þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Maryland | 80-0854717 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
1845 Walnut Street, 18th Floor, Philadelphia, PA 19103 | ||
(Address of principal executive offices) (Zip code) | ||
(215) 231-7050 | ||
(Registrant's telephone number, including area code) | ||
Securities registered pursuant to Section 12(b) of the Act: | ||
Title of each class | Name of exchange on which registered | |
None | None | |
Securities registered pursuant to Section 12(g) of the Act: | ||
Common Stock, par value $0.1 per share |
Large accelerated filer | o | Accelerated filer | o | |
Non-accelerated filer | o | (Do not check if a smaller reporting company) | Smaller reporting company | þ |
Emerging growth company | þ |
PAGE | ||
PART I | ||
Item 1. | ||
Item 1A. | ||
Item 1B. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II | ||
Item 5. | ||
Item 6 | ||
Item 7. | ||
Item 7A. | ||
Item 8. | ||
Item 9. | ||
Item 9A. | ||
Item 9B. | ||
PART III | ||
Item 10. | ||
Item 11. | ||
Item 12. | ||
Item 13. | ||
Item 14. | ||
PART IV. | ||
Item 15. | ||
ITEM 1. | BUSINESS |
• | where we may acquire real estate investments in the United States; |
• | the percentage of our proceeds that may be invested in properties as compared with the percentage of our portfolio that we may invest in real estate-related debt investments or mortgage loans, each of which may be leveraged and will have differing risks and profit potential; or |
• | the percentage of our portfolio that may be invested in any one real estate investment (the greater the percentage of our subscription proceeds invested in one asset, the greater the potential adverse effect on us if that asset is unprofitable). |
• | the continuation, renewal or enforcement of our agreements with our Advisor and its affiliates, including the advisory agreement and the management agreement; |
• | sales of properties and other investments, which may entitle our Advisor to disposition fees and the possible issuance to our Advisor of shares of our common stock through the conversion of our convertible stock; |
• | acquisitions of properties and investments in loans, which entitle our Advisor to acquisition and asset management fees, and, in the case of acquisitions or investments from other Resource Real Estate-sponsored programs, might entitle affiliates of our Advisor to disposition fees in connection with its services for the seller; |
• | borrowings to acquire properties and other investments, which borrowings will increase the acquisition and asset management fees payable to our Advisor; |
• | whether and when we seek to list our common stock on a national securities exchange, which listing could entitle our Advisor to the issuance of shares of our common stock through the conversion of our convertible stock; and |
• | whether and when we seek to sell the company or its assets, which sale could entitle our Advisor to disposition fees and to the issuance of shares of our common stock through the conversion of our convertible stock and terminate the asset management fee. |
▪ | (1) the value of the company as of the date of the event triggering the conversion plus the total distributions paid to our stockholders through such date on the then outstanding shares of our common stock exceeds |
▪ | (2) the sum of the aggregate issue price of those outstanding shares plus a 7% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, divided by |
• | For those shares held by the redeeming stockholder for at least two years, 95.0% of our most recent applicable NAV 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 applicable NAV 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 applicable NAV per share as of the applicable redemption date. |
• | stagger our board of directors into three classes; |
• | require a two-thirds stockholder vote for removal of directors; |
• | provide that only the board can fix the size of the board; |
• | provide that all vacancies on the board, however created, may be filled only by the affirmative vote of a majority of the remaining directors in office; and |
• | require that special stockholder meetings may only be called by holders of a majority of the voting shares entitled to be cast at the meeting. |
• | downturns in national, regional and local economic conditions; |
• | competition; |
• | adverse local conditions, such as oversupply or reduction in demand and changes in real estate zoning laws that may reduce the desirability of real estate in an area; |
• | vacancies, changes in market rental rates and the need to periodically repair, renovate and re-let space; |
• | changes in the supply of or the demand for similar or competing properties in an area; |
• | changes in interest rates and the availability of permanent mortgage financing, which may render the sale of a property or loan difficult or unattractive; |
• | changes in governmental regulations, including those involving tax, real estate usage, environmental and zoning laws; and |
• | periods of high interest rates and tight money supply. |
• | increased staffing levels; |
• | enhanced technology applications; and |
• | increased marketing efforts. |
• | real estate taxes; |
• | insurance costs; and |
• | maintenance costs. |
• | greater demand for the acquisition of real estate and real estate-related assets, which results in increased prices we must pay for our real estate and real estate-related assets; |
• | delayed investment of our capital; |
• | decreased availability of financing to us; or |
• | reductions in the size or desirability of the potential tenant base for one or more properties that we lease. |
• | that our co‑venturer, co‑tenant or partner in an investment could become insolvent or bankrupt; |
• | that such co‑venturer, co‑tenant or partner may at any time have economic or business interests or goals that are or that become inconsistent with our business interests or goals; |
• | that such co‑venturer, co‑tenant or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives; or |
• | that such co-venturer, co-tenant or partner may grant us a right of first refusal or buy/sell right to buy out such co-venturer or partner, and that we may be unable to finance such a buy-out if it becomes exercisable or we are required to purchase such interest at a time when it would not otherwise be in our best interest to do so. If our interest is subject to a buy/sell right, we may not have sufficient cash, available borrowing capacity or other capital resources to allow us to elect to purchase an interest of a co-venturer subject to the buy/sell right, in which case we may be forced to sell our interest as the result of the exercise of such right when we would otherwise prefer to keep our interest. |
• | make it more difficult for us to find residents to lease units in our apartment communities; |
• | force us to lower our rental prices in order to lease units in our apartment communities; or |
• | substantially reduce our revenues and cash available for distribution. |
• | funds may be expended and management’s time devoted to projects that may not be completed due to a variety of factors, including without limitation, the inability to obtain necessary governmental approvals; |
• | construction costs of a renovation or repositioning project may exceed original estimates, possibly making the project economically unfeasible or the economic return on a repositioned property less than anticipated; |
• | increased material and labor costs, problems with subcontractors, or other costs due to errors and omissions which occur in the renovation process; |
• | projects may be delayed due to required governmental approvals, adverse weather conditions, labor shortages or other unforeseen complications; |
• | occupancy rates and rents at a repositioned property may be less than anticipated; and |
• | the operating expenses at a repositioned property may be higher than anticipated. |
• | In order to continue to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain for this purpose) to you. |
• | To the extent that we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on the undistributed income. |
• | We will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. |
• | If we have net income from the sale of foreclosure property that we hold primarily for sale to customers in the ordinary course of business or other non-qualifying income from foreclosure property, we must pay a tax on that income at the highest corporate income tax rate. |
• | If we sell an asset, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business and do not qualify for a safe harbor in the Internal Revenue Code, our gain would be subject to the 100% “prohibited transaction” tax. |
