainder of 2017 and we will only be able to redeem up to $45,000 of shares in connection with Special Redemptions for the remainder of 2017. As of June 30, 2017, we had $3.0 million of outstanding and unfulfilled ordinary redemption requests.

33

PART II. OTHER INFORMATION (CONTINUED)

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

a) During the period covered by this Form 10-Q, we did not sell any equity securities that were not registered under the Securities Act of 1933.

b) Not applicable.

c) We have a share redemption program that may enable stockholders to sell their shares to us in limited circumstances.

Pursuant to our share redemption program, there are several limitations on our ability to redeem shares:

• Unless the shares are being redeemed in connection with a Special Redemption, we may not redeem shares until the stockholder has held his or her shares for one year.

• During any calendar year, we may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year.

• We have no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.

• We may redeem only the number of shares that we could purchase with the amount of the net proceeds from the sale of shares under our dividend reinvestment plan during the prior calendar year; provided that we may not redeem more than $2.0 million of shares in the aggregate during any calendar year. Furthermore, during any calendar year, once we have redeemed $1.5 million of shares under our share redemption program, including in connection with Special Redemptions, the remaining $0.5 million of the $2.0 million annual limit shall be reserved exclusively for shares being redeemed in connection with a Special Redemption. Notwithstanding anything contained in this paragraph to the contrary, we may increase or decrease the funding available for the redemption of shares pursuant to our share redemption program upon ten business days’ notice to our stockholders. We may provide this notice by including such information (a) in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC or (b) in a separate mailing to our stockholders.

Because of limitations on the dollar value of shares that may be redeemed under our share redemption program, we exhausted the funds available for all redemptions for the remainder of 2017 in January 2017. We will only be able to redeem shares in connection with Special Redemptions for the remainder of 2017. As of June 30, 2017, we may redeem up to $45,000 of shares in connection with Special Redemptions and we had $3.0 million of outstanding and unfulfilled ordinary redemption requests.

Pursuant to our share redemption program, redemptions made in connection with a Special Redemption are made at a price per share equal to the most recent estimated value per share of our common stock as of the applicable redemption date. The price at which we redeem all other shares eligible for redemption is as follows:

• For those shares held by the redeeming stockholder for at least one year, 92.5% of our most recent estimated value per share as of the applicable redemption date;

• For those shares held by the redeeming stockholder for at least two years, 95.0% of our most recent estimated value per share as of the applicable redemption date;

• For those shares held by the redeeming stockholder for at least three years, 97.5% of our most recent estimated value per share as of the applicable redemption date; and

• For those shares held by the redeeming stockholder for at least four years, 100% of our most recent estimated value per share as of the applicable redemption date.

If we cannot redeem all shares presented for redemption in any month because of the limitations on redemptions set forth in our share redemption program, then we will honor redemption requests on a pro rata basis, except that if a pro rata redemption would result in a stockholder owning less than the minimum purchase requirement described in our currently effective, or the most recently effective, registration statement as such registration statement has been amended or supplemented, then we would redeem all of such stockholder’s shares.

Upon a transfer of shares, any pending redemption requests with respect to such transferred shares will be canceled as of the date we accept the transfer. Stockholders wishing us to continue to consider a redemption request related to any transferred shares must resubmit their redemption request.

34

PART II. OTHER INFORMATION (CONTINUED)

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (continued)

On December 9, 2016, our board of directors approved an estimated value per share of our common stock of $9.35 (unaudited) based on the estimated value of our assets less the estimated value of our liabilities divided by the number of shares outstanding, all as of September 30, 2016. For a full description of the assumptions and methodologies used to value our assets and liabilities in connection with the calculation of the December 2016 estimated value per share, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Market Information” of our Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 10, 2017.

On April 5, 2017, our board of directors approved an estimated value per share of our common stock of $8.35, effective April 20, 2017. The estimated value per share is equal to the December 2016 estimated value per share of the our common stock of $9.35, reduced for the impact of the Special Distribution. For a full description of the methodologies and assumptions used in the determination of the April 2017 estimated value per share, see our Current Report on Form 8-K, filed with the SEC on April 11, 2017. We currently expect to utilize an independent valuation firm to update the estimated value per share in December 2017.

Our board of directors may amend, suspend or terminate the program without stockholder approval upon 30 days’ notice, provided that we may increase or decrease the funding available for the redemption of shares pursuant to our share redemption program upon ten business days’ notice to our stockholders. We may provide this notice by including such information (a) in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC or (b) in a separate mailing to our stockholders.

During the six months ended June 30, 2017, we funded redemptions under our share redemption program with the net proceeds from our dividend reinvestment plan, which we terminated effective as of August 20, 2017, and we redeemed shares pursuant to our share redemption program as follows:

Month	Total Number of Shares Redeemed (1)	Average Price Paid Per Share (2)		Total Number of Shares Purchased as Part of the Share Redemption Program	Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Share Redemption Program
January 2017	182,847	$	9.33	182,847	(3)
February 2017	6,738	9.35		6,738	(3)
March 2017	3,207	9.35		3,207	(3)
April 2017	200	8.35		200	(3)
May 2017	8,198	8.35		8,198	(3)
June 2017	10,357	8.35		10,357	(3)
Total	211,547			211,547

_____________________

⁽¹⁾ We announced the adoption and commencement of the program on March 12, 2010. We announced amendments to the program on January 18, 2013 (which amendment became effective on February 17, 2013), on February 26, 2013 (which amendment became effective on March 28, 2013), on January 28, 2014 (which amendment became effective on February 27, 2014) and on October 17, 2014 (which amendment became effective on November 16, 2014).

⁽²⁾ The prices at which we redeem shares under our share redemption program are set forth above.

⁽³⁾ We limit the dollar value of shares that may be redeemed under our share redemption program as described above. In January 2017, we exhausted the $1.5 million of funds available for all redemptions in 2017. We will only be able to redeem shares in connection with Special Redemptions for the remainder of 2017. As of June 30, 2017, we may redeem up to $45,000 of shares in connection with Special Redemptions. As of June 30, 2017, we had a total of $3.0 million outstanding and unfulfilled ordinary redemption requests, representing 360,041 shares. We recorded $1.5 million of redemptions payable in other liabilities on the accompanying consolidated balance sheets.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

35

PART II. OTHER INFORMATION

Item 6. Exhibits

Ex.	Description
3.1	Articles of Amendment and Restatement as adopted on January 8, 2010, incorporated by reference to Exhibit 3.1 to Pre-Effective Amendment No. 4 to the Company’s Registration Statement on Form S-11, Commission File No. 333-161449, filed January 12, 2010
3.2	Second Amended and Restated Bylaws, incorporated by reference to Exhibit 3.1 to the Company’s Periodic Report on Form 8-K, filed November 17, 2016
4.1	Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates), incorporated by reference to Exhibit 4.2 to Pre-Effective Amendment No. 1 to the Company’s Registration Statement on Form S-11, Commission File No. 333-161449, filed October 2, 2009
4.2	Third Amended and Restated Dividend Reinvestment Plan, incorporated by reference to Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2013, filed May 10, 2013
4.3	Fourth Amended and Restated Dividend Reinvestment Plan, incorporated by reference to Exhibit 4.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed March 10, 2017
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 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
99.1	Fifth Amended and Restated Share Redemption Program, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed October 17, 2014
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

36

SIGNATURES

Pursuant to the requirements 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.

		KBS LEGACY PARTNERS APARTMENT REIT, INC.
Date:	August 10, 2017	By:	/s/ W. DEAN HENRY
			W. Dean Henry
			Chief Executive Officer
			(principal executive officer)
Date:	August 10, 2017	By:	/s/ JEFFREY K. WALDVOGEL
			Jeffrey K. Waldvogel
			Chief Financial Officer, Treasurer and Secretary
			(principal financial officer)

37

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, W. Dean Henry, certify that:

1. I have reviewed this quarterly report on Form 10-Q of KBS Legacy Partners Apartment 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 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 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.

Date:	August 10, 2017	By:	/S/ W. DEAN HENRY
			W. Dean Henry
			Chief Executive Officer
			(principal executive officer)

EX-31.32

Exhibit 31.2

Certification of Chief Financial Officer pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Jeffrey K. Waldvogel, certify that:

1. I have reviewed this quarterly report on Form 10-Q of KBS Legacy Partners Apartment 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 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 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.

Date:	August 10, 2017	By:	/S/ JEFFREY  K. WALDVOGEL
			Jeffrey K. Waldvogel
			Chief Financial Officer, Treasurer  and Secretary
			(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 on Form 10-Q of KBS Legacy Partners Apartment REIT, Inc. (the “Registrant”) for the quarter ended June 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, W. Dean Henry, Chief Executive Officer of the Registrant, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief:

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 Registrant.

Date:	August 10, 2017	By:	/S/ W. DEAN HENRY
			W. Dean Henry
			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 on Form 10-Q of KBS Legacy Partners Apartment REIT, Inc. (the “Registrant”) for the quarter ended June 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Jeffrey K. Waldvogel, the Chief Financial Officer of the Registrant, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief:

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 Registrant.

Date:	August 10, 2017	By:	/S/ JEFFREY  K. WALDVOGEL
			Jeffrey K. Waldvogel
			Chief Financial Officer, Treasurer  and Secretary
			(principal financial officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 04, 2017
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Entity Registrant Name	KBS Legacy Partners Apartment REIT, Inc.
Entity Central Index Key	0001469822
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		21,028,095

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Real estate held for investment:
Land	$ 41,771	$ 41,771
Buildings and improvements	326,700	327,619
Total real estate held for investment, cost	368,471	369,390
Less accumulated depreciation and amortization	(46,984)	(42,622)
Total real estate held for investment, net	321,487	326,768
Real estate held for sale, net	0	39,926
Total real estate, net	321,487	366,694
Cash and cash equivalents	21,213	15,998
Restricted cash	5,090	5,099
Prepaid expenses and other assets	4,013	4,146
Total assets	351,803	391,937
Notes payable:
Notes payable, net	249,901	252,326
Notes payable related to real estate held for sale, net	0	26,820
Total notes payable, net	249,901	279,146
Accounts payable and accrued liabilities	4,680	5,566
Due to affiliates	148	157
Distributions payable	934	1,154
Other liabilities	2,640	2,778
Total liabilities	258,303	288,801
Commitments and contingencies (Note 7)
Redeemable common stock	545	350
Stockholders’ equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding	0	0
Common stock, $.01 par value; 1,000,000,000 shares authorized, 20,937,850 and 20,896,268 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively	209	209
Additional paid-in capital	180,391	180,196
Cumulative distributions and net losses	(87,645)	(77,619)
Total stockholders’ equity	92,955	102,786
Total liabilities and stockholders’ equity	$ 351,803	$ 391,937

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	1,000,000,000	1,000,000,000
Common stock, shares issued (in shares)	20,937,850	20,896,268
Common stock, shares outstanding (in shares)	20,937,850	20,896,268

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Revenues:
Rental income	$ 10,381	$ 11,367	$ 21,347	$ 22,521
Total revenues	10,381	11,367	21,347	22,521
Expenses:
Operating, maintenance, and management	1,523	1,559	2,907	3,185
Real estate taxes and insurance	1,823	1,811	3,635	3,451
Asset management fees to affiliate	0	44	234	238
Property management fees and expenses to affiliate	1,378	1,498	2,990	2,853
General and administrative expenses	551	849	1,108	1,474
Depreciation and amortization	2,758	3,065	5,763	6,116
Interest expense	2,346	2,579	5,128	5,170
Total expenses	10,379	11,405	21,765	22,487
Other income:
Interest and other income	49	14	75	28
Gain on sale of real estate, net	0	0	16,470	0
Total other income	49	14	16,545	28
Net income (loss)	$ 51	$ (24)	$ 16,127	$ 62
Net income per common share, basic and diluted (in dollars per share)	$ 0.00	$ 0.00	$ 0.77	$ 0.00
Weighted-average number of common shares outstanding, basic and diluted (in shares)	20,920,275	20,585,367	20,897,493	20,543,217

XML

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Cumulative Distributions and Net Income (Loss)
Balance, shares at Dec. 31, 2015		20,508,397
Balance, value at Dec. 31, 2015	$ 107,371	$ 205	$ 176,476	$ (69,310)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock, shares		586,585
Issuance of common stock, value	5,737	$ 6	5,731
Redemptions of common stock, shares		(198,714)
Redemptions of common stock, value	(2,019)	$ (2)	(2,017)
Distributions declared	(13,430)			(13,430)
Other offering costs	6		6
Net income	$ 5,121			5,121
Balance, shares at Dec. 31, 2016	20,896,268	20,896,268
Balance, value at Dec. 31, 2016	$ 102,786	$ 209	180,196	(77,619)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock, shares		253,129
Issuance of common stock, value	2,206	$ 2	2,204
Redemptions of common stock, shares		(211,547)
Redemptions of common stock, value	(1,955)	$ (2)	(1,953)
Transfers to redeemable common stock	(46)		(46)
Distributions declared	(26,153)			(26,153)
Other offering costs	(10)		(10)
Net income	$ 16,127			16,127
Balance, shares at Jun. 30, 2017	20,937,850	20,937,850
Balance, value at Jun. 30, 2017	$ 92,955	$ 209	$ 180,391	$ (87,645)

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Cash Flows from Operating Activities:
Net income	$ 51	$ (24)	$ 16,127	$ 62	$ 5,121
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,758	3,065	5,763	6,116
Bad debt expense			217	213
Loss due to property damages			764	145
Loss due to extinguishment of debt			267	0
Amortization of discount on notes payable			44	44
Amortization of deferred financing costs			226	207
Gain on sale of real estate, net			(16,470)	0
Changes in operating assets and liabilities:
Prepaid expenses and other assets			(176)	630
Accounts payable and accrued liabilities			(1,016)	(750)
Due to affiliates			(9)	404
Other liabilities			11	31
Net cash provided by operating activities			5,748	7,102
Cash Flows from Investing Activities:
Proceeds from sale of real estate			56,191	0
Improvements to real estate			(819)	(1,180)
Insurance proceeds received for property damage			0	133
Net cash provided by (used in) investing activities			55,372	(1,047)
Cash Flows from Financing Activities:
Principal payments on mortgage notes payable			(29,515)	(2,898)
Prepayment fees related to the extinguishment of debt			(267)	0
Payments to redeem common stock			(1,955)	(1,769)
Payments of other offering costs			(10)	(11)
Distributions paid			(24,167)	(3,776)
Net cash used in financing activities			(55,914)	(8,454)
Net increase (decrease) in cash, cash equivalents and restricted cash			5,206	(2,399)
Cash, cash equivalents and restricted cash, beginning of period			21,097	24,869	24,869
Cash, cash equivalents and restricted cash, end of period	$ 26,303	$ 22,470	26,303	22,470	$ 21,097
Supplemental Disclosure of Cash Flow Information:
Interest paid			4,674	4,947
Supplemental Disclosure of Noncash Transactions:
Distributions paid to common stockholders through common stock issuances pursuant to the dividend reinvestment plan			2,206	2,876
Increase in redeemable common stock payable			0	205
Increase in accrued improvements to real estate			$ 130	$ 0

XML

ORGANIZATION

6 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION

ORGANIZATION

KBS Legacy Partners Apartment REIT, Inc. (the “Company”) was formed on July 31, 2009 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2010. Substantially all of the Company’s business is conducted through KBS Legacy Partners Limited Partnership (the “Operating Partnership”), a Delaware limited partnership formed on August 4, 2009. The Company is the sole general partner of and owns a 0.1% partnership interest in the Operating Partnership. KBS Legacy Partners Holdings LLC (“REIT Holdings”), a Delaware limited liability company formed on August 4, 2009, owns the remaining 99.9% interest in the Operating Partnership and is its sole limited partner. The Company is the sole member and manager of REIT Holdings.

Subject to certain restrictions and limitations, the business of the Company is externally managed by KBS Capital Advisors LLC (the “Advisor”), an affiliate of the Company, pursuant to an advisory agreement the Company renewed with the Advisor on January 25, 2017 (the “Advisory Agreement”).

On August 7, 2009, the Company issued 20,000 shares of its common stock to KBS-Legacy Apartment Community REIT Venture, LLC (the “Sub-Advisor”), an affiliate of the Company, at a purchase price of $10.00 per share. As of June 30, 2017, the Sub-Advisor owned 20,000 shares of common stock of the Company.

The Company invested in and manages a portfolio of high quality apartment complexes located throughout the United States. The Company’s portfolio consists of “core” apartment complexes that were already well-positioned and producing rental income at acquisition. As of June 30, 2017, the Company owned 10 apartment complexes.

On August 19, 2009, the Company filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to offer a minimum of 250,000 shares and a maximum of 280,000,000 shares of common stock for sale to the public (the “Initial Offering”), of which 80,000,000 shares would be offered pursuant to the Company’s dividend reinvestment plan.

The SEC declared the Company’s registration statement for the Initial Offering effective on March 12, 2010, and the Company retained KBS Capital Markets Group LLC (the “Dealer Manager”), an affiliate of the Company, to serve as the dealer manager for the Initial Offering pursuant to a dealer manager agreement dated March 12, 2010 (the “Initial Dealer Manager Agreement”). Under the Initial Dealer Manager Agreement, the Dealer Manager was responsible for marketing the Company’s shares being offered pursuant to the Initial Offering.

On May 31, 2012, the Company filed a registration statement on Form S-11 with the SEC to register a follow-on public offering (the “Follow-on Offering” and together with the Initial Offering, the “Offerings”). Pursuant to the registration statement, as amended, the Company registered up to an additional $2,000,000,000 of shares of common stock for sale to the public and up to an additional $760,000,000 of shares of common stock pursuant to the dividend reinvestment plan. The SEC declared the Company’s registration statement for the Follow-on Offering effective on March 8, 2013.

The Company retained the Dealer Manager to serve as the dealer manager for the Follow-on Offering pursuant to a dealer manager agreement dated March 8, 2013 (the “Follow-on Dealer Manager Agreement” and together with the Initial Dealer Manager Agreement, the “Dealer Manager Agreements”). On March 12, 2013, the Company ceased offering shares pursuant to the Initial Offering and on March 13, 2013, the Company commenced offering shares to the public pursuant to the Follow-on Offering.

In the Initial Offering, the Company sold 18,088,084 shares of common stock for gross offering proceeds of $179.2 million, including 368,872 shares of common stock under the dividend reinvestment plan for gross offering proceeds of $3.5 million. The Company ceased offering shares in the primary Follow-on Offering on March 31, 2014 and completed subscription processing procedures on April 30, 2014. The Company sold 1,496,198 shares of common stock in the primary Follow-on Offering for gross offering proceeds of $15.9 million.

As of June 30, 2017, the Company had sold an aggregate of 21,937,089 shares of common stock in the Offerings for gross offering proceeds of $218.1 million, including an aggregate of 2,721,679 shares of common stock under the dividend reinvestment plan for gross offering proceeds of $26.6 million. Also, as of June 30, 2017, the Company had redeemed 1,019,239 shares sold in the Offerings for $9.9 million.

The Company terminated the dividend reinvestment plan effective as of August 20, 2017.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2016. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”).

Principles of Consolidation and Basis of Presentation

The accompanying unaudited consolidated financial statements and condensed notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Operating results for the six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

The consolidated financial statements include the accounts of the Company, REIT Holdings, the Operating Partnership and their direct and indirect wholly owned subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation.

Use of Estimates

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

Segments

The Company owned 10 apartment complexes as of June 30, 2017. Substantially all of the Company’s revenue and net income (loss) is from real estate, and therefore, the Company currently operates in one reportable segment.

Reclassifications

Certain amounts in the Company’s prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods. During the six months ended June 30, 2017, the Company sold one apartment complex. As a result, certain assets and liabilities were reclassified to held for sale on the consolidated balance sheets for all periods presented. Additionally, during the year ended December 31, 2016, the Company elected to early adopt ASU No. 2016-18 (as defined below).  As a result, the Company no longer presents the changes within restricted cash in the consolidated statements of cash flows.  Instead, restricted cash is included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the consolidated statements of cash flows.

Square Footage, Occupancy and Other Measures

Any references to square footage or occupancy are unaudited and outside the scope of the Company’s independent registered public accounting firm’s review of the Company’s financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.