• | Any domestic taxable REIT subsidiary, or TRS, of ours will be subject to federal corporate income tax on its income, and on any non-arm’s-length transactions between us and any TRS, for instance, excessive rents charged to a TRS could be subject to a 100% tax. |
• | We may be subject to tax on income from certain activities conducted as a result of taking title to collateral. |
• | We may be subject to state or local income, property and transfer taxes, such as mortgage recording taxes. |
• | Reduces the corporate income tax rate from 35% to 21% (including with respect to our taxable REIT subsidiary); |
• | Reduces the rate of U.S. federal withholding tax on distributions made to non-U.S. stockholders by a REIT that are attributable to gains from the sale or exchange of U.S. real property interests from 35% to 21%; |
• | Allows an immediate 100% deduction of the cost of certain capital asset investments (generally excluding real estate assets), subject to a phase-down of the deduction percentage over time; |
• | Changes the recovery periods for certain real property and building improvements (for example, to 15 years for qualified improvement property under the modified accelerated cost recovery system, and to 30 years (previously 40 years) for residential real property and 20 years (previously 40 years) for qualified improvement property under the alternative depreciation system); |
• | Restricts the deductibility of interest expense by businesses (generally, to 30% of the business’ adjusted taxable income) except, among others, real property businesses electing out of such restriction; we have not yet determined whether we and/or our subsidiaries can and/or will make such an election; |
• | Requires the use of the less favorable alternative depreciation system to depreciate real property in the event a real property business elects to avoid the interest deduction restriction above; |
• | Restricts the benefits of like-kind exchanges that defer capital gains for tax purposes to exchanges of real property; |
• | Permanently repeals the “technical termination” rule for partnerships, meaning sales or exchanges of the interests in a partnership will be less likely to, among other things, terminate the taxable year of, and restart the depreciable lives of assets held by, such partnership for tax purposes; |
• | Requires accrual method taxpayers to take certain amounts in income no later than the taxable year in which such income is taken into account as revenue in an applicable financial statement prepared under GAAP, which, with respect to certain leases, could accelerate the inclusion of rental income; |
• | Eliminates the federal corporate alternative minimum tax; |
• | Reduces the highest marginal income tax rate for individuals to 37% from 39.6% (excluding, in each case, the 3.8% Medicare tax on net investment income); |
• | Generally allows a deduction for individuals equal to 20% of certain income from pass-through entities, including ordinary dividends distributed by a REIT (excluding capital gain dividends and qualified dividend income), generally resulting in a maximum effective federal income tax rate applicable to such dividends of 29.6% compared to 37% (excluding, in each case, the 3.8% Medicare tax on net investment income); and |
• | Limits certain deductions for individuals, including deductions for state and local income taxes, and eliminates deductions for miscellaneous itemized deductions (including certain investment expenses). |
• | the investment is consistent with their fiduciary and other obligations under ERISA and the Internal Revenue Code; |
• | the investment is made in accordance with the documents and instruments governing the plan or IRA, including the plan’s or account’s investment policy; |
• | the investment satisfies the prudence and diversification requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA and other applicable provisions of ERISA and the Internal Revenue Code; |
• | the investment in our shares, for which no public market currently exists, is consistent with the liquidity needs of the plan or IRA; |
• | the investment will not produce an unacceptable amount of “unrelated business taxable income” for the plan or IRA; |
• | our stockholders will be able to comply with the requirements under ERISA and the Internal Revenue Code to value the assets of the plan or IRA annually; and |
• | the investment will not constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code. |
ITEM 1B. | UNRESOLVED STAFF COMMENTS |
ITEM 2. | PROPERTIES |
Multifamily Community Name | City and State | Number of Units | Date of Acquisition | Purchase Price (1) (in thousands) | Year of Construction | Average Unit Size (Sq. Ft.) | Physical Occupancy Rate (2) | Effective Monthly Revenue per Unit (3) | Mortgage Debt Secured by Property (in thousands) | ||||||||||||||||||
Adair off Addison | Dallas, TX | 152 | 6/4/2014 | $ | 9,500 | 1980 | 856 | 88.8 | % | $ | 1,166 | $ | 7,650 | ||||||||||||||
Overton Trails Apartment Homes | Fort Worth, TX | 360 | 12/19/2014 | $ | 47,000 | 1999 | 952 | 91.4 | % | $ | 1,596 | $ | 30,485 | ||||||||||||||
Uptown Buckhead | Atlanta, GA | 216 | 3/30/2015 | $ | 32,500 | 1989 | 739 | 88.4 | % | $ | 1,424 | $ | 20,200 | ||||||||||||||
Crosstown at Chapel Hill | Chapel Hill, NC | 411 | 5/19/2015 | $ | 46,750 | 1990/1996 | 1,005 | 86.1 | % | $ | 1,150 | $ | 32,000 | ||||||||||||||
The Brookwood | Homewood, AL | 274 | 8/21/2015 | $ | 30,050 | 1968/1972 | 1,051 | 92.0 | % | $ | 1,122 | $ | 21,342 | ||||||||||||||
Adair off Addison Apartment Homes | Dallas, TX | 200 | 8/27/2015 | $ | 21,250 | 1979 | 1,098 | 90.5 | % | $ | 1,290 | $ | 17,850 | ||||||||||||||
1000 Spalding Crossing | Atlanta, GA | 252 | 9/24/2015 | $ | 41,000 | 1995 | 989 | 94.0 | % | $ | 1,406 | $ | 24,600 | ||||||||||||||
Montclair Terrace | Portland, OR | 188 | 10/29/2015 | $ | 32,750 | 1968 | 918 | 88.3 | % | $ | 1,385 | $ | 21,300 | ||||||||||||||
Grand Reserve | Naperville, IL | 319 | 12/18/2015 | $ | 66,700 | 1997 | 1,025 | 90.3 | % | $ | 1,776 | $ | 42,832 | ||||||||||||||
Verdant Apartment Homes | Boulder, CO | 216 | 12/18/2015 | $ | 65,200 | 1991 | 850 | 87.0 | % | $ | 2,006 | $ | 37,300 | ||||||||||||||
Arcadia Apartment Homes | Centennial, CO | 300 | 1/22/2016 | $ | 60,250 | 1984 | 977 | 86.7 | % | $ | 1,662 | $ | 40,200 | ||||||||||||||
Riverlodge | Austin, TX | 498 | 3/23/2016 | $ | 57,000 | 2001 | 993 | 91.4 | % | $ | 1,227 | $ | 28,715 | ||||||||||||||
Breckenridge | Portland, OR | 357 | 5/16/2016 | $ | 81,500 | 1985 | 763 | 82.1 | % | $ | 1,515 | $ | 52,975 | ||||||||||||||
Santa Rosa | Irving, TX | 476 | 6/28/2016 | $ | 70,000 | 1991 | 966 | 92.6 | % | $ | 1,353 | $ | 45,700 | ||||||||||||||
Windbrooke | Buffalo Grove, IL | 236 | 12/22/2016 | $ | 48,250 | 1986 | 903 | 94.1 | % | $ | 1,720 | $ | 38,320 | ||||||||||||||
The Woods of Burnsville | Burnsville, MN | 400 | 12/23/2016 | $ | 51,000 | 1984 | 953 | 88.5 | % | $ | 1,246 | $ | 38,250 | ||||||||||||||
Indigo Creek | Glendale, AZ | 408 | 4/4/2017 | $ | 55,200 | 1998 | 983 | 92.2 | % | $ | 1,134 | $ | 40,789 | ||||||||||||||
Martin's Point | Lombard, IL | 256 | 10/31/2017 | $ | 38,250 | 1989 | 789 | 96.1 | % | $ | 960 | $ | 29,990 |
(1) | Purchase price excludes closing costs and acquisition expenses. |
(2) | Physical occupancy rate is defined as the units occupied as of December 31, 2017 divided by the total number of residential units |
(3) | Effective monthly rental revenue per unit has been calculated based on the leases in effect as of December 31, 2017, adjusted for any tenant concessions, such as free rent. Effective monthly rental revenue per unit only includes base rents for occupied units, including affordable housing payments and subsidies. It does not include other charges for storage, parking, pets, cleaning, clubhouse or other miscellaneous amounts. |
ITEM 3. | LEGAL PROCEEDINGS |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Net Asset Value as of December 31, 2017 | Net Asset Value as of December 31, 2017 (per share) | |||||||
Investments | $ | 1,054,100 | $ | 17.34 | ||||
Cash | 76,895 | 1.27 | ||||||
Other Assets | 1,418 | 0.02 | ||||||
Mortgage Notes Payable and Credit Facilities | (564,556 | ) | (9.29 | ) | ||||
Other Liabilities | (15,922 | ) | (0.26 | ) | ||||
Net asset value | $ | 551,935 | $ | 9.08 |
December 31, 2017 | December 31, 2016 | Change in | ||||||||||
Net Asset Value per Share | Net Asset Value per Share (1) | Estimated Value per Share | ||||||||||
Investments (2) | $ | 17.34 | $ | 15.20 | $ | 2.14 | ||||||
Cash (2) | 1.27 | 1.88 | (0.61 | ) | ||||||||
Other Assets (2) | 0.02 | 0.04 | (0.02 | ) | ||||||||
Mortgage Notes Payable and Credit Facilities (2) | (9.29 | ) | (7.75 | ) | (1.54 | ) | ||||||
Other Liabilities | (0.26 | ) | (0.27 | ) | 0.01 | |||||||
$ | 9.08 | $ | 9.10 | $ | (0.02 | ) |
Range in Values | Weighted Average Basis | ||||