Per Share Data

Basic net income (loss) per share of common stock is calculated by dividing net income (loss) by the weighted-average number of shares of common stock issued and outstanding during such period. Diluted net income (loss) per share of common stock equals basic net income (loss) per share of common stock as there were no potentially dilutive securities outstanding during the six months ended June 30, 2017 and 2016.

Distributions declared per share of common stock were $1.091 and $1.251 for the three and six months ended June 30, 2017. Distributions declared per share of common stock assumes each share was issued and outstanding each day that was a record date for distributions during this period. These distributions declared consisted of the following:

• The Company’s board of directors declared distributions per common share based on daily record dates for each day during the period from January 1, 2017 to February 28, 2017. Each day during the period was a record date for distributions and distributions were calculated at a rate of $0.00178082 per share per day.

• On March 9, 2017, the Company’s board of directors declared a March 2017 distribution in the amount of $0.05520548 per share of common stock to stockholders of record as of the close of business on March 20, 2017.

• On April 5, 2017, the Company’s board of directors declared a special distribution in the amount of $1.00 per share of common stock to stockholders of record as of the close of business on April 20, 2017.

• On May 9, 2017, the Company’s board of directors declared May 2017 and June 2017 distributions in the amounts of $0.04609658 and $0.04460959, respectively, per share of common stock to stockholders of record as of the close of business on May 19, 2017 and June 20, 2017, respectively.

Distributions declared per share of common stock were $0.162 and $0.322 for the three and six months ended June 30, 2016, respectively. Distributions declared per share of common stock assumes each share was issued and outstanding each day that was a record date for distributions during these periods. For the three and six months ended June 30, 2016, distributions were based on daily record dates and calculated at a rate of $0.00178082 per share per day. Each day during the periods from January 1, 2016 through February 28, 2016 and March 1, 2016 through June 30, 2016 was a record date for distributions.

Recently Issued Accounting Standards Update

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU No. 2014-09”).  ASU No. 2014-09 requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.  ASU No. 2014-09 supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification.  ASU No. 2014-09 does not apply to lease contracts within the scope of Leases (Topic 840). ASU No. 2014-09 was to be effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and is to be applied retrospectively, with early application not permitted.  In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU No. 2015-14”), which defers the effective date of ASU No. 2014-09 by one year. Early adoption is permitted but not before the original effective date. The primary source of revenue for the Company is generated through leasing arrangements, which are excluded from this standard. The Company’s revenues that may be impacted by this standard primarily include other operating income, sales of real estate and other ancillary income earned at its properties. In 2016, other operating income and other ancillary income were approximately 3% of consolidated revenue. The Company is in process of evaluating how this standard will impact sales of real estate. The Company continues to evaluate the impact that the standard will have on its consolidated financial statements. The Company expects to adopt the standard using the modified retrospective approach, which requires a cumulative effect adjustment as of the date of the adoption.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU No. 2016-01”).  The amendments in ASU No. 2016-01 address certain aspects of recognition, measurement, presentation and disclosure of financial instruments.  ASU No. 2016-01 primarily affects accounting for equity investments and financial liabilities where the fair value option has been elected.  ASU No. 2016-01 also requires entities to present financial assets and financial liabilities separately, grouped by measurement category and form of financial asset in the balance sheet or in the accompanying notes to the financial statements.  ASU No. 2016-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.  Early application of certain provisions of the standard is permitted for financial statements that have not been previously issued.  The Company does not expect the adoption of ASU No. 2016-01 to have a significant impact on its financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”). The amendments in ASU No. 2016-02 change the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of ASU No. 2016-02 as of its issuance is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting the new leases standard on its consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU No. 2016-15”).  ASU No. 2016-15 is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows.  The amendments in ASU No. 2016-15 provide guidance on eight specific cash flow issues, including the following that are or may be relevant to the Company: (a) Cash payments for debt prepayment or debt extinguishment costs should be classified as cash outflows for financing activities; (b) Cash payments relating to contingent consideration made soon after an acquisition’s consummation date (i.e., approximately three months or less) should be classified as cash outflows for investing activities. Payments made thereafter should be classified as cash outflows for financing activities up to the amount of the original contingent consideration liability. Payments made in excess of the amount of the original contingent consideration liability should be classified as cash outflows for operating activities; (c) Cash payments received from the settlement of insurance claims should be classified on the basis of the nature of the loss (or each component loss, if an entity receives a lump-sum settlement); (d) In the absence of specific guidance, an entity should classify each separately identifiable cash source and use on the basis of the nature of the underlying cash flows. For cash flows with aspects of more than one class that cannot be separated, the classification should be based on the activity that is likely to be the predominant source or use of cash flow.  ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period.  The Company is still evaluating the impact of adopting ASU No. 2016-15 on its financial statements, but does not expect the adoption of ASU No. 2016-15 to have a material impact on its financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU No. 2016-18”). ASU No. 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents.  Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows.  ASU No. 2016-18 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.  The Company elected to early adopt ASU No. 2016-18 for the reporting period ended December 31, 2016 and it was applied retrospectively. As a result of the adoption of ASU No. 2016-18, the Company no longer presents the changes within restricted cash in the consolidated statements of cash flows.

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REAL ESTATE

6 Months Ended

Jun. 30, 2017

Real Estate [Abstract]

REAL ESTATE

REAL ESTATE

As of June 30, 2017, the Company owned 10 apartment complexes, containing 2,738 units and encompassing 2.8 million rentable square feet, which were 95% occupied. The following table provides summary information regarding the properties owned by the Company as of June 30, 2017 (dollars in thousands):

Property Name	Date Acquired	Location	Total Real Estate, Cost		Accumulated Depreciation and Amortization			Total Real Estate, Net
Legacy at Valley Ranch	10/26/2010	Irving, TX	$	36,609	$	(5,622	)	$	30,987
Poplar Creek	02/09/2012	Schaumburg, IL	27,194		(3,010		)	24,184
The Residence at Waterstone	04/06/2012	Pikesville, MD	65,387		(8,571		)	56,816
Legacy Crescent Park	05/03/2012	Greer, SC	19,717		(2,967		)	16,750
Legacy at Martin’s Point	05/31/2012	Lombard, IL	37,332		(5,896		)	31,436
Watertower Apartments	01/15/2013	Eden Prairie, MN	38,870		(4,890		)	33,980
Crystal Park at Waterford	05/08/2013	Frederick, MD	46,126		(5,877		)	40,249
Millennium Apartment Homes	06/07/2013	Greenville, SC	33,367		(4,165		)	29,202
Legacy Grand at Concord	02/18/2014	Concord, NC	27,949		(2,775		)	25,174
Lofts at the Highlands	02/25/2014	St. Louis, MO	35,920		(3,211		)	32,709
			$	368,471	$	(46,984	)	$	321,487

Additionally, as of June 30, 2017 and December 31, 2016, the Company had recorded unamortized tax abatement intangible assets, which are included in prepaid expenses and other assets in the accompanying balance sheets, of $2.4 million and $2.5 million, respectively.  During the three and six months ended June 30, 2017, the Company recorded amortization expense of $41,000 and $106,000, respectively, related to tax abatement intangible assets. During the three and six months ended June 30, 2016, the Company recorded amortization expense of $65,000 and $130,000, respectively, related to tax abatement intangible assets.

Recent Disposition

Wesley Village

On November 6, 2012, the Company, through an indirect wholly owned subsidiary, purchased a 301-unit apartment complex on approximately 11.0 acres of land and the adjacent 3.8-acre parcel of undeveloped land located in Charlotte, North Carolina (together, “Wesley Village”) for an aggregate purchase price of $45.8 million. On March 9, 2017, the Company sold Wesley Village to Bluerock Real Estate, LLC (the “Purchaser”) for $57.2 million, resulting in a gain of $16.5 million, which gain was reduced by disposition fees related to the sale paid to the Advisor of $0.4 million and which includes a reduction to the net book value of the property due to historical depreciation and amortization expense.

For the three months ended June 30, 2016, Wesley Village had revenues and expenses of $1.1 million and $0.9 million, respectively. For the six months ended June 30, 2017 and 2016, Wesley Village had revenues of $0.8 million and $2.2 million, respectively and expenses of $1.1 million and $1.7 million, respectively. The results of operations from Wesley Village and related gain on sale are included in continuing operations on the Company’s consolidated statements of operations.

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NOTES PAYABLE

6 Months Ended

Jun. 30, 2017

Notes Payable [Abstract]

NOTES PAYABLE

NOTES PAYABLE

As of June 30, 2017 and December 31, 2016, the Company’s notes payable consisted of the following (dollars in thousands):

	Book Value as of June 30, 2017			Book Value as of December 31, 2016			Contractual Interest Rate as of June 30, 2017	Payment Type	Maturity Date
Legacy at Valley Ranch Mortgage Loan	$	30,647		$	30,958		3.9%	Principal & Interest	04/01/2019
Poplar Creek Mortgage Loan	19,220			19,414			4.0%	Principal & Interest	03/01/2019	(1)
The Residence at Waterstone Mortgage Loan	45,187			45,653			3.8%	Principal & Interest	05/01/2019	(1)
Legacy Crescent Park Mortgage Loan	13,406			13,560			3.5%	Principal & Interest	06/01/2019	(1)
Legacy at Martin’s Point Mortgage Loan	21,625			21,866			3.3%	Principal & Interest	06/01/2019	(1)
Wesley Village Mortgage Loan (2)	—			26,862			(2)	(2)	(2)
Watertower Mortgage Loan	23,647			23,943			2.5%	Principal & Interest	02/10/2018	(1)
Crystal Park Mortgage Loan	26,656			27,013			2.5%	Principal & Interest	06/01/2018	(1)
Millennium Mortgage Loan	19,934			20,190			2.7%	Principal & Interest	07/01/2018	(1)
Legacy Grand at Concord Mortgage Loan	22,237			22,392			4.1%	Principal & Interest	12/01/2050	(1)
Lofts at the Highlands Mortgage Loan	30,531			30,754			3.4%	Principal & Interest	08/01/2052	(1)
Total notes payable principal outstanding	$	253,090		$	282,605
Discount on note payable, net	(2,600		)	(2,644		)
Deferred financing costs, net	(589		)	(815		)
Total notes payable, net	$	249,901		$	279,146

____________________

⁽¹⁾ The Company has the right to repay the loan subject to certain conditions and prepayment penalties.

⁽²⁾ On March 9, 2017, in connection with the disposition of Wesley Village, the Company paid off the Wesley Village Mortgage Loan.

During the three and six months ended June 30, 2017, the Company incurred $2.3 million and $5.1 million of interest expense, respectively. During the three and six months ended June 30, 2016, the Company incurred $2.6 million and $5.2 million of interest expense, respectively. Included in interest expense for the three and six months ended June 30, 2017 were $0.1 million and $0.2 million of amortization of deferred financing costs, respectively, and $0.3 million of prepayment fees during the six months ended June 30, 2017. Included in interest expense for the three and six months ended June 30, 2016 were $0.1 million and $0.2 million of amortization of deferred financing costs, respectively. Also included in interest expense for the three and six months ended June 30, 2017 were $22,000 and $44,000 of amortization of discount on a note payable, respectively, and $22,000 and $44,000 of amortization of discount on a note payable for the three and six months ended June 30, 2016, respectively. As of June 30, 2017 and December 31, 2016, the Company recorded interest payable of $0.7 million and $0.8 million, respectively.

The following is a schedule of maturities, including principal payments, for the Company’s notes payable outstanding as of June 30, 2017 (in thousands):

July 1, 2017 through December 31, 2017	$	2,681
2018	72,958
2019	126,682
2020	852
2021	884
Thereafter	49,033
	$	253,090

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FAIR VALUE DISCLOSURES

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

FAIR VALUE DISCLOSURES

FAIR VALUE DISCLOSURES

Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other non-financial and financial assets at fair value on a non-recurring basis (e.g., carrying value of impaired long-lived assets). Fair value, as defined under GAAP, is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

• Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

• Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

The fair value for certain financial instruments is derived using valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments. Financial instruments for which actively quoted prices or pricing parameters are available and for which markets contain orderly transactions will generally have a higher degree of price transparency than financial instruments for which markets are inactive or consist of non-orderly trades. The Company evaluates several factors when determining if a market is inactive or when market transactions are not orderly. The following is a summary of the methods and assumptions used by management in estimating the fair value of each class of financial instrument for which it is practicable to estimate the fair value:

Cash and cash equivalents, restricted cash, and accounts payable and accrued liabilities: These balances approximate their fair values due to the short maturities of these items.

Notes payable: The fair value of the Company’s notes payable is estimated using a discounted cash flow analysis based on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities or similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach. The Company classifies these inputs as Level 3 inputs.

The following were the face value, carrying amount and fair value of the Company’s notes payable as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017						December 31, 2016
	Face Value		Carrying Amount		Fair Value		Face Value		Carrying Amount		Fair Value
Financial liabilities:
Notes payable	$	253,090	$	249,901	$	254,486	$	282,605	$	279,146	$	279,258

Disclosure of the fair values of financial instruments is based on pertinent information available to the Company as of the period end and requires a significant amount of judgment. Low levels of transaction volume for certain financial instruments have made the estimation of fair values difficult and, therefore, both the actual results and the Company’s estimate of value at a future date could be materially different.

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RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2017

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

The Company has entered into the Advisory Agreement with the Advisor and the Follow-on Dealer Manager Agreement with the Dealer Manager. These agreements entitled the Advisor and/or the Dealer Manager to specified fees upon the provision of certain services with regard to the Follow-on Offering and entitle the Advisor to specified fees upon the provision of certain services with regard to the management and disposition of the Company’s real estate properties, among other services, as well as reimbursement of organization and offering costs incurred by the Advisor and the Dealer Manager on behalf of the Company, such as expenses related to the dividend reinvestment plan, which the Company terminated effective as of August 20, 2017, and certain costs incurred by the Advisor in providing services to the Company, such as certain operating costs. The Company has also entered into a fee reimbursement agreement with the Dealer Manager pursuant to which the Company agreed to reimburse the Dealer Manager for certain fees and expenses it incurs for administering the Company’s participation in the DTCC Alternative Investment Product Platform with respect to certain accounts of the Company’s investors serviced through the platform. The Advisor and Dealer Manager also serve or served as the advisor and dealer manager, respectively, for KBS Real Estate Investment Trust, Inc., KBS Real Estate Investment Trust II, Inc., KBS Real Estate Investment Trust III, Inc., KBS Strategic Opportunity REIT, Inc., KBS Strategic Opportunity REIT II, Inc. and KBS Growth & Income REIT, Inc.

On January 6, 2014, the Company, together with KBS Real Estate Investment Trust, Inc. (“KBS REIT I”), KBS Real Estate Investment Trust II, Inc., KBS Real Estate Investment Trust III, Inc., KBS Strategic Opportunity REIT, Inc., KBS Strategic Opportunity REIT II, Inc., the Dealer Manager, the Advisor and other KBS-affiliated entities, entered into an errors and omissions and directors and officers liability insurance program where the lower tiers of such insurance coverage are shared. The cost of these lower tiers is allocated by the Advisor and its insurance broker among each of the various entities covered by the program, and is billed directly to each entity. The allocation of these shared coverage costs is proportionate to the pricing by the insurance marketplace for the first tiers of directors and officers liability coverage purchased individually by each REIT. The Advisor’s and the Dealer Manager’s portion of the shared lower tiers’ cost is proportionate to the respective entities’ prior cost for the errors and omissions insurance. In June 2015, KBS Growth & Income REIT, Inc. was added to the insurance program at terms similar to those described above. In June 2017, the Company renewed its participation in the program, and the program is effective through June 30, 2018. As KBS REIT I is implementing its plan of liquidation, at renewal in June 2017, KBS REIT I elected to cease participation in the program and obtain separate insurance coverage.

During the three and six months ended June 30, 2017 and 2016, no other business transactions occurred between the Company and KBS REIT I, KBS Real Estate Investment Trust II, Inc., KBS Real Estate Investment Trust III, Inc., KBS Strategic Opportunity REIT, Inc., KBS Strategic Opportunity REIT II, Inc. and KBS Growth & Income REIT, Inc.

Pursuant to the terms of these agreements and the property management agreements discussed below, summarized below are the related-party costs incurred by the Company for the three and six months ended June 30, 2017 and 2016, respectively, and any related amounts payable as of June 30, 2017 and December 31, 2016 (in thousands):

	Incurred								Payable as of
	Three Months Ended June 30,				Six Months Ended June 30,				June 30,		December 31,
	2017		2016		2017		2016		2017		2016
Expensed
Asset management fees (1)	$	—	$	44	$	234	$	238	$	—	$	—
Reimbursable operating expenses (2)	55		54		124		120		12		15
Property management fees and expenses (3)	1,378		1,498		2,990		2,853		136		142
Disposition fees (4)	—		—		371		—		—		—
	$	1,433	$	1,596	$	3,719	$	3,211	$	148	$	157

____________________

⁽¹⁾ See “Advisory Agreement – Asset Management Fee” below.

⁽²⁾ Reimbursable operating expenses primarily consist of marketing research costs and property site visit expenses incurred by the Sub-Advisor and internal audit personnel costs, accounting software and cybersecurity related expenses incurred by the Advisor under the Advisory Agreement. Beginning July 1, 2010, the Company has reimbursed the Advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. These amounts totaled $36,000 and $33,000 for the three months ended June 30, 2017 and 2016, respectively, and $72,000 and $75,000 for the six months ended June 30, 2017 and 2016, respectively, and were the only type of employee costs reimbursed under the Advisory Agreement through June 30, 2017. The Company does not reimburse for employee costs in connection with services for which the Advisor earns acquisition or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits the Advisor or its affiliates may pay to the Company’s executive officers. In addition to the amounts above, the Company reimburses the Advisor and Sub-Advisor for certain of the Company’s direct property operating costs incurred from third parties that were initially paid by the Advisor and Sub-Advisor on behalf of the Company.

⁽³⁾ Property management fees and expenses are all paid to Legacy Partners, Inc. (“LPI”), an affiliate of the Sub-Advisor, and consist of (i) reimbursable on-site salary and related benefits expenses for personnel at the managed properties, and (ii) fees for account maintenance and bookkeeping services. See “— Property Management Agreements.”

⁽⁴⁾ Disposition fees with respect to real estate sold are included in the gain on sale of real estate, net, in the accompanying consolidated statements of operations. 

During the six months ended June 30, 2017, the Advisor reimbursed the Company for a $27,000 property insurance rebate.

In connection with the Follow-on Offering, the Company’s sponsors agreed to provide additional indemnification to one of the participating broker-dealers.  The Company agreed to add supplemental coverage to its directors’ and officers’ insurance coverage to insure the sponsors’ obligations under this indemnification agreement in exchange for reimbursement by the sponsors to the Company for all costs, expenses and premiums related to this supplemental coverage.  During the six months ended June 30, 2017, the Advisor incurred $61,000 for the costs of the supplemental coverage obtained by the Company.

On March 9, 2017, the Company sold Wesley Village to the Purchaser.  Gary T. Kachadurian, one of the Company’s independent directors, is also a director of a real estate investment trust sponsored by the Purchaser (the “Purchaser REIT”) and is Vice Chairman of the manager of the Purchaser REIT and as such, Mr. Kachadurian (i) recused himself from all of the Company’s deliberations relating to the disposition of Wesley Village, and (ii) informed the Company and its board of directors that he recused himself from all of the Purchaser REIT’s and its manager’s deliberations relating to the acquisition of Wesley Village.

Advisory Agreement - Asset Management Fee

Pursuant to the Advisory Agreement, the asset management fee payable by the Company to the Advisor with respect to investments in real estate is a monthly fee equal to the lesser of one-twelfth of (i) 1.0% of the amount paid or allocated to fund the acquisition, development, construction or improvement of the property (whether at or subsequent to acquisition), including acquisition expenses and budgeted capital improvement costs (regardless of the level of debt used to finance the investment), and (ii) 2.0% of the amount paid or allocated to fund the acquisition, development, construction or improvement of the property (whether at or subsequent to acquisition), including acquisition expenses and budgeted capital improvement costs, less any debt used to finance the investment.