Terminal Capitalization Rate | 4.75% to 5.75% | 5.17 | % | ||
Discount Rate | 6.00% to 8.25% | 6.78 | % |
Change in Estimated Value per Share | ||||||||||||||||
Increase of 25 Basis Points | Decrease of 25 Basis Points | Increase of 5% | Decrease of 5% | |||||||||||||
Overall Capitalization Rate | N/A | N/A | N/A | N/A | ||||||||||||
Terminal Capitalization Rate | $ | 8.42 | $ | 9.82 | $ | 8.29 | $ | 9.96 | ||||||||
Discount Rate | $ | 9.01 | $ | 9.15 | $ | 9.00 | $ | 9.18 |
• | a stockholder would be able to resell his or her shares at the estimated value per share; |
• | a stockholder would ultimately realize distributions per share equal to our estimated value per share upon liquidation of our assets and settlement of its liabilities or a sale of the Company; |
• | our shares of common stock would trade at the estimated value per share on a national securities exchange; |
• | a third party would offer the estimated value per share in an arm’s-length transaction to purchase all or substantially all of our shares of common stock; |
• | another independent third-party appraiser or third-party valuation firm would agree with the our estimated value per share; or |
• | the methodology used to calculate our estimated value per share would be acceptable to FINRA or for compliance with ERISA reporting requirements. |
• | For those shares held by the redeeming stockholder for at least one year, 92.5% of the price paid to acquire the shares from us; |
• | For those shares held by the redeeming stockholder for at least two years, 95.0% of the price paid to acquire the shares from us; |
• | For those shares held by the redeeming stockholder for at least three years, 97.5% of the price paid to acquire the shares from us; and |
• | For those shares held by the redeeming stockholder for at least four years, 100% of the price paid to acquire the shares from us. |
• | For those shares held by the redeeming stockholder for at least one year, 92.5% of our estimated value per share, |
• | For those shares held by the redeeming stockholder for at least two years, 95.0% of our estimated share value; |
• | For those shares held by the redeeming stockholder for at least three years, 97.5% of our estimated share value; and |
• | For those shares held by the redeeming stockholder for at least four years, 100% of our estimated share value. |
Period | Total Number of Shares Redeemed (1) | Average Price Paid per Share | Cumulative Number of Shares Purchased as Part of a Publicly Announced Plan or Program (2) | Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program | ||||
October 2017 | — | $— | — | (2) | ||||
November 2017 | — | $— | — | (2) | ||||
December 2017 | 128 | $8.68 | 773 | (2) |
(1) | All purchases of equity securities by the Company in the three months ended December 31, 2017 were made pursuant to our share redemption program. |
(2) | We currently limit the dollar value and number of shares that may be repurchased under the program, as discussed above. |
Distributions Paid | Distributions Declared | Sources of Distributions Paid | ||||||||||||||||||||||||||||||
2017 | Cash | Distributions Reinvested (DRIP) | Total | Cash Provided By (Used In ) Operating Activities - Quarter to Date | Cash Provided By (Used In ) Operating Activities - Year to Date | Total | Per Share | Amount Paid from Operating Activities/Percent of Total Distributions Paid | Amount Paid from Debt Financing/Percent of Total Distributions Paid | |||||||||||||||||||||||
First Quarter | $ | 3,685 | $ | 5,090 | $ | 8,775 | $ | (1,466 | ) | $ | (1,466 | ) | 8,954 | $ | 0.149589 | -/- | $8,954/100% | |||||||||||||||
Second Quarter | 3,765 | 5,183 | 8,948 | (426 | ) | (1,892 | ) | 8,995 | $ | 0.149589 | -/- | $8,995/100% | ||||||||||||||||||||
Third Quarter | 3,786 | 5,209 | 8,995 | 1,200 | (692 | ) | 9,062 | $ | 0.149589 | $1,200/13% | $7,862/87% | |||||||||||||||||||||
Fourth Quarter | 3,859 | 5,203 | 9,062 | 2,546 | 1,854 | 9,112 | $ | 0.149589 | $2,546/28% | $6,566/72% | ||||||||||||||||||||||
Total | $ | 15,095 | $ | 20,685 | $ | 35,780 | $ | 1,854 | $ | 36,123 |
ITEM 6. | SELECTED FINANCIAL DATA |
ITEM 7. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION |
Years Ended | |||||||
December 31, | |||||||
2017 | 2016 | ||||||
Revenues: | |||||||
Rental income | $ | 77,240 | $ | 52,928 | |||
Total revenues | 77,240 | 52,928 | |||||
Expenses: | |||||||
Rental operating - expenses | 13,580 | 11,911 | |||||
Rental operating - payroll | 7,645 | 6,220 | |||||
Rental operating - real estate taxes | 10,412 | 7,336 | |||||
Subtotal - Rental operating expenses | 31,637 | 25,467 | |||||
Acquisition costs | 2,199 | 9,079 | |||||
Management fees | 12,801 | 9,235 | |||||
General and administrative | 8,700 | 9,272 | |||||
Loss on disposal of assets | 963 | 2,516 | |||||
Depreciation and amortization expense | 39,135 | 30,964 | |||||
Total expenses | 95,435 | 86,533 | |||||
Loss before other income (expense) | (18,195 | ) | (33,605 | ) | |||
Other income (expense): | |||||||
Interest income | 120 | 209 | |||||
Insurance proceeds in excess of cost basis | 148 | 185 | |||||
Interest expense | (19,764 | ) | (10,950 | ) | |||
Net loss | $ | (37,691 | ) | $ | (44,161 | ) |
For the year ended December 31, 2017 | For the year ended December 31, 2016 | |||||||||||||||||||||||||||||||
Properties owned both periods | Properties purchased during either period | Company level | Total | Properties owned both periods | Properties purchased during either period | Company level | Total | |||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||
Rental income | $ | 39,034 | $ | 38,206 | $ | — | $ | 77,240 | $ | 36,313 | $ | 16,615 | $ | — | $ | 52,928 | ||||||||||||||||
Total revenues | 39,034 | 38,206 | — | 77,240 | 36,313 | 16,615 | — | 52,928 | ||||||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||||||||
Rental operating - expenses | 6,476 | 6,865 | 239 | 13,580 | 7,994 | 3,886 | 31 | 11,911 | ||||||||||||||||||||||||
Rental operating - payroll | 3,942 | 3,621 | 82 | 7,645 | 4,489 | 1,731 | — | 6,220 | ||||||||||||||||||||||||
Rental operating - real estate taxes | 5,124 | 5,176 | 112 | 10,412 | 5,301 | 2,147 | (112 | ) | 7,336 | |||||||||||||||||||||||
Subtotal - Rental operating expenses | 15,542 | 15,662 | 433 | 31,637 | 17,784 | 7,764 | (81 | ) | 25,467 | |||||||||||||||||||||||
Acquisition costs | 6 | 272 | 1,921 | 2,199 | (149 | ) | 816 | 8,412 | 9,079 | |||||||||||||||||||||||
Management fees | 1,738 | 1,700 | 9,363 | 12,801 | 1,624 | 719 | 6,892 | 9,235 | ||||||||||||||||||||||||
General and administrative | 1,461 | 1,416 | 5,823 | 8,700 | 1,803 | 986 | 6,483 | 9,272 | ||||||||||||||||||||||||
Loss on disposal of assets | 654 | 309 | — | 963 | 593 | 1,923 | — | 2,516 | ||||||||||||||||||||||||
Depreciation and amortization expense | 18,540 | 20,595 | — | 39,135 | 19,481 | 11,483 | — | 30,964 | ||||||||||||||||||||||||
Total expenses | 37,941 | 39,954 | 17,540 | 95,435 | 41,136 | 23,691 | 21,706 | 86,533 | ||||||||||||||||||||||||
Income (loss) before other income (expense) | 1,093 | (1,748 | ) | (17,540 | ) | (18,195 | ) | (4,823 | ) | (7,076 | ) | (21,706 | ) | (33,605 | ) | |||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||||
Interest income | 44 | 59 | 17 | 120 | 82 | 53 | 74 | 209 | ||||||||||||||||||||||||
Insurance proceeds in excess of cost basis | 143 | 5 | — | 148 | 185 | — | — | 185 | ||||||||||||||||||||||||
Interest expense | (18,655 | ) | (1,109 | ) | — | (19,764 | ) | (7,534 | ) | (3,416 | ) | — | (10,950 | ) | ||||||||||||||||||
Net loss | $ | (17,375 | ) | $ | (2,793 | ) | $ | (17,523 | ) | $ | (37,691 | ) | $ | (12,090 | ) | $ | (10,439 | ) | $ | (21,632 | ) | $ | (44,161 | ) |
Change in Effective | ||||||||||
Monthly Revenue | ||||||||||
Multifamily Community | Rental Increase (in thousands) | Change in Occupancy % | per Unit (in dollars) | |||||||
Adair off Addison | $ | 64 | (5.3 | )% | 60 | |||||
Overton Trails Apartment Homes | 696 | 4.2 | % | 37 | ||||||
Uptown Buckhead | 305 | (4.2 | )% | 129 | ||||||
Crosstown at Chapel Hill | 603 | (4.4 | )% | 110 | ||||||
The Brookwood | 19 | 1.5 | % | (32 | ) | |||||
Adair off Addison Apartment Homes | 217 | 2.0 | % | 24 | ||||||
Montclair | 335 | 5.7 | % | 20 | ||||||
1000 Spalding Crossing | 18 | (1.4 | )% | 17 | ||||||
Grand Reserve | 324 | (0.3 | )% | 56 | ||||||
Verdant Apartment Homes | 141 | (2.3 | )% | 83 | ||||||
Arcadia Apartment Homes | 482 | (2.0 | )% | 135 | ||||||
Riverlodge | 1,648 | 2.0 | % | (15 | ) | |||||
Breckenridge | 1,965 | (6.5 | )% | 76 | ||||||
The Palmer at Las Colinas | 3,441 | (0.2 | )% | 29 | ||||||
Windbrooke Crossing | 4,478 | 3.4 | % | 135 | ||||||
Woods of Burnsville | 5,236 | (7.0 | )% | 214 | ||||||
Properties acquired in 2017 | 4,340 | N/A | N/A | |||||||
$ | 24,312 |
Properties owned during both periods | All other properties | Total | |||||||||