The Advisory Agreement defers the Company’s obligation to pay asset management fees, without interest, accruing from February 1, 2013 through July 31, 2013. The Company will only be obligated to pay the Advisor such deferred amounts if and to the extent that the Company’s funds from operations, as such term is defined by the National Association of Real Estate Investment Trusts and interpreted by the Company, as adjusted for the effects of straight-line rents and acquisition costs and expenses (“AFFO”) for the immediately preceding month exceeds the amount of distributions declared for record dates of such prior month (an “AFFO Surplus”). The amount of any AFFO Surplus in a given month shall be applied first to pay to the Advisor asset management fees currently due with respect to such month (including any that would otherwise have been deferred for that month in accordance with the Advisory Agreement) and then to pay asset management fees previously deferred by the Advisor in accordance with the Advisory Agreement that remain unpaid. As of June 30, 2017, the Company had deferred payment of $1.5 million of asset management fees for the period from February 2013 through July 2013, but did not record an accrual on its books as the Company believed that the chance of payment of this amount to the Advisor is remote.

In addition, the Advisory Agreement defers without interest under certain circumstances, the Company’s obligation to pay asset management fees accruing from August 1, 2013. Specifically, the Advisory Agreement defers the Company’s obligation to pay an asset management fee for any month in which the Company’s modified funds from operations (“MFFO”) for such month, as such term is defined in the practice guideline issued by the Investment Program Association (“IPA”) in November 2010 and interpreted by the Company, excluding asset management fees, does not exceed the amount of distributions declared by the Company for record dates of that month. The Company remains obligated to pay the Advisor an asset management fee in any month in which the Company’s MFFO, excluding asset management fees, for such month exceeds the amount of distributions declared for the record dates of that month (such excess amount, an “MFFO Surplus”); however, any amount of such asset management fee in excess of the MFFO Surplus is also deferred under the Advisory Agreement. If the MFFO Surplus for any month exceeds the amount of the asset management fee payable for such month, any remaining MFFO Surplus will not be applied to pay asset management fee amounts previously deferred by the Advisor in accordance with the Advisory Agreement. As of June 30, 2017, the Company had deferred payment of $8.0 million of asset management fees for the period from August 2013 through December 2016, but did not record an accrual on its books as the Company believed that the chance of payment of this amount to the Advisor is remote.

During the six months ended June 30, 2017, the Company incurred $1.4 million of asset management fees. However, the Company only recorded $0.2 million pursuant to the limitations in the Advisory Agreement as noted above. The Company did not accrue the remaining $1.2 million of these asset management fees as it is uncertain whether any of this amount will be paid in the future. During the six months ended June 30, 2016, the Company incurred $1.4 million of asset management fees. However, the Company only recorded $0.2 million pursuant to the limitations in the Advisory Agreement as noted above. The Company did not accrue the remaining $1.2 million of these asset management fees as it is uncertain whether any of this amount will be paid in the future.

However, notwithstanding any of the foregoing, any and all deferred asset management fees shall be immediately due and payable at such time as the Company’s stockholders have received, together as a collective group, aggregate distributions (including distributions that may constitute a return of capital for federal income tax purposes) sufficient to provide (i) a return of their net invested capital, or the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by any amounts to repurchase shares pursuant to the Company’s share redemption plan, and (ii) an 8.0% per year cumulative, non-compounded return on such net invested capital (the “Stockholders’ 8% Return”). The Stockholders’ 8% Return is not based on the return provided to any individual stockholder. Accordingly, it is not necessary for each of the Company’s stockholders to have received any minimum return in order for the Advisor to receive deferred asset management fees.

Property Management Agreements

The Company, through indirect wholly owned subsidiaries (each, a “Property Owner”), has entered into property management agreements with LPI (each, a “Property Management Agreement”), pursuant to which LPI provides, among other services, general property management services, including bookkeeping and accounting services, construction management services and budgeting and business plans for the Company’s properties as follows:

Property Name	Effective Date	Management Fee Percentage
Watertower Apartments	04/07/2015	2.75%
Crystal Park at Waterford	04/14/2015	3.00%
The Residence at Waterstone	04/28/2015	3.00%
Lofts at the Highlands	05/05/2015	3.00%
Legacy at Martin’s Point	05/12/2015	3.00%
Poplar Creek	05/14/2015	3.00%
Wesley Village (1)	05/19/2015	3.00%
Legacy Grand at Concord	05/21/2015	3.00%
Millennium Apartment Homes (2)	05/27/2015	3.00%
Legacy Crescent Park (2)	05/29/2015	3.00%
Legacy at Valley Ranch	06/09/2015	3.00%

____________________

⁽¹⁾ On March 9, 2017, the Company sold Wesley Village. The Property Management Agreement for Wesley Village was terminated effective as of March 9, 2017. For more information, see Note 3, “Real Estate – Recent Disposition – Wesley Village.”

⁽²⁾ Under the Property Management Agreement, the Property Owner will pay LPI the Management Fee Percentage in an amount equal to the greater of (a) 3% of the Gross Monthly Collections (as defined in the Property Management Agreement) or (b) $4,000 per month.

Under the Property Management Agreements, each Property Owner pays LPI: (i) a monthly fee based on a percentage (as described in the table above, the “Management Fee Percentage”) of the Gross Monthly Collections (as defined in each Property Management Agreement), (ii) a construction supervision fee equal to a percentage of construction costs to the extent overseen by LPI and as further detailed in each Property Management Agreement, (iii) a leasing commission at a rate to be agreed upon between the Property Owner and LPI for retail leases executed that were procured or obtained by LPI, (iv) certain reimbursements if included in an approved capital budget and (v) certain reimbursements if included in the approved operating budget, including the reimbursement of the salaries and benefits for on-site personnel and fees for account maintenance and bookkeeping services. Unless otherwise provided for in an approved operating budget, LPI is responsible for all expenses that it incurs in rendering services pursuant to each Property Management Agreement. Each Property Management Agreement had an initial term of one year and each has continued on a month-to-month basis pursuant to its terms. Either party may terminate a Property Management Agreement provided it gives 30 days’ prior written notice of its desire to terminate such agreement. Notwithstanding the foregoing, the Property Owner may terminate each Property Management Agreement at any time without cause upon 30 days’ prior written notice to LPI. The Property Owner may also terminate the Property Management Agreement with cause immediately upon notice to LPI and the expiration of any applicable cure period. LPI may terminate each Property Management Agreement at any time without cause upon prior written notice to the Property Owner which, depending upon the terms of the particular Property Management Agreement, requires either 30, 60 or 90 days prior written notice. LPI may terminate the Property Management Agreement for cause if a Property Owner commits any material default under the Property Management Agreement and the default continues for a period of 30 days after notice from LPI to a Property Owner for a default or, in the case of Watertower Apartments, Lofts at the Highlands, Legacy Grand at Concord, Millennium Apartment Homes and Legacy Crescent Park, if a monetary default continues for a period of 10 days after notice of such monetary default.

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Economic Dependency

The Company is dependent on the Advisor and the Sub-Advisor for certain services that are essential to the Company, including the management of the daily operations of the Company’s investment portfolio; the disposition of investments; and other general and administrative responsibilities. The Company is also dependent on LPI to provide the property management services under the Property Management Agreements. In the event that these companies are unable to provide any of the respective services, the Company will be required to obtain such services from other sources.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. Although there can be no assurance, the Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s property, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the property could result in future environmental liabilities.

Legal Matters

From time to time, the Company may become party to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on the Company’s results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2017

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

The Company evaluates subsequent events up until the date the consolidated financial statements are issued.

Distributions Paid

On July 5, 2017, the Company paid distributions of $0.9 million, which related to distributions declared for June 2017 in the amount of $0.04460959 per share of common stock to stockholders of record as of the close of business on June 20, 2017. On August 1, 2017, the Company paid distributions of $1.0 million, which related to distributions declared for July 2017 in the amount of $0.04609658 per share of common stock to stockholders of record as of the close of business on July 19, 2017.

Distributions Authorized

On August 9, 2017, the Company’s board of directors authorized an August 2017 distribution in the amount of $0.04609658 per share of common stock to stockholders of record as of the close of business on August 18, 2017, which the Company expects to pay in cash in September 2017, and a September 2017 distribution in the amount of $0.04460959 per share of common stock to stockholders of record as of the close of business on September 20, 2017, which the Company expects to pay in cash in October 2017.

Termination of Dividend Reinvestment Plan

The Company terminated the dividend reinvestment plan effective as of August 20, 2017.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Basis of Presentation

The accompanying unaudited consolidated financial statements and condensed notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Operating results for the six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, REIT Holdings, the Operating Partnership and their direct and indirect wholly owned subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation.

Use of Estimates

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

Segments

The Company owned 10 apartment complexes as of June 30, 2017. Substantially all of the Company’s revenue and net income (loss) is from real estate, and therefore, the Company currently operates in one reportable segment.

Reclassifications

Certain amounts in the Company’s prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods. During the six months ended June 30, 2017, the Company sold one apartment complex. As a result, certain assets and liabilities were reclassified to held for sale on the consolidated balance sheets for all periods presented. Additionally, during the year ended December 31, 2016, the Company elected to early adopt ASU No. 2016-18 (as defined below).  As a result, the Company no longer presents the changes within restricted cash in the consolidated statements of cash flows.  Instead, restricted cash is included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the consolidated statements of cash flows.

Square Footage, Occupancy and Other Measures

Any references to square footage or occupancy are unaudited and outside the scope of the Company’s independent registered public accounting firm’s review of the Company’s financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.

Per Share Data

Basic net income (loss) per share of common stock is calculated by dividing net income (loss) by the weighted-average number of shares of common stock issued and outstanding during such period. Diluted net income (loss) per share of common stock equals basic net income (loss) per share of common stock as there were no potentially dilutive securities outstanding during the six months ended June 30, 2017 and 2016.

Distributions declared per share of common stock were $1.091 and $1.251 for the three and six months ended June 30, 2017. Distributions declared per share of common stock assumes each share was issued and outstanding each day that was a record date for distributions during this period. These distributions declared consisted of the following:

• The Company’s board of directors declared distributions per common share based on daily record dates for each day during the period from January 1, 2017 to February 28, 2017. Each day during the period was a record date for distributions and distributions were calculated at a rate of $0.00178082 per share per day.

• On March 9, 2017, the Company’s board of directors declared a March 2017 distribution in the amount of $0.05520548 per share of common stock to stockholders of record as of the close of business on March 20, 2017.

• On April 5, 2017, the Company’s board of directors declared a special distribution in the amount of $1.00 per share of common stock to stockholders of record as of the close of business on April 20, 2017.

• On May 9, 2017, the Company’s board of directors declared May 2017 and June 2017 distributions in the amounts of $0.04609658 and $0.04460959, respectively, per share of common stock to stockholders of record as of the close of business on May 19, 2017 and June 20, 2017, respectively.

Distributions declared per share of common stock were $0.162 and $0.322 for the three and six months ended June 30, 2016, respectively. Distributions declared per share of common stock assumes each share was issued and outstanding each day that was a record date for distributions during these periods. For the three and six months ended June 30, 2016, distributions were based on daily record dates and calculated at a rate of $0.00178082 per share per day. Each day during the periods from January 1, 2016 through February 28, 2016 and March 1, 2016 through June 30, 2016 was a record date for distributions.

Recently Issued Accounting Standards Update

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU No. 2014-09”).  ASU No. 2014-09 requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.  ASU No. 2014-09 supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification.  ASU No. 2014-09 does not apply to lease contracts within the scope of Leases (Topic 840). ASU No. 2014-09 was to be effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and is to be applied retrospectively, with early application not permitted.  In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU No. 2015-14”), which defers the effective date of ASU No. 2014-09 by one year. Early adoption is permitted but not before the original effective date. The primary source of revenue for the Company is generated through leasing arrangements, which are excluded from this standard. The Company’s revenues that may be impacted by this standard primarily include other operating income, sales of real estate and other ancillary income earned at its properties. In 2016, other operating income and other ancillary income were approximately 3% of consolidated revenue. The Company is in process of evaluating how this standard will impact sales of real estate. The Company continues to evaluate the impact that the standard will have on its consolidated financial statements. The Company expects to adopt the standard using the modified retrospective approach, which requires a cumulative effect adjustment as of the date of the adoption.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU No. 2016-01”).  The amendments in ASU No. 2016-01 address certain aspects of recognition, measurement, presentation and disclosure of financial instruments.  ASU No. 2016-01 primarily affects accounting for equity investments and financial liabilities where the fair value option has been elected.  ASU No. 2016-01 also requires entities to present financial assets and financial liabilities separately, grouped by measurement category and form of financial asset in the balance sheet or in the accompanying notes to the financial statements.  ASU No. 2016-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.  Early application of certain provisions of the standard is permitted for financial statements that have not been previously issued.  The Company does not expect the adoption of ASU No. 2016-01 to have a significant impact on its financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”). The amendments in ASU No. 2016-02 change the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of ASU No. 2016-02 as of its issuance is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting the new leases standard on its consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU No. 2016-15”).  ASU No. 2016-15 is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows.  The amendments in ASU No. 2016-15 provide guidance on eight specific cash flow issues, including the following that are or may be relevant to the Company: (a) Cash payments for debt prepayment or debt extinguishment costs should be classified as cash outflows for financing activities; (b) Cash payments relating to contingent consideration made soon after an acquisition’s consummation date (i.e., approximately three months or less) should be classified as cash outflows for investing activities. Payments made thereafter should be classified as cash outflows for financing activities up to the amount of the original contingent consideration liability. Payments made in excess of the amount of the original contingent consideration liability should be classified as cash outflows for operating activities; (c) Cash payments received from the settlement of insurance claims should be classified on the basis of the nature of the loss (or each component loss, if an entity receives a lump-sum settlement); (d) In the absence of specific guidance, an entity should classify each separately identifiable cash source and use on the basis of the nature of the underlying cash flows. For cash flows with aspects of more than one class that cannot be separated, the classification should be based on the activity that is likely to be the predominant source or use of cash flow.  ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period.  The Company is still evaluating the impact of adopting ASU No. 2016-15 on its financial statements, but does not expect the adoption of ASU No. 2016-15 to have a material impact on its financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU No. 2016-18”). ASU No. 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents.  Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows.  ASU No. 2016-18 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.  The Company elected to early adopt ASU No. 2016-18 for the reporting period ended December 31, 2016 and it was applied retrospectively. As a result of the adoption of ASU No. 2016-18, the Company no longer presents the changes within restricted cash in the consolidated statements of cash flows.  

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REAL ESTATE (Tables)

6 Months Ended

Jun. 30, 2017

Real Estate [Abstract]

Schedule of Real Estate Investments

The following table provides summary information regarding the properties owned by the Company as of June 30, 2017 (dollars in thousands):

Property Name	Date Acquired	Location	Total Real Estate, Cost		Accumulated Depreciation and Amortization			Total Real Estate, Net
Legacy at Valley Ranch	10/26/2010	Irving, TX	$	36,609	$	(5,622	)	$	30,987
Poplar Creek	02/09/2012	Schaumburg, IL	27,194		(3,010		)	24,184
The Residence at Waterstone	04/06/2012	Pikesville, MD	65,387		(8,571		)	56,816
Legacy Crescent Park	05/03/2012	Greer, SC	19,717		(2,967		)	16,750
Legacy at Martin’s Point	05/31/2012	Lombard, IL	37,332		(5,896		)	31,436
Watertower Apartments	01/15/2013	Eden Prairie, MN	38,870		(4,890		)	33,980
Crystal Park at Waterford	05/08/2013	Frederick, MD	46,126		(5,877		)	40,249
Millennium Apartment Homes	06/07/2013	Greenville, SC	33,367		(4,165		)	29,202
Legacy Grand at Concord	02/18/2014	Concord, NC	27,949		(2,775		)	25,174
Lofts at the Highlands	02/25/2014	St. Louis, MO	35,920		(3,211		)	32,709
			$	368,471	$	(46,984	)	$	321,487

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NOTES PAYABLE (Tables)

6 Months Ended

Jun. 30, 2017

Notes Payable [Abstract]

Schedule of Long-term Debt Instruments

As of June 30, 2017 and December 31, 2016, the Company’s notes payable consisted of the following (dollars in thousands):

	Book Value as of June 30, 2017			Book Value as of December 31, 2016			Contractual Interest Rate as of June 30, 2017	Payment Type	Maturity Date
Legacy at Valley Ranch Mortgage Loan	$	30,647		$	30,958		3.9%	Principal & Interest	04/01/2019
Poplar Creek Mortgage Loan	19,220			19,414			4.0%	Principal & Interest	03/01/2019	(1)
The Residence at Waterstone Mortgage Loan	45,187			45,653			3.8%	Principal & Interest	05/01/2019	(1)
Legacy Crescent Park Mortgage Loan	13,406			13,560			3.5%	Principal & Interest	06/01/2019	(1)
Legacy at Martin’s Point Mortgage Loan	21,625			21,866			3.3%	Principal & Interest	06/01/2019	(1)
Wesley Village Mortgage Loan (2)	—			26,862			(2)	(2)	(2)
Watertower Mortgage Loan	23,647			23,943			2.5%	Principal & Interest	02/10/2018	(1)
Crystal Park Mortgage Loan	26,656			27,013			2.5%	Principal & Interest	06/01/2018	(1)
Millennium Mortgage Loan	19,934			20,190			2.7%	Principal & Interest	07/01/2018	(1)
Legacy Grand at Concord Mortgage Loan	22,237			22,392			4.1%	Principal & Interest	12/01/2050	(1)
Lofts at the Highlands Mortgage Loan	30,531			30,754			3.4%	Principal & Interest	08/01/2052	(1)
Total notes payable principal outstanding	$	253,090		$	282,605
Discount on note payable, net	(2,600		)	(2,644		)
Deferred financing costs, net	(589		)	(815		)
Total notes payable, net	$	249,901		$	279,146

____________________

⁽¹⁾ The Company has the right to repay the loan subject to certain conditions and prepayment penalties.

⁽²⁾ On March 9, 2017, in connection with the disposition of Wesley Village, the Company paid off the Wesley Village Mortgage Loan.

Schedule of Maturities of Long-term Debt

The following is a schedule of maturities, including principal payments, for the Company’s notes payable outstanding as of June 30, 2017 (in thousands):

July 1, 2017 through December 31, 2017	$	2,681
2018	72,958
2019	126,682
2020	852
2021	884
Thereafter	49,033
	$	253,090

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FAIR VALUE DISCLOSURES (Tables)

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Schedule of Face Value, Carrying Amounts and Fair Value

The following were the face value, carrying amount and fair value of the Company’s notes payable as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017						December 31, 2016
	Face Value		Carrying Amount		Fair Value		Face Value		Carrying Amount		Fair Value
Financial liabilities:
Notes payable	$	253,090	$	249,901	$	254,486	$	282,605	$	279,146	$	279,258

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RELATED PARTY TRANSACTIONS (Tables)

6 Months Ended

Jun. 30, 2017

Related Party Transactions [Abstract]

Schedule of Related Party Costs

Pursuant to the terms of these agreements and the property management agreements discussed below, summarized below are the related-party costs incurred by the Company for the three and six months ended June 30, 2017 and 2016, respectively, and any related amounts payable as of June 30, 2017 and December 31, 2016 (in thousands):

	Incurred								Payable as of
	Three Months Ended June 30,				Six Months Ended June 30,				June 30,		December 31,
	2017		2016		2017		2016		2017		2016
Expensed
Asset management fees (1)	$	—	$	44	$	234	$	238	$	—	$	—
Reimbursable operating expenses (2)	55		54		124		120		12		15
Property management fees and expenses (3)	1,378		1,498		2,990		2,853		136		142
Disposition fees (4)	—		—		371		—		—		—
	$	1,433	$	1,596	$	3,719	$	3,211	$	148	$	157

____________________

⁽¹⁾ See “Advisory Agreement – Asset Management Fee” below.