Depreciation | $ | 11,543 | $ | 1,659 | $ | 13,202 | |||||
Amortization of intangibles | (6,406 | ) | 1,375 | (5,031 | ) | ||||||
$ | 5,137 | $ | 3,034 | $ | 8,171 |
Capital deployed during the year ended | Remaining capital budgeted | |||||||
December 31, 2017 | ||||||||
Overton Trails Apartment Homes | $ | 1,550 | $ | 829 | ||||
Uptown Buckhead | 759 | 140 | ||||||
Crosstown at Chapel Hill | 1,787 | 2,335 | ||||||
The Brookwood | 1,732 | 4,263 | ||||||
1000 Spalding Crossing | 1,682 | 1,019 | ||||||
Grand Reserve | 1,810 | 2,085 | ||||||
Montclair | 998 | 3,776 | ||||||
Verdant Apartment Homes | 1,444 | 1,154 | ||||||
Arcadia Apartment Homes | 1,764 | 1,871 | ||||||
Riverlodge | 3,582 | 5,353 | ||||||
Breckenridge | 2,984 | 4,827 | ||||||
Santa Rosa | 4,211 | 6,048 | ||||||
All other properties | 2,653 | 8,940 | ||||||
$ | 26,956 | $ | 42,640 |
Shares Issued | Gross Proceeds | ||||||
Shares issued through initial public offering | 55,791,297 | $ | 556,197 | ||||
Shares issued through stock distributions | 246,365 | — | |||||
Shares issued through distribution reinvestment plan | 5,675,748 | 49,932 | |||||
Advisor's initial investment, net of 5,000 share conversion | 15,000 | 150 | |||||
Shares redeemed and retired | (946,391 | ) | (8,235 | ) | |||
Total shares outstanding | 60,782,019 | $ | 598,044 |
December 31, 2017 | December 31, 2016 | |||||||||||||||||||||||||||||||
Collateral | Outstanding borrowings | Premium, net | Deferred Financing Costs, net | Carrying Value | Outstanding borrowings | Premium, net | Deferred Financing Costs, net | Carrying Value | ||||||||||||||||||||||||
Overton Trails Apartment Homes | $ | 30,485 | $ | — | $ | (291 | ) | $ | 30,194 | $ | 31,075 | $ | — | $ | (344 | ) | $ | 30,731 | ||||||||||||||
Uptown Buckhead | 20,039 | — | (248 | ) | 19,791 | 20,200 | — | (284 | ) | 19,916 | ||||||||||||||||||||||
Crosstown at Chapel Hill | 31,826 | — | (265 | ) | 31,561 | 32,000 | — | (373 | ) | 31,627 | ||||||||||||||||||||||
The Brookwood - Key Bank | 17,871 | 399 | (188 | ) | 18,082 | 18,247 | 508 | (239 | ) | 18,516 | ||||||||||||||||||||||
The Brookwood - Capital One | 2,657 | 30 | (32 | ) | 2,655 | 2,699 | 39 | (41 | ) | 2,697 | ||||||||||||||||||||||
Adair off Addison and Adair off Addison Apartment Homes | 25,091 | — | (347 | ) | 24,744 | 25,500 | — | (464 | ) | 25,036 | ||||||||||||||||||||||
1000 Spalding Crossing | 24,600 | — | (230 | ) | 24,370 | 24,600 | — | (289 | ) | 24,311 | ||||||||||||||||||||||
Riverlodge | 27,634 | — | (315 | ) | 27,319 | 28,292 | — | (393 | ) | 27,899 | ||||||||||||||||||||||
Verdant Apartment Homes | 37,300 | — | (289 | ) | 37,011 | 37,300 | — | (345 | ) | 36,955 | ||||||||||||||||||||||
Arcadia Apartment Homes | 40,200 | — | (318 | ) | 39,882 | 40,200 | — | (379 | ) | 39,821 | ||||||||||||||||||||||
Grand Reserve | 41,520 | — | (372 | ) | 41,148 | 42,395 | — | (446 | ) | 41,949 | ||||||||||||||||||||||
Montclair Terrace | 20,674 | — | (290 | ) | 20,384 | 21,083 | — | (345 | ) | 20,738 | ||||||||||||||||||||||
Breckenridge | 52,975 | — | (588 | ) | 52,387 | 52,975 | — | (697 | ) | 52,278 | ||||||||||||||||||||||
The Palmer at Las Colinas | 45,700 | — | (574 | ) | 45,126 | 45,700 | — | (643 | ) | 45,057 | ||||||||||||||||||||||
Windbrooke Crossing | 38,320 | — | (411 | ) | 37,909 | 38,320 | — | (490 | ) | 37,830 | ||||||||||||||||||||||
Woods of Burnsville | 38,250 | — | (534 | ) | 37,716 | — | — | — | — | |||||||||||||||||||||||
Indigo Creek | 40,789 | — | (471 | ) | 40,318 | — | — | — | — | |||||||||||||||||||||||
Martin's Point | 29,990 | — | (423 | ) | 29,567 | — | — | — | — | |||||||||||||||||||||||
$ | 565,921 | $ | 429 | $ | (6,186 | ) | $ | 560,164 | $ | 460,586 | $ | 547 | $ | (5,772 | ) | $ | 455,361 |
Maturity Date | Margin over LIBOR | Annual Interest Rate | Average Monthly Debt Service | Average Monthly Escrow | ||||||||||||||
Overton Trails Apartment Homes | 1/1/2025 | 1.91 | % | 3.47 | % | $ | 137 | $ | 117 | (1) (3) (5) | ||||||||
Uptown Buckhead | 7/1/2025 | 2.22 | % | 3.78 | % | $ | 92 | $ | 58 | (1) (3) (5) | ||||||||
Crosstown at Chapel Hill | 7/10/2020 | 1.70 | % | 3.26 | % | $ | 121 | $ | — | (1) (4) (5) | ||||||||
The Brookwood - Key Bank | 11/1/2021 | — | 4.73 | % | $ | 104 | $ | 48 | (2) (7) | |||||||||
The Brookwood - Capital One | 11/1/2021 | — | 5.40 | % | $ | 16 | $ | — | (2) (7) | |||||||||
Adair off Addison and Adair off Addison Apartment Homes | 1/1/2021 | 1.55 | % | 3.11 | % | $ | 104 | $ | — | (1) (3) (5) | ||||||||
1000 Spalding Crossing | 1/1/2022 | — | 3.88 | % | $ | 115 | $ | 47 | (2) (5) | |||||||||
Riverlodge | 5/1/2022 | — | 3.76 | % | $ | 144 | $ | 141 | (2) (7) | |||||||||
Verdant Apartment Homes | 5/1/2023 | — | 3.89 | % | $ | 161 | $ | 26 | (2) (5) | |||||||||
Arcadia Apartment Homes | 5/1/2023 | — | 3.89 | % | $ | 174 | $ | 19 | (2) (5) | |||||||||
Grand Reserve | 6/1/2023 | 2.57 | % | 4.13 | % | $ | 210 | $ | 133 | (1) (3) (6) | ||||||||
Montclair Terrace | 6/1/2023 | 2.45 | % | 4.01 | % | $ | 93 | $ | 26 | (1) (3) (7) | ||||||||
Breckenridge | 7/1/2023 | 2.36 | % | 3.92 | % | $ | 230 | $ | 56 | (1) (3) (5) | ||||||||
The Palmer at Las Colinas | 9/1/2026 | 2.11 | % | 3.67 | % | $ | 179 | $ | 146 | (1) (3) (5) | ||||||||
Windbrooke Crossing | 1/1/2024 | 2.69 | % | 4.25 | % | $ | 230 | $ | 71 | (1) (3) (5) | ||||||||
Woods of Burnsville | 2/1/2024 | 2.13 | % | 3.694 | % | $ | 198 | $ | 63 | (1) (3) (5) | ||||||||
Indigo Creek | 5/1/2024 | 1.93 | % | 3.494 | % | $ | 242 | $ | 51 | (1) (3) (5) | ||||||||
Martin's Point | 11/1/2024 | 1.86 | % | 3.424 | % | $ | 137 | $ | 76 | (1) (3) (5) |
(1) | Variable rate based on one-month LIBOR of 1.56425% (as of December 31, 2017) plus a fixed margin |
(2) | Fixed rate |
(3) | Variable rate hedged with interest rate cap cash flow hedge |
(4) | Fixed rate interest rate swap associated with the variable rate debt |
(5) | Monthly interest-only payment currently required |
(6) | Monthly fixed principal plus interest payment required |
(7) | Fixed monthly payment of principal and interest payment required |
Subsidiary | Apartment Complex | Number of Units | Property Location | |||
RRE Bear Creek Holdings, LLC, or Bear Creek | Adair off Addison | 152 | Dallas, TX | |||
RRE Oak Hill Holdings, LLC, or Oak Hill | Overton Trails Apartment Homes | 360 | Fort Worth, TX | |||
RRE Buckhead Holdings, LLC, or Buckhead | Uptown Buckhead | 216 | Atlanta, GA | |||
RRE Farrington Holdings, LLC, or Farrington | Crosstown at Chapel Hill | 411 | Chapel Hill, NC | |||
RRE Mayfair Chateau Holdings, LLC, or Mayfair Chateau | The Brookwood | 274 | Homewood, AL | |||
RRE Fairways of Bent Tree Holdings, LLC, or Fairways of Bent Tree | Adair off Addison Apartment Homes | 200 | Dallas, TX | |||
RRE Spalding Crossing Holdings, LLC, or Spalding Crossing | 1000 Spalding Crossing | 252 | Atlanta, GA | |||
RRE Montclair Terrace Holdings, LLC, or Montclair Holdings | Montclair | 188 | Portland, OR | |||
RRE Canterwood Holdings, LLC, or Canterwood | Verdant Apartment Homes | 216 | Boulder, CO | |||
RRE Grand Reserve Holdings, LLC, or Grand Reserve | Grand Reserve | 319 | Naperville, IL | |||
RRE Fox Ridge Holdings, LLC, or Fox Ridge | Arcadia Apartment Homes | 300 | Centennial, CO | |||
RRE Riverlodge Holdings, LLC, or Riverlodge | Riverlodge | 498 | Austin, TX | |||
RRE Breckenridge Holdings, LLC, or Breckenridge | Breckenridge | 357 | Portland, OR | |||
RRE Santa Rosa Holdings, LLC, or Santa Rosa | The Palmer at Las Colinas | 476 | Irving, TX | |||
RRE Windbrooke Holdings, LLC, or Windbrooke Crossing | Windbrooke Crossing | 236 | Buffalo Grove, IL | |||
RRE Woods Holdings, LLC, or The Woods of Burnsville | The Woods of Burnsville | 400 | Burnsville, MN | |||
RRE Indigo Creek Holdings, LLC, or Indigo Creek | Indigo Creek | 408 | Glendale, AZ | |||
RRE Martin's Point Holdings, LLC, or Martin's Point | Martin's Point | 256 | Lombard, IL | |||
5,519 |
Authorization Date | Per Common Share | Record Dates | Distribution Date | Distributions reinvested in shares of Common Stock | Net Cash Distributions | Total Aggregate Distributions | ||||||||||||||
December 15, 2016 | $ | 0.00164384 | December 30, 2016 through January 30, 2017 | January 31, 2017 | $ | 1,748 | $ | 1,265 | $ | 3,013 | ||||||||||
December 15, 2016 | 0.00164384 | January 31, 2017 through February 27, 2017 | February 28, 2017 | 1,587 | 1,144 | 2,731 | ||||||||||||||
December 15, 2016 | 0.00164384 | February 28, 2017 through March 30, 2017 | March 31, 2017 | 1,755 | 1,276 | 3,031 | ||||||||||||||
March 28, 2017 | 0.00164384 | March 31, 2017 through April 27, 2017 | April 28, 2017 | 1,593 | 1,156 | 2,749 | ||||||||||||||
March 28, 2017 | 0.00164384 | April 28, 2017 through May 30, 2017 | May 31, 2017 | 1,877 | 1,366 | 3,243 | ||||||||||||||
March 28, 2017 | 0.00164384 | May 31, 2017 through June 29, 2017 | June 30, 2017 | 1,713 | 1,243 | 2,956 | ||||||||||||||
June 16, 2017 | 0.00164384 | June 30, 2017 through July 30, 2017 | July 31, 2017 | 1,774 | 1,286 | 3,060 | ||||||||||||||
June 16, 2017 | 0.00164384 | July 31, 2017 through August 30, 2017 | August 31, 2017 | 1,777 | 1,292 | 3,069 | ||||||||||||||
June 16, 2017 | 0.00164384 | August 31, 2017 through September 28, 2017 | September 29, 2017 | 1,658 | 1,208 | 2,866 | ||||||||||||||
September 30, 2017 | 0.00164384 | September 29, 2017 through October 30, 2017 | October 31, 2017 | 1,835 | 1,337 | 3,172 | ||||||||||||||
September 30, 2017 | 0.00164384 | October 31, 2017 through November 29, 2017 | November 30, 2017 | 1,719 | 1,265 | 2,984 | ||||||||||||||
September 30, 2017 | 0.00164384 | November 30, 2017 through December 28, 2017 | December 29, 2017 | 1,649 | 1,257 | 2,906 | ||||||||||||||
$ | 20,685 | $ | 15,095 | $ | 35,780 |
Total aggregate distributions paid | $ | 35,780 | ||
Less: distribution payable at December 31, 2016 | (8,769 | ) | ||
Add: distribution payable at December 31, 2017 | 9,112 | |||
Total distributions declared | $ | 36,123 |
Fiscal Year paid | Per Common Share per Day | Distribution invested in shares of Common Stock | Net Cash Distribution | Total Aggregate Distribution | ||||||||||||
2014 | $ | 0.00071223 | $ | 215 | $ | 114 | $ | 329 | ||||||||
2015 | 0.00164384 | 8,424 | 5,654 | 14,078 | ||||||||||||
2016 | 0.00164384 | 20,608 | 14,025 | 34,633 | ||||||||||||
2017 | 0.00163438 | 20,685 | 15,095 | 35,780 | ||||||||||||
$ | 49,932 | $ | 34,888 | $ | 84,820 |
(1) | acquisition fees and expenses; |
(2) | straight-line rent amounts, both income and expense; |
(3) | amortization of above- or below-market intangible lease assets and liabilities; |
(4) | amortization of discounts and premiums on debt investments; |
(5) | impairment charges; |
(6) | gains or losses from the early extinguishment of debt; |
(7) | gains or losses on the extinguishment or sales of hedges, foreign exchange, securities and other derivatives holdings except where the trading of such instruments is a fundamental attribute of our operations; |
(8) | gains or losses related to fair-value adjustments for derivatives not qualifying for hedge accounting, including interest rate and foreign exchange derivatives; |
(9) | gains or losses related to consolidation from, or deconsolidation to, equity accounting; |
(10) | gains or losses related to contingent purchase price adjustments; and |
(11) | adjustments related to the above items for unconsolidated entities in the application of equity accounting. |
• | Acquisition expenses. In evaluating investments in real estate, including both business combinations and investments accounted for under the equity method of accounting, management’s investment models and analysis differentiate costs to acquire the investment from the operations derived from the investment. Prior to 2009, acquisition costs for both of these types of investments were capitalized under GAAP; however, beginning in 2009, acquisition costs related to business combinations are expensed. Both of these acquisition costs have been and will continue to be funded from the proceeds of our offering and debt proceeds and not from operations. We believe by excluding expensed acquisition costs, MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition expenses include those paid to our Advisor or third parties. |
• | Adjustments for straight-line rents and amortization of discounts and premiums on debt investments. In the proper application of GAAP, rental receipts and discounts and premiums on debt investments are allocated to periods using various systematic methodologies. This application will result in income recognition that could be significantly different than underlying contract terms. By adjusting for these items, MFFO provides useful supplemental information on the realized economic impact of lease terms and debt investments and aligns results with management’s analysis of operating performance. |
• | Adjustments for amortization of above or below market intangible lease assets. Similar to depreciation and amortization of other real estate related assets that are excluded from FFO, GAAP implicitly assumes that the value of intangibles diminishes predictably over time and that these charges be recognized currently in revenue. Since real estate values and market lease rates in the aggregate have historically risen or fallen with market conditions, management believes that by excluding these charges, MFFO provides useful supplemental information on the performance of the real estate. |
• | Impairment charges, gains or losses related to fair-value adjustments for derivatives not qualifying for hedge accounting and gains or losses related to contingent purchase price adjustments. Each of these items relates to a fair value adjustment, which is based on the impact of current market fluctuations and underlying assessments of general market conditions and specific performance of the holding which may not be directly attributable to current operating performance. As these gains or losses relate to underlying long-term assets and liabilities, management believes MFFO provides useful supplemental information by focusing on the changes in our core operating fundamentals rather than changes that may reflect anticipated gains or losses. In particular, because GAAP impairment charges are not allowed to be reversed if the underlying fair values improve or because the timing of impairment charges may lag the onset of certain operating consequences, we believe MFFO provides useful supplemental information related to current consequences, benefits and sustainability related to rental rate, occupancy and other core operating fundamentals. |
• | Adjustment for gains or losses related to early extinguishment of hedges, debt, consolidation or deconsolidation and contingent purchase price. Similar to extraordinary items excluded from FFO, these adjustments are not related to continuing operations. By excluding these items, management believes that MFFO provides supplemental information related to sustainable operations that will be more comparable between other reporting periods and to other real estate operators. |
Years Ended | |||||||
December 31, | |||||||
2017 | 2016 | ||||||
(in thousands) | |||||||
Net loss – GAAP | $ | (37,691 | ) | $ | (44,161 | ) | |
Depreciation expense | 35,071 | 21,870 | |||||
FFO | (2,620 | ) | (22,291 | ) | |||
Adjustments for straight-line rents | 241 | 160 | |||||
Fair value adjustment for cancelable swap | 135 | (283 | ) | ||||
Amortization of intangible lease assets | 4,064 | 9,094 | |||||
Acquisition costs | 2,199 | 9,079 | |||||
MFFO | $ | 4,019 | $ | (4,241 | ) | ||
Basic and diluted loss per common share - GAAP | $ | (0.63 | ) | $ | (0.76 | ) | |
FFO per share | $ | (0.04 | ) | $ | (0.39 | ) | |
MFFO per share | $ | 0.07 | $ | (0.07 | ) | ||
Weighted average shares outstanding | 60,018 | 57,834 |
Buildings | 27.5 years |
Building improvements | 5.0 to 27.5 years |
Furniture and fixtures | 3.0 to 5.0 years |
Tenant improvements | Shorter of lease term or expected useful life |
Lease intangibles | Remaining term of related lease |
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A. | CONTROLS AND PROCEDURES |
ITEM 9B. | OTHER INFORMATION |
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. | EXECUTIVE COMPENSATION |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
(a) | Financial Statements |
1. | See the Index to Consolidated Financial Statements at page F-1 of this report. |
(b) | Financial Statement Schedules |
i. | Schedule III Real Estate and Accumulated Depreciation |
(c) | Exhibits |
Exhibit No. | Description | |
3.1 | ||
3.2 | ||
4.1 | ||
4.2 | ||
10.1 | ||
10.2 | ||
10.3 | ||
10.4 | ||
10.5 | ||
10.6 | ||
10.7 | ||
21.1 | ||
23.1 | ||
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
99.1 | ||
99.2 | ||
101.1 | The following information from the Company's Quarterly Report on Form 10-K for the year ended December 31, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations and Comprehensive (Loss) Income; (iii) Consolidated Statements of Changes in Stockholders' Equity; and (iv) Consolidated Statements of Cash Flows |
RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC. | |
March 29, 2018 | By: /s/ Alan F. Feldman |
Alan F. Feldman | |
Chief Executive Officer and Director |
/s/ George Carleton | Director | March 29, 2018 |
GEORGE CARLETON | ||
/s/ Gary Lichtenstein | Director | March 29, 2018 |
GARY LICHTENSTEIN | ||
/s/ Thomas J. Ikeler | Director | March 29, 2018 |
THOMAS J. IKELER | ||
/s/ David Spoont | Director | March 29, 2018 |
DAVID SPOONT | ||
/s/ Alan F. Feldman | Chief Executive Officer and Director | March 29, 2018 |
ALAN F. FELDMAN | (Principal Executive Officer) | |