⁽²⁾ Reimbursable operating expenses primarily consist of marketing research costs and property site visit expenses incurred by the Sub-Advisor and internal audit personnel costs, accounting software and cybersecurity related expenses incurred by the Advisor under the Advisory Agreement. Beginning July 1, 2010, the Company has reimbursed the Advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. These amounts totaled $36,000 and $33,000 for the three months ended June 30, 2017 and 2016, respectively, and $72,000 and $75,000 for the six months ended June 30, 2017 and 2016, respectively, and were the only type of employee costs reimbursed under the Advisory Agreement through June 30, 2017. The Company does not reimburse for employee costs in connection with services for which the Advisor earns acquisition or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits the Advisor or its affiliates may pay to the Company’s executive officers. In addition to the amounts above, the Company reimburses the Advisor and Sub-Advisor for certain of the Company’s direct property operating costs incurred from third parties that were initially paid by the Advisor and Sub-Advisor on behalf of the Company.

⁽³⁾ Property management fees and expenses are all paid to Legacy Partners, Inc. (“LPI”), an affiliate of the Sub-Advisor, and consist of (i) reimbursable on-site salary and related benefits expenses for personnel at the managed properties, and (ii) fees for account maintenance and bookkeeping services. See “— Property Management Agreements.”

⁽⁴⁾ Disposition fees with respect to real estate sold are included in the gain on sale of real estate, net, in the accompanying consolidated statements of operations. 

Schedule of Property Management Agreements

The Company, through indirect wholly owned subsidiaries (each, a “Property Owner”), has entered into property management agreements with LPI (each, a “Property Management Agreement”), pursuant to which LPI provides, among other services, general property management services, including bookkeeping and accounting services, construction management services and budgeting and business plans for the Company’s properties as follows:

Property Name	Effective Date	Management Fee Percentage
Watertower Apartments	04/07/2015	2.75%
Crystal Park at Waterford	04/14/2015	3.00%
The Residence at Waterstone	04/28/2015	3.00%
Lofts at the Highlands	05/05/2015	3.00%
Legacy at Martin’s Point	05/12/2015	3.00%
Poplar Creek	05/14/2015	3.00%
Wesley Village (1)	05/19/2015	3.00%
Legacy Grand at Concord	05/21/2015	3.00%
Millennium Apartment Homes (2)	05/27/2015	3.00%
Legacy Crescent Park (2)	05/29/2015	3.00%
Legacy at Valley Ranch	06/09/2015	3.00%

____________________

⁽¹⁾ On March 9, 2017, the Company sold Wesley Village. The Property Management Agreement for Wesley Village was terminated effective as of March 9, 2017. For more information, see Note 3, “Real Estate – Recent Disposition – Wesley Village.”

⁽²⁾ Under the Property Management Agreement, the Property Owner will pay LPI the Management Fee Percentage in an amount equal to the greater of (a) 3% of the Gross Monthly Collections (as defined in the Property Management Agreement) or (b) $4,000 per month.

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ORGANIZATION (Details)	6 Months Ended	12 Months Ended	36 Months Ended	52 Months Ended	88 Months Ended
	Jun. 30, 2017 USD ($) property shares	Dec. 31, 2016 USD ($) shares	Mar. 12, 2013 USD ($) shares	Jun. 30, 2017 USD ($) property shares	Jun. 30, 2017 USD ($) property shares	May 31, 2012 USD ($)	Aug. 19, 2009 shares	Aug. 07, 2009 $ / shares shares
Organizational Structure [Line Items]
Partnership interest in Operating Partnership	0.10%
Partnership interest in the Operating Partnership and is its sole limited partner	99.90%
Common stock, shares issued (in shares)	20,937,850	20,896,268		20,937,850	20,937,850
Issuance of common stock, value | $	$ 2,206,000	$ 5,737,000	$ 179,200,000	$ 15,900,000	$ 218,100,000
Shares of common stock sold under dividend reinvestment plan, value | $			$ 3,500,000		26,600,000
Redemptions of common stock, value | $	$ 1,955,000	$ 2,019,000			$ 9,900,000
Apartment Complex
Organizational Structure [Line Items]
Number of real estate properties | property	10			10	10
Common Stock
Organizational Structure [Line Items]
Shares of common stock authorized under dividend reinvestment plan, shares							80,000,000
Issuance of common stock, shares	253,129	586,585	18,088,084	1,496,198	21,937,089
Issuance of common stock, value | $	$ 2,000	$ 6,000
Shares of common stock sold under dividend reinvestment plan, shares			368,872		2,721,679
Redemptions of common stock, shares	211,547	198,714			1,019,239
Redemptions of common stock, value | $	$ 2,000	$ 2,000
Common Stock | Minimum
Organizational Structure [Line Items]
Number of shares authorized to be repurchased							250,000
Common Stock | Maximum
Organizational Structure [Line Items]
Number of shares authorized to be repurchased							280,000,000
Stock offering, shares authorized for issuance, value | $						$ 2,000,000,000
Stock offering, shares authorized for dividend reinvestment plan, value | $						$ 760,000,000
KBS-Legacy Apartment Community REIT Venture, LLC
Organizational Structure [Line Items]
Common stock, shares issued (in shares)								20,000
Common stock, purchase price per share | $ / shares								$ 10
KBS-Legacy Apartment Community REIT Venture, LLC | Common Stock
Organizational Structure [Line Items]
Shares held by affiliate	20,000			20,000	20,000

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	1 Months Ended			2 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2017 property $ / shares	May 31, 2017 $ / shares	Mar. 31, 2017 $ / shares	Feb. 28, 2017 $ / shares	Jun. 30, 2017 property $ / shares	Jun. 30, 2016 $ / shares	Jun. 30, 2017 segments property $ / shares	Jun. 30, 2016 $ / shares	Dec. 31, 2016	Apr. 05, 2017 $ / shares
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Distributions declared per common share (in dollars per share)					$ 1.091	$ 0.162	$ 1.251	$ 0.322
Distribution rate per share per day on annual basis, declared	$ 0.04460959	$ 0.04609658	$ 0.05520548	$ 0.00178082				$ 0.00178082
Common stock, special dividends, declared (per share)										$ 1.00
Real Estate Properties [Line Items]
Number of reportable segments | segments							1
Apartment Complex
Real Estate Properties [Line Items]
Number of real estate properties | property	10				10		10
Apartment Complex | Disposed of by Sale
Real Estate Properties [Line Items]
Number of real estate properties | property	1				1		1
Accounting Standards Update 2014-09
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Other operating income and other ancillary income as percent of consolidated revenue									3.00%

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REAL ESTATE (Narrative) (Details) $ in Thousands, ft² in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2017 USD ($) ft² Units property	Jun. 30, 2016 USD ($)	Jun. 30, 2017 USD ($) ft² Units property	Jun. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)
Real Estate Properties [Line Items]
Number of real estate units | Units	2,738		2,738
Rentable square feet | ft²	2.8		2.8
Percentage of portfolio occupied	95.00%		95.00%
Tax abatement asset	$ 2,400		$ 2,400		$ 2,500
Property Tax Abatement Intangible Asset
Real Estate Properties [Line Items]
Amortization of intangible assets	$ 41	$ 65	$ 106	$ 130
Apartment Complex
Real Estate Properties [Line Items]
Number of real estate properties | property	10		10

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REAL ESTATE (Schedule of Real Estate Investments) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Real Estate Properties [Line Items]
Total Real Estate at Cost	$ 368,471	$ 369,390
Accumulated Depreciation and Amortization	(46,984)	(42,622)
Total real estate held for investment, net	$ 321,487	$ 326,768
Legacy at Valley Ranch
Real Estate Properties [Line Items]
Date Acquired	Oct. 26, 2010
Total Real Estate at Cost	$ 36,609
Accumulated Depreciation and Amortization	(5,622)
Total real estate held for investment, net	$ 30,987
Poplar Creek
Real Estate Properties [Line Items]
Date Acquired	Feb. 09, 2012
Total Real Estate at Cost	$ 27,194
Accumulated Depreciation and Amortization	(3,010)
Total real estate held for investment, net	$ 24,184
The Residence at Waterstone
Real Estate Properties [Line Items]
Date Acquired	Apr. 06, 2012
Total Real Estate at Cost	$ 65,387
Accumulated Depreciation and Amortization	(8,571)
Total real estate held for investment, net	$ 56,816
Legacy Crescent Park
Real Estate Properties [Line Items]
Date Acquired	May 03, 2012
Total Real Estate at Cost	$ 19,717
Accumulated Depreciation and Amortization	(2,967)
Total real estate held for investment, net	$ 16,750
Legacy at Martin’s Point
Real Estate Properties [Line Items]
Date Acquired	May 31, 2012
Total Real Estate at Cost	$ 37,332
Accumulated Depreciation and Amortization	(5,896)
Total real estate held for investment, net	$ 31,436
Watertower Apartments
Real Estate Properties [Line Items]
Date Acquired	Jan. 15, 2013
Total Real Estate at Cost	$ 38,870
Accumulated Depreciation and Amortization	(4,890)
Total real estate held for investment, net	$ 33,980
Crystal Park at Waterford
Real Estate Properties [Line Items]
Date Acquired	May 08, 2013
Total Real Estate at Cost	$ 46,126
Accumulated Depreciation and Amortization	(5,877)
Total real estate held for investment, net	$ 40,249
Millennium Apartment Homes
Real Estate Properties [Line Items]
Date Acquired	Jun. 07, 2013
Total Real Estate at Cost	$ 33,367
Accumulated Depreciation and Amortization	(4,165)
Total real estate held for investment, net	$ 29,202
Legacy Grand at Concord
Real Estate Properties [Line Items]
Date Acquired	Feb. 18, 2014
Total Real Estate at Cost	$ 27,949
Accumulated Depreciation and Amortization	(2,775)
Total real estate held for investment, net	$ 25,174
Lofts at the Highlands
Real Estate Properties [Line Items]
Date Acquired	Feb. 25, 2014
Total Real Estate at Cost	$ 35,920
Accumulated Depreciation and Amortization	(3,211)
Total real estate held for investment, net	$ 32,709