/s/ Steven R. Saltzman | Chief Financial Officer, Senior Vice President and Treasurer | March 29, 2018 |
STEVEN R. SALTZMAN | (Principal Financial Officer and Principal Accounting Officer) |
Financial Statements | Page | |
December 31, | ||||||||
2017 | 2016 | |||||||
ASSETS | ||||||||
Investments: | ||||||||
Rental properties, net | $ | 836,971 | $ | 754,588 | ||||
Identified intangible assets, net | 813 | 2,689 | ||||||
Total investments | 837,784 | 757,277 | ||||||
Cash | 69,227 | 104,889 | ||||||
Restricted cash | 7,668 | 6,620 | ||||||
Tenant receivables | 87 | 68 | ||||||
Due from related parties | 57 | 604 | ||||||
Prepaid expenses and other assets | 1,647 | 1,852 | ||||||
Total assets | $ | 916,470 | $ | 871,310 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Liabilities: | ||||||||
Mortgage notes payable, net | $ | 560,164 | $ | 455,361 | ||||
Accounts payable and accrued expenses | 14,109 | 11,997 | ||||||
Due to related parties | 538 | 2,648 | ||||||
Tenant prepayments | 575 | 546 | ||||||
Security deposits | 1,312 | 1,097 | ||||||
Distribution payable | 9,112 | 8,769 | ||||||
Total liabilities | 585,810 | 480,418 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock (par value $.01, 10,000,000 shares authorized, none issued and outstanding) | — | — | ||||||
Convertible stock (par value $.01; 50,000 shares authorized, 50,000 issued and outstanding) | 1 | 1 | ||||||
Common stock (par value $.01; 1,000,000,000 shares authorized, 60,782,019 and 59,160,177 issued and outstanding, respectively) | 606 | 591 | ||||||
Additional paid-in capital | 534,683 | 520,746 | ||||||
Accumulated other comprehensive loss | (444 | ) | (74 | ) | ||||
Accumulated deficit | (204,186 | ) | (130,372 | ) | ||||
Total stockholders’ equity | 330,660 | 390,892 | ||||||
Total liabilities and stockholders’ equity | $ | 916,470 | $ | 871,310 |
Years Ended | |||||||
December 31, | |||||||
2017 | 2016 | ||||||
Revenues: | |||||||
Rental income | $ | 77,240 | $ | 52,928 | |||
Total revenues | 77,240 | 52,928 | |||||
Expenses: | |||||||
Rental operating - expenses | 13,580 | 11,911 | |||||
Rental operating - payroll | 7,645 | 6,220 | |||||
Rental operating - real estate taxes | 10,412 | 7,336 | |||||
Subtotal - Rental operating expenses | 31,637 | 25,467 | |||||
Acquisition costs | 2,199 | 9,079 | |||||
Management fees | 12,801 | 9,235 | |||||
General and administrative | 8,700 | 9,272 | |||||
Loss on disposal of assets | 963 | 2,516 | |||||
Depreciation and amortization expense | 39,135 | 30,964 | |||||
Total expenses | 95,435 | 86,533 | |||||
Loss before other income (expense) | (18,195 | ) | (33,605 | ) | |||
Other income (expense): | |||||||
Interest income | 120 | 209 | |||||
Insurance proceeds in excess of cost basis | 148 | 185 | |||||
Interest expense | (19,764 | ) | (10,950 | ) | |||
Net loss | (37,691 | ) | (44,161 | ) | |||
Other comprehensive loss: | |||||||
Designated derivatives, fair value adjustment | (370 | ) | 43 | ||||
Comprehensive loss | $ | (38,061 | ) | $ | (44,118 | ) | |
Weighted average common shares outstanding | 60,018 | 57,834 | |||||
Basic and diluted net loss per common share | $ | (0.63 | ) | $ | (0.76 | ) |
Common Stock | Convertible Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | ||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Total | ||||||||||||||||||||||||||
Balance at December 31, 2015 | 52,697 | $ | 526 | 50 | $ | 1 | $ | 465,449 | $ | (117 | ) | $ | (45,587 | ) | $ | 420,272 | ||||||||||||||
Issuance of common stock | 4,259 | 43 | — | — | 42,423 | — | — | 42,466 | ||||||||||||||||||||||
Offering costs | — | — | — | — | (6,263 | ) | — | — | (6,263 | ) | ||||||||||||||||||||
Common stock issued through distribution reinvestment plan | 2,371 | 24 | — | — | 20,584 | — | — | 20,608 | ||||||||||||||||||||||
Distributions declared | — | — | — | — | — | — | (40,624 | ) | (40,624 | ) | ||||||||||||||||||||
Common stock redemptions | (167 | ) | (2 | ) | — | — | (1,447 | ) | — | — | (1,449 | ) | ||||||||||||||||||
Designated derivatives, fair value adjustment | — | — | — | — | — | 43 | — | 43 | ||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (44,161 | ) | (44,161 | ) | ||||||||||||||||||||
Balance, at December 31, 2016 | 59,160 | 591 | 50 | 1 | 520,746 | (74 | ) | (130,372 | ) | 390,892 | ||||||||||||||||||||
Common stock issued through distribution reinvestment plan | 2,395 | 23 | — | — | 20,662 | — | — | 20,685 | ||||||||||||||||||||||
Distributions declared | — | — | — | — | — | — | (36,123 | ) | (36,123 | ) | ||||||||||||||||||||
Common stock redemptions | (773 | ) | (8 | ) | — | — | (6,725 | ) | — | — | (6,733 | ) | ||||||||||||||||||
Designated derivatives, fair value adjustment | — | — | — | — | — | (370 | ) | — | (370 | ) | ||||||||||||||||||||
Net loss | — | — | — | — | — | — | (37,691 | ) | (37,691 | ) | ||||||||||||||||||||
Balance, at December 31, 2017 | 60,782 | $ | 606 | 50 | $ | 1 | $ | 534,683 | $ | (444 | ) | $ | (204,186 | ) | $ | 330,660 |
Years Ended December 31, | ||||||||
2017 | 2016 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (37,691 | ) | $ | (44,161 | ) | ||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||
Loss on disposal of assets | 963 | 2,516 | ||||||
Depreciation and amortization | 39,135 | 30,964 | ||||||
Amortization of deferred financing costs | 1,163 | 737 | ||||||
Amortization of mortgage premiums | (118 | ) | (121 | ) | ||||
Change in fair value of interest rate swap | (123 | ) | (170 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Restricted cash | (2,052 | ) | (1,301 | ) | ||||
Tenant receivables | (19 | ) | (51 | ) | ||||
Due from related parties | 547 | (241 | ) | |||||
Prepaid expenses and other assets | 155 | 2,479 | ||||||
Due to related parties | (2,110 | ) | (1,450 | ) | ||||
Accounts payable and accrued expenses | 1,914 | 4,657 | ||||||
Tenant prepayments | 17 | 173 | ||||||
Security deposits | 73 | (57 | ) | |||||
Net cash provided by (used in) operating activities | 1,854 | (6,026 | ) | |||||
Cash flows from investing activities | ||||||||
Property acquisitions | (63,824 | ) | (339,080 | ) | ||||
Capital expenditures | (26,956 | ) | (31,334 | ) | ||||
Change in restricted cash - capital reserves | 1,005 | (676 | ) | |||||
Net cash used in investing activities | (89,775 | ) | (371,090 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of common stock, net of redemptions | (6,733 | ) | 48,632 | |||||
Payment of deferred financing costs | (1,146 | ) | (3,908 | ) | ||||
Increase in borrowings | 79,039 | 278,627 | ||||||
Repayments on borrowings | (3,690 | ) | (1,657 | ) | ||||
Purchase of interest rate caps | (116 | ) | (227 | ) | ||||
Distributions paid on common stock | (15,095 | ) | (14,025 | ) | ||||
Offering costs | — | (6,263 | ) | |||||
Net cash provided by financing activities | 52,259 | 301,179 | ||||||
Net decrease in cash | (35,662 | ) | (75,937 | ) | ||||
Cash at beginning of year | 104,889 | 180,826 | ||||||
Cash at end of year | $ | 69,227 | $ | 104,889 |
Subsidiary | Apartment Complex | Number of Units | Property Location | |||
RRE Opportunity Holdings II, LLC | N/A | N/A | N/A | |||
RRE Opportunity OP II, LP | N/A | N/A | N/A | |||
RRE Bear Creek Holdings, LLC, or Bear Creek | Adair off Addison | 152 | Dallas, TX | |||
RRE Oak Hill Holdings, LLC, or Oak Hill | Overton Trails Apartment Homes | 360 | Fort Worth, TX | |||
RRE Buckhead Holdings, LLC, or Buckhead | Uptown Buckhead | 216 | Atlanta, GA | |||
RRE Farrington Holdings, LLC, or Farrington | Crosstown at Chapel Hill | 411 | Chapel Hill, NC | |||
RRE Mayfair Chateau Holdings, LLC, or Mayfair Chateau | The Brookwood | 274 | Homewood, AL | |||
RRE Fairways of Bent Tree Holdings, LLC, or Fairways of Bent Tree | Adair off Addison Apartment Homes | 200 | Dallas, TX | |||
RRE Montclair Terrace Holdings, LLC, or Montclair Holdings | Montclair | 188 | Portland, OR | |||
RRE Spalding Crossing Holdings, LLC, or Spalding Crossing | 1000 Spalding Crossing | 252 | Atlanta, GA | |||
RRE Grand Reserve Holdings, LLC, or Grand Reserve | Grand Reserve | 319 | Naperville, IL | |||
RRE Canterwood Holdings, LLC, or Canterwood | Verdant Apartment Homes | 216 | Boulder, CO | |||
RRE Fox Ridge Holdings, LLC, or Fox Ridge | Arcadia Apartment Homes | 300 | Centennial, CO | |||
RRE Riverlodge Holdings, LLC, or Riverlodge | Riverlodge | 498 | Austin, TX | |||
RRE Breckenridge Holdings, LLC, or Breckenridge | Breckenridge | 357 | Portland, OR | |||
RRE Santa Rosa Holdings, LLC, or Santa Rosa | The Palmer at Las Colinas | 476 | Irving, TX | |||
RRE Windbrooke Holdings, LLC, or Windbrooke Crossing | Windbrooke Crossing | 236 | Buffalo Grove, IL | |||
RRE Woods Holdings, LLC, or The Woods of Burnsville | The Woods of Burnsville | 400 | Burnsville, MN | |||
RRE Indigo Creek Holdings, LLC, or Indigo Creek | Indigo Creek | 408 | Glendale, AZ | |||
RRE Martin's Point Holdings, LLC, or Martin's Point | Martin's Point | 256 | Lombard, IL |
Buildings | 27.5 years |
Building improvements | 5.0 to 27.5 years |
Furniture and fixtures | 3.0 to 5.0 years |
Tenant improvements | Shorter of lease term or expected useful life |
Lease intangibles | Remaining term of related lease |
Years Ended | |||||||
December 31, | |||||||
2017 | 2016 | ||||||
Non-cash financing and investing activities: | |||||||
Distributions on common stock declared but not yet paid | $ | 9,112 | 8,769 | ||||
Stock issued from distribution reinvestment plan | 20,685 | 20,608 | |||||
Rental property and other assets acquired through assumption of mortgage notes payable | — | 28,704 | |||||
Mortgage note payable used to acquire real property | 29,990 | — | |||||
Cash paid during the period for: | |||||||
Interest | $ | 20,324 | $ | 9,082 |
December 31, 2017 | December 31, 2016 | ||||||
Real estate taxes | $ | 4,594 | $ | 3,252 | |||
Insurance | 973 | 671 | |||||
Capital improvements | 1,693 | 2,697 | |||||
Other | 408 | — | |||||
Total | $ | 7,668 | $ | 6,620 | |||
Unrestricted cash designated for capital expenditures | $ | 42,640 | $ | 71,738 |
December 31, 2017 | December 31, 2016 | ||||||
Land | $ | 123,863 | $ | 108,587 | |||
Building and improvements | 748,062 | 629,060 | |||||
Furniture, fixtures and equipment | 21,743 | 36,307 | |||||
Construction in progress | 5,061 | 7,641 | |||||
898,729 | 781,595 | ||||||
Less: accumulated depreciation | (61,758 | ) | (27,007 | ) | |||
$ | 836,971 | $ | 754,588 |
Fair Value Assigned | ||||||||||||||||||||||||||||||||
Multifamily Community Name | City and State | Date of Acquisition | Contractual Purchase Price (1) | Land | Building and Improvements | Furniture, Fixture and Equipment | Intangible Assets | Debt Assumed | Other Liabilities | |||||||||||||||||||||||
Indigo Creek | Glendale, Arizona | 4/4/2017 | $ | 55,200 | $ | 7,202 | $ | 46,348 | $ | 508 | $ | 1,143 | $ | — | $ | (97 | ) | |||||||||||||||
Martin's Point | Lombard, Illinois | 10/31/2017 | $ | 38,250 | $ | 8,074 | $ | 28,485 | $ | 646 | $ | 1,045 | $ | — | $ | (786 | ) |
(1) | Contractual purchase price excludes closing costs and acquisition expenses and other immaterial settlement date adjustments and pro-rations. |
Year Ended | |||||
Multifamily Community | December 31, 2017 | ||||
Indigo Creek | |||||
Total Revenues | $ | 3,631 | |||
Net Loss | $ | (1,877 | ) | ||
Acquisition Costs | $ | 51 | |||
Acquisition Fee | $ | 1,141 | |||
Martin's Point | |||||
Total Revenues | $ | 709 | |||
Net Loss | $ | (441 | ) | ||
Acquisition Costs | $ | 140 | |||
Acquisition Fee | $ | 780 |
December 31, 2017 | December 31, 2016 | |||||||||||||||||||||||||||||||
Collateral | Outstanding borrowings | Premium, net | Deferred Financing Costs, net | Carrying Value | Outstanding borrowings | Premium, net | Deferred Financing Costs, net | Carrying Value | ||||||||||||||||||||||||
Overton Trails Apartment Homes | $ | 30,485 | $ | — | $ | (291 | ) | $ | 30,194 | $ | 31,075 | $ | — | $ | (344 | ) | $ | 30,731 | ||||||||||||||
Uptown Buckhead | 20,039 | — | (248 | ) | 19,791 | 20,200 | — | (284 | ) | 19,916 | ||||||||||||||||||||||
Crosstown at Chapel Hill | 31,826 | — | (265 | ) | 31,561 | 32,000 | — | (373 | ) | 31,627 | ||||||||||||||||||||||
The Brookwood - Key Bank | 17,871 | 399 | (188 | ) | 18,082 | 18,247 | 508 | (239 | ) | 18,516 | ||||||||||||||||||||||
The Brookwood - Capital One | 2,657 | 30 | (32 | ) | 2,655 | 2,699 | 39 | (41 | ) | 2,697 | ||||||||||||||||||||||
Adair off Addison and Adair off Addison Apartment Homes | 25,091 | — | (347 | ) | 24,744 | 25,500 | — | (464 | ) | 25,036 | ||||||||||||||||||||||
1000 Spalding Crossing | 24,600 | — | (230 | ) | 24,370 | 24,600 | — | (289 | ) | 24,311 | ||||||||||||||||||||||
Riverlodge | 27,634 | — | (315 | ) | 27,319 | 28,292 | — | (393 | ) | 27,899 | ||||||||||||||||||||||
Verdant Apartment Homes | 37,300 | — | (289 | ) | 37,011 | 37,300 | — | (345 | ) | 36,955 | ||||||||||||||||||||||
Arcadia Apartment Homes | 40,200 | — | (318 | ) | 39,882 | 40,200 | — | (379 | ) | 39,821 | ||||||||||||||||||||||
Grand Reserve | 41,520 | — | (372 | ) | 41,148 | 42,395 | — | (446 | ) | 41,949 | ||||||||||||||||||||||
Montclair Terrace | 20,674 | — | (290 | ) | 20,384 | 21,083 | — | (345 | ) | 20,738 | ||||||||||||||||||||||
Breckenridge | 52,975 | — | (588 | ) | 52,387 | 52,975 | — | (697 | ) | 52,278 | ||||||||||||||||||||||
The Palmer at Las Colinas | 45,700 | — | (574 | ) | 45,126 | 45,700 | — | (643 | ) | 45,057 | ||||||||||||||||||||||
Windbrooke Crossing | 38,320 | — | (411 | ) | 37,909 | 38,320 | — | (490 | ) | 37,830 | ||||||||||||||||||||||
Woods of Burnsville | 38,250 | — | (534 | ) | 37,716 | — | — | — | — | |||||||||||||||||||||||
Indigo Creek | 40,789 | — | (471 | ) | 40,318 | — | — | — | — | |||||||||||||||||||||||
Martin's Point | 29,990 | — | (423 | ) | 29,567 | — | — | — | — | |||||||||||||||||||||||
$ | 565,921 | $ | 429 | $ | (6,186 | ) | $ | 560,164 | $ | 460,586 | $ | 547 | $ | (5,772 | ) | $ | 455,361 |
Maturity Date | Margin over LIBOR | Annual Interest Rate | Average Monthly Debt Service | Average Monthly Escrow | ||||||||||||||
Overton Trails Apartment Homes | 1/1/2025 | 1.91 | % | 3.47 | % | $ | 137 | $ | 117 | (1) (3) (5) | ||||||||
Uptown Buckhead | 7/1/2025 | 2.22 | % | 3.78 | % | $ | 92 | $ | 58 | (1) (3) (5) | ||||||||
Crosstown at Chapel Hill | 7/10/2020 | 1.70 | % | 3.26 | % | $ | 121 | $ | — | (1) (4) (5) | ||||||||
The Brookwood - Key Bank | 11/1/2021 | — | 4.73 | % | $ | 104 | $ | 48 | (2) (7) | |||||||||
The Brookwood - Capital One | 11/1/2021 | — | 5.40 | % | $ | 16 | $ | — | (2) (7) | |||||||||
Adair off Addison and Adair off Addison Apartment Homes | 1/1/2021 | 1.55 | % | 3.11 | % | $ | 104 | $ | — | (1) (3) (5) | ||||||||
1000 Spalding Crossing | 1/1/2022 | — | 3.88 | % | $ | 115 | $ | 47 | (2) (5) | |||||||||
Riverlodge | 5/1/2022 | — | 3.76 | % | $ | 144 | $ | 141 | (2) (7) | |||||||||
Verdant Apartment Homes | 5/1/2023 | — | 3.89 | % | $ | 161 | $ | 26 | (2) (5) | |||||||||
Arcadia Apartment Homes | 5/1/2023 | — | 3.89 | % | $ | 174 | $ | 19 | (2) (5) | |||||||||
Grand Reserve | 6/1/2023 | 2.57 | % | 4.13 | % | $ | 210 | $ | 133 | (1) (3) (6) | ||||||||
Montclair Terrace | 6/1/2023 | 2.45 | % | 4.01 | % | $ | 93 | $ | 26 | (1) (3) (7) | ||||||||
Breckenridge | 7/1/2023 | 2.36 | % | 3.92 | % | $ | 230 | $ | 56 | (1) (3) (5) | ||||||||
The Palmer at Las Colinas | 9/1/2026 | 2.11 | % | 3.67 | % | $ | 179 | $ | 146 | (1) (3) (5) | ||||||||
Windbrooke Crossing | 1/1/2024 | 2.69 | % | 4.25 | % | $ | 230 | $ | 71 | (1) (3) (5) | ||||||||
Woods of Burnsville | 2/1/2024 | 2.13 | % | 3.69 | % | $ | 198 | $ | 63 | (1) (3) (5) | ||||||||
Indigo Creek | 5/1/2024 | 1.93 | % | 3.49 | % | $ | 242 | $ | 51 | (1) (3) (5) | ||||||||
Martin's Point | 11/1/2024 | 1.86 | % | 3.42 | % | $ | 137 | $ | 76 | (1) (3) (5) |
(1) | Variable rate based on one-month LIBOR of 1.56425% (as of December 31, 2017) plus a fixed margin |
(2) | Fixed rate |
(3) | Variable rate hedged with interest rate cap cash flow hedge |
(4) | Fixed rate interest swap associated with the variable rate debt |
(5) | Monthly interest-only payment currently required |
(6) | Monthly fixed principal plus interest payment required |
(7) | Fixed monthly payment of principal and interest payment required |
2018 | $ | 6,068 | ||
2019 | 9,915 | |||
2020 | 43,206 | |||
2021 | 54,425 | |||
2022 | 58,662 | |||
Thereafter | 393,646 | |||
$ | 565,922 |
2018 | $ | 1,236 | ||
2019 | 1,218 | |||
2020 | 1,142 | |||
2021 | 952 | |||
2022 | 772 | |||
Thereafter | 866 | |||
$ | 6,186 |
Net unrealized (loss) gain on derivatives | ||||
Balance, January 1, 2016 | $ | (117 | ) | |
Designated derivatives, fair value adjustment | 43 | |||
Balance, December 31, 2016 | (74 | ) | ||
Designated derivatives, fair value adjustment | (370 | ) | ||
Balance, December 31, 2017 | $ | (444 | ) |
December 31, 2017 | December 31, 2016 | |||||||
Due from related parties: | ||||||||
RAI - self-insurance funds held | 57 | 604 | ||||||
$ | 57 | $ | 604 | |||||
Due to related parties: | ||||||||
Advisor | ||||||||
Acquisition fees | $ | — | $ | 1,022 | ||||
Operating expense reimbursements | 1 | 1,078 | ||||||
Manager | ||||||||
Property management fees | 315 | 244 | ||||||
Operating expense reimbursements | 204 | 304 | ||||||
RAI | ||||||||
Internal audit fees | 18 | — | ||||||
$ | 538 | $ | 2,648 | |||||
Graphic Images (8) | $ | 9 | $ | 3 |
Years Ended | ||||||||
December 31, | ||||||||
2017 | 2016 | |||||||
Fees earned / expenses incurred: | ||||||||
Advisor | ||||||||
Acquisition fees (1) | $ | 1,921 | $ | 8,497 | ||||
Asset management fees (2) | $ | 9,363 | $ | 6,892 | ||||
Debt financing fees (3) | $ | 545 | $ | 1,537 | ||||
Organization and offering costs (4) | $ | — | $ | 86 | ||||
Operating expense reimbursements (5) | $ | 3,885 | $ | 4,130 | ||||