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REAL ESTATE (Wesley Village) (Details) $ in Thousands			3 Months Ended		6 Months Ended
	Mar. 09, 2017 USD ($)	Nov. 06, 2012 USD ($) a unit	Jun. 30, 2017 USD ($)	Jun. 30, 2016 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2016 USD ($)
Real Estate Properties [Line Items]
Gain on sale of real estate					$ 16,470	$ 0
Revenues			$ 10,381	$ 11,367	21,347	22,521
Expenses			$ 10,379	11,405	21,765	22,487
Wesley Village
Real Estate Properties [Line Items]
Revenues				1,100	800	2,200
Expenses				$ 900	$ 1,100	$ 1,700
Wesley Village | Disposed of by Sale
Real Estate Properties [Line Items]
Disposal group, consideration	$ 57,200
Gain on sale of real estate	16,500
Wesley Village | Disposed of by Sale | KBS Capital Advisors LLC
Real Estate Properties [Line Items]
Disposition Fees to Affiliates	$ 400
Wesley Village
Real Estate Properties [Line Items]
Area of land | a		11.0
Purchase price		$ 45,800
Wesley Village | Apartment Building
Real Estate Properties [Line Items]
Number of units in real estate property | unit		301
Wesley Village | Undeveloped Land
Real Estate Properties [Line Items]
Area of land | a		3.8

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NOTES PAYABLE (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Debt Instrument [Line Items]
Interest expense	$ 2,346	$ 2,579	$ 5,128	$ 5,170
Amortization of deferred financing costs	100	100	200	200
Prepayment fees			300
Amortization of discount on notes payable			44	44
Interest payable, current	700		700		$ 800
Notes Payable
Debt Instrument [Line Items]
Amortization of discount on notes payable	$ 22	$ 22	$ 44	$ 44

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NOTES PAYABLE (Schedule of Long-term Debt Instruments) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Total notes payable principal outstanding	$ 253,090	$ 282,605
Discount on note payable, net	(2,600)	(2,644)
Deferred financing costs, net	(589)	(815)
Total notes payable, net	249,901	279,146
Mortgages | Legacy at Valley Ranch Mortgage Loan
Debt Instrument [Line Items]
Total notes payable principal outstanding	$ 30,647	30,958
Contractual Interest Rate	3.93%
Maturity Date	Apr. 01, 2019
Mortgages | Poplar Creek Mortgage Loan
Debt Instrument [Line Items]
Total notes payable principal outstanding	$ 19,220	19,414
Contractual Interest Rate	4.00%
Maturity Date	Mar. 01, 2019
Mortgages | The Residence at Waterstone Mortgage Loan
Debt Instrument [Line Items]
Total notes payable principal outstanding	$ 45,187	45,653
Contractual Interest Rate	3.79%
Maturity Date	May 01, 2019
Mortgages | Legacy Crescent Park Mortgage Loan
Debt Instrument [Line Items]
Total notes payable principal outstanding	$ 13,406	13,560
Contractual Interest Rate	3.47%
Maturity Date	Jun. 01, 2019
Mortgages | Legacy at Martin’s Point Mortgage Loan
Debt Instrument [Line Items]
Total notes payable principal outstanding	$ 21,625	21,866
Contractual Interest Rate	3.33%
Maturity Date	Jun. 01, 2019
Mortgages | Wesley Village Mortgage Loan
Debt Instrument [Line Items]
Total notes payable principal outstanding	$ 0	26,862
Mortgages | Watertower Mortgage Loan
Debt Instrument [Line Items]
Total notes payable principal outstanding	$ 23,647	23,943
Contractual Interest Rate	2.46%
Maturity Date	Feb. 10, 2018
Mortgages | Crystal Park Mortgage Loan
Debt Instrument [Line Items]
Total notes payable principal outstanding	$ 26,656	27,013
Contractual Interest Rate	2.50%
Maturity Date	Jun. 01, 2018
Mortgages | Millennium Mortgage Loan
Debt Instrument [Line Items]
Total notes payable principal outstanding	$ 19,934	20,190
Contractual Interest Rate	2.74%
Maturity Date	Jul. 01, 2018
Mortgages | Legacy Grand at Concord Mortgage Loan
Debt Instrument [Line Items]
Total notes payable principal outstanding	$ 22,237	22,392
Contractual Interest Rate	4.05%
Maturity Date	Dec. 01, 2050
Mortgages | Lofts at the Highlands Mortgage Loan
Debt Instrument [Line Items]
Total notes payable principal outstanding	$ 30,531	$ 30,754
Contractual Interest Rate	3.40%
Maturity Date	Aug. 01, 2052

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NOTES PAYABLE (Schedule of Maturities of Long-Term Debt) (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Notes Payable [Abstract]
July 1, 2017 through December 31, 2017	$ 2,681
2018	72,958
2019	126,682
2020	852
2021	884
Thereafter	49,033
Notes payable	$ 253,090	$ 282,605

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FAIR VALUE DISCLOSURES (Details) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notes payable, Face Value	$ 253,090,000	$ 282,605,000
Carrying Amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notes payable, Value	249,901,000	279,146,000
Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notes payable, Value	$ 254,486,000	$ 279,258,000

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RELATED PARTY TRANSACTIONS (Narrative) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Jul. 31, 2013	Mar. 31, 2017	Dec. 31, 2016	Mar. 05, 2014	Aug. 14, 2013
Related Party Transaction [Line Items]
Due to affiliates	$ 148,000		$ 148,000				$ 157,000
Asset management fees to affiliate	0	$ 44,000	$ 234,000	$ 238,000	$ 1,500,000
Non‑compounded return on net invested capital								8.00%
LPI Inc.
Related Party Transaction [Line Items]
Initial term of management agreements			1 year
Period of termination notice			30 days
Period of termination notice 2			60 days
Period of termination notice 3			90 days
Period of material default			30 days
LPI Inc. | Watertower Apartments and Lofts at the Highlands
Related Party Transaction [Line Items]
Period of monetary default			10 days
LPI Inc. | Legacy Grand at Concord
Related Party Transaction [Line Items]
Period of monetary default			10 days
LPI Inc. | Millennium Apartment Homes
Related Party Transaction [Line Items]
Period of monetary default			10 days
LPI Inc. | Legacy Crescent Park
Related Party Transaction [Line Items]
Period of monetary default			10 days
Option One
Related Party Transaction [Line Items]
Acquisition advisory fee, percent						1.00%
Monthly asset management fee, percent of acquisition expense									0.083%
Option Two
Related Party Transaction [Line Items]
Acquisition advisory fee, percent						2.00%
Monthly asset management fee, percent of acquisition expense									0.166%
Asset Management Fees
Related Party Transaction [Line Items]
Due to affiliates	200,000	$ 200,000	$ 200,000	200,000
Incurred expenses			1,400,000	1,400,000
Deferred fees			1,200,000	$ 1,200,000
Asset Management Fees | August 2013 through December 2016
Related Party Transaction [Line Items]
Due to affiliates	8,000,000		8,000,000
KBS Capital Advisors LLC
Related Party Transaction [Line Items]
Due to affiliates	$ 61,000		61,000
KBS Capital Advisors LLC | Property Insurance Rebate
Related Party Transaction [Line Items]
Incurred			$ 27,000

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RELATED PARTY TRANSACTIONS (Schedule of Related Party Costs) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Related Party Transaction [Line Items]
Payable as of	$ 148		$ 148		$ 157
Administrative fees	36	$ 33	72	$ 75
Asset management fees
Related Party Transaction [Line Items]
Expenses			1,400	1,400
Payable as of	200	200	200	200
Advisor and Dealer Manager
Related Party Transaction [Line Items]
Incurred	1,433	1,596	3,719	3,211
Payable as of	148		148		157
Advisor and Dealer Manager | Asset management fees
Related Party Transaction [Line Items]
Expenses	0	44	234	238
Payable as of	0		0		0
Advisor and Dealer Manager | Reimbursable operating expenses
Related Party Transaction [Line Items]
Expenses	55	54	124	120
Payable as of	12		12		15
Advisor and Dealer Manager | Property management fees and expenses
Related Party Transaction [Line Items]
Expenses	1,378	1,498	2,990	2,853
Payable as of	136		136		142
Advisor and Dealer Manager | Disposition fees
Related Party Transaction [Line Items]
Expenses	0	$ 0	371	$ 0
Payable as of	$ 0		$ 0		$ 0

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RELATED PARTY TRANSACTIONS (Property Management Agreements) (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2017 USD ($)
Watertower Apartments
Related Party Transaction [Line Items]
Management Fee Percentage	2.75%
Crystal Park at Waterford
Related Party Transaction [Line Items]
Management Fee Percentage	3.00%
The Residence at Waterstone
Related Party Transaction [Line Items]
Management Fee Percentage	3.00%
Lofts at the Highlands
Related Party Transaction [Line Items]
Management Fee Percentage	3.00%
Legacy at Martin’s Point
Related Party Transaction [Line Items]
Management Fee Percentage	3.00%
Poplar Creek
Related Party Transaction [Line Items]
Management Fee Percentage	3.00%
Wesley Village
Related Party Transaction [Line Items]
Management Fee Percentage	3.00%
Legacy Grand at Concord
Related Party Transaction [Line Items]
Management Fee Percentage	3.00%
Millennium Apartment Homes
Related Party Transaction [Line Items]
Management Fee Percentage	3.00%
Property management fee, amount	$ 4
Legacy Crescent Park
Related Party Transaction [Line Items]
Management Fee Percentage	3.00%
Property management fee, amount	$ 4
Legacy at Valley Ranch
Related Party Transaction [Line Items]
Management Fee Percentage	3.00%

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SUBSEQUENT EVENTS (Details) - USD ($) $ / shares in Units, $ in Thousands			1 Months Ended				3 Months Ended		6 Months Ended		12 Months Ended
	Aug. 01, 2017	Jul. 05, 2017	Sep. 30, 2017	Aug. 31, 2017	Jul. 31, 2017	Jun. 30, 2017	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Subsequent Event [Line Items]
Distributions declared									$ 26,153		$ 13,430
Distributions declared per common share (in dollars per share)							$ 1.091	$ 0.162	$ 1.251	$ 0.322
Dividend Paid
Subsequent Event [Line Items]
Distributions declared per common share (in dollars per share)						$ 0.04460959
Dividend Declared | Forecast
Subsequent Event [Line Items]
Distributions declared per common share (in dollars per share)			$ 0.04460959	$ 0.04609658
Subsequent Event | Dividend Paid
Subsequent Event [Line Items]
Distributions declared	$ 1,000	$ 900
Distributions declared per common share (in dollars per share)					$ 0.04609658