Manager | ||||||||
Property management fees (2) | $ | 3,438 | $ | 2,278 | ||||
Construction management fees (7) | $ | 981 | $ | 1,371 | ||||
Construction payroll reimbursements (7) | $ | 233 | $ | 471 | ||||
Operating expense reimbursements (5) | $ | 659 | $ | 1,188 | ||||
Information technology fees (5) | $ | — | $ | 166 | ||||
Resource Securities: | ||||||||
Selling commissions and dealer-manager fees (6) | $ | — | $ | 4,193 | ||||
Other | ||||||||
Graphic Images (5) | $ | 9 | $ | 8 | ||||
The Planning & Zoning Resource Company (5) | $ | 2 | $ | 2 |
(A) | the lesser of |
(1) | the value of the Company as of the date of the event triggering the conversion plus the total distributions paid to its stockholders through such date on the then-outstanding shares of its common stock exceeds |
(2) | the sum of the aggregate issue price of those outstanding shares plus a 7% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, divided by |
Shares Issued | Gross Proceeds | ||||||
Shares issued through initial public offering | 55,791,297 | $ | 556,197 | ||||
Shares issued through stock distributions | 246,365 | — | |||||
Shares issued through distribution reinvestment plan | 5,675,748 | 49,932 | |||||
Advisor's initial investment, net of 5,000 share conversion | 15,000 | 150 | |||||
Total | 61,728,410 | 606,279 | |||||
Shares redeemed and retired | (946,391 | ) | (8,235 | ) | |||
Total shares outstanding | 60,782,019 | $ | 598,044 |
Period | Total Number of Shares Redeemed (1) | Average Price Paid per Share | Cumulative Number of Shares Purchased as Part of a Publicly Announced Plan or Program (2) | Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program | ||||
January 2017 | — | $— | — | (2) | ||||
February 2017 | — | $— | — | (2) | ||||
March 2017 | 121 | $8.74 | 121 | (2) | ||||
April 2017 | — | $— | — | (2) | ||||
May 2017 | — | $— | — | (2) | ||||
June 2017 | 188 | $8.60 | 309 | (2) | ||||
July 2017 | — | $— | — | (2) | ||||
August 2017 | — | $— | — | (2) | ||||
September 2017 | 336 | $8.59 | 645 | (2) | ||||
October 2017 | — | $— | — | (2) | ||||
November 2017 | — | $— | — | (2) | ||||
December 2017 | 128 | $8.68 | 773 | (2) |
(1) | All purchases of equity securities by the Company in the year ended December 31, 2017 were made pursuant to the Company's share redemption program. |
(2) | The Company currently limits the dollar value and number of shares that may be repurchased under the program, as discussed below. |
Authorization Date | Per Common Share | Record Dates | Distribution Date | Distributions reinvested in shares of Common Stock | Net Cash Distributions | Total Aggregate Distributions | ||||||||||||||
December 15, 2016 | $ | 0.00164384 | December 30, 2016 through January 30, 2017 | January 31, 2017 | $ | 1,748 | $ | 1,265 | 3,013 | |||||||||||
December 15, 2016 | 0.00164384 | January 31, 2017 through February 27, 2017 | February 28, 2017 | 1,587 | 1,144 | 2,731 | ||||||||||||||
December 15, 2016 | 0.00164384 | February 28, 2017 through March 30, 2017 | March 31, 2017 | 1,755 | 1,276 | 3,031 | ||||||||||||||
March 28, 2017 | 0.00164384 | March 31, 2017 through April 27, 2017 | April 28, 2017 | 1,593 | 1,156 | 2,749 | ||||||||||||||
March 28, 2017 | 0.00164384 | April 28, 2017 through May 30, 2017 | May 31, 2017 | 1,877 | 1,366 | 3,243 | ||||||||||||||
March 28, 2017 | 0.00164384 | May 31, 2017 through June 29, 2017 | June 30, 2017 | 1,713 | 1,243 | 2,956 | ||||||||||||||
June 16, 2017 | 0.00164384 | June 30, 2017 through July 30, 2017 | July 31, 2017 | 1,774 | 1,286 | 3,060 | ||||||||||||||
June 16, 2017 | 0.00164384 | July 31, 2017 through August 30, 2017 | August 31, 2017 | 1,777 | 1,292 | 3,069 | ||||||||||||||
June 16, 2017 | 0.00164384 | August 31, 2017 through September 28, 2017 | September 29, 2017 | 1,658 | 1,208 | 2,866 | ||||||||||||||
September 30, 2017 | 0.00164384 | September 29, 2017 through October 30, 2017 | October 31, 2017 | 1,835 | 1,337 | 3,172 | ||||||||||||||
September 30, 2017 | 0.00164384 | October 31, 2017 through November 29, 2017 | November 30, 2017 | 1,719 | 1,265 | 2,984 | ||||||||||||||
September 30, 2017 | 0.00164384 | November 30, 2017 through December 28, 2017 | December 29, 2017 | 1,649 | 1,257 | 2,906 | ||||||||||||||
$ | 20,685 | $ | 15,095 | $ | 35,780 |
Total aggregate distributions paid | $ | 35,780 | ||
Less: distribution payable at December 31, 2016 | (8,769 | ) | ||
Add: distribution payable at December 31, 2017 | 9,112 | |||
Total distributions declared | $ | 36,123 |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
December 31, 2017 | |||||||||||||||
Assets: | |||||||||||||||
Interest rate caps | $ | — | $ | 58 | $ | — | $ | 58 | |||||||
Cancelable swap | — | 166 | — | 166 | |||||||||||
$ | — | $ | 224 | $ | — | $ | 224 | ||||||||
December 31, 2016 | |||||||||||||||
Assets: | |||||||||||||||
Interest rate caps | $ | — | $ | 365 | $ | — | $ | 365 | |||||||
Cancelable swap | $ | — | $ | 43 | $ | — | $ | 43 | |||||||
$ | — | $ | 408 | $ | — | $ | 408 |
December 31, 2017 | December 31, 2016 | ||||||||||||||
Outstanding Balance | Estimated Fair Value | Outstanding Balance | Estimated Fair Value | ||||||||||||
Mortgage notes payable | $ | 565,921 | $ | 571,275 | $ | 460,586 | $ | 449,977 |
Interest Rate Derivative | Number of Instruments | Notional Amount | Maturity Dates | |||||
Derivatives designated as hedging instruments: | ||||||||
Interest rate caps | 12 | $ | 388,931 | January 1, 2018 through January 1, 2021 | ||||
Derivatives not designated as hedging instruments: | ||||||||
Cancelable swap | 1 | $ | 31,826 | July 28, 2020 |
Asset Derivatives | Liabilities Derivatives | |||||||||||||||||||||
December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||||||||
Balance Sheet | Fair Value | Balance Sheet | Fair Value | Balance Sheet | Fair Value | Balance Sheet | Fair Value | |||||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||||||||
Interest rate caps | $ | 58 | Interest rate caps | $ | 365 | NA | $ | — | NA | $ | — | |||||||||||
Derivatives not designated as hedging instruments: | ||||||||||||||||||||||
Cancelable swap | $ | 166 | NA | $ | 43 | NA | $ | — | NA | $ | — |
Amount of Gain (Loss) Recognized in Income for the Years Ended | ||||||||||
Derivatives Designated as Hedging Instruments | Location of Gain (Loss) Recognized in Income | December 31, 2017 | December 31, 2016 | |||||||
Interest rate caps | Interest expense | $ | 70 | $ | 10 |
Amount of Gain (Loss) Recognized in Income for the Years Ended | ||||||||||
Derivatives Not Designated as Hedging Instruments | Location of Gain (Loss) Recognized in Income | December 31, 2017 | December 31, 2016 | |||||||
Cancelable swap | Interest expense | $ | 135 | $ | 283 |
Derivatives in Cash Flow Hedging Relationships | Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) for the Years Ended | Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) for the Years Ended | |||||||||||||||
December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||||
Interest rate products | $ | (440 | ) | $ | 33 | Interest expense | $ | (70 | ) | $ | (10 | ) |
Column A | Column B | Column C | Column D | Column E | Column F | Column G | Column H | |||||||||||||||||
Description | Encumbrances | Initial cost to Company | Cost capitalized subsequent to acquisition | Gross Amount at which carried at close of period | Accumulated Depreciation | Date of Construction | Date Acquired | |||||||||||||||||
Real estate owned: | ||||||||||||||||||||||||
Residential | — | 9,148 | 3,103 | 12,251 | (2,243 | ) | 1980 | 6/4/2014 | ||||||||||||||||
Dallas, Texas | ||||||||||||||||||||||||
Residential | 30,484 | 45,824 | 5,738 | 51,562 | (6,606 | ) | 1999 | 12/19/2014 | ||||||||||||||||
Fort Worth, Texas | ||||||||||||||||||||||||
Residential | 20,039 | 31,856 | 4,615 | 36,471 | (3,762 | ) | 1989 | 3/30/2015 | ||||||||||||||||
Atlanta, Georgia | ||||||||||||||||||||||||
Residential | 31,826 | 45,653 | 5,488 | 51,141 | (5,289 | ) | 1990 | 5/19/2015 | ||||||||||||||||
Chapel Hill, North Carolina | ||||||||||||||||||||||||
Residential | 20,529 | 30,003 | 5,877 | 35,880 | (3,256 | ) | 1968 | 8/21/2015 | ||||||||||||||||
Homewood, Alabama | ||||||||||||||||||||||||
Residential | 25,091 | 20,667 | 2,634 | 23,301 | (2,337 | ) | 1979 | 8/27/2015 | ||||||||||||||||
Dallas, Texas | ||||||||||||||||||||||||
Residential | 24,600 | 40,194 | 4,054 | 44,248 | (3,782 | ) | 1995 | 9/24/2015 | ||||||||||||||||
Atlanta Georgia | ||||||||||||||||||||||||
Residential | 20,674 | 32,130 | 1,963 | 34,094 | (2,673 | ) | 2004 | 10/29/2015 | ||||||||||||||||
Portland, Oregon | ||||||||||||||||||||||||
Residential | 41,520 | 66,213 | 4,677 | 70,890 | (5,189 | ) | 1991 | 12/18/2015 | ||||||||||||||||
Naperville, Illinois | ||||||||||||||||||||||||
Residential | 37,300 | 64,181 | 3,399 | 67,580 | (3,865 | ) | 1997 | 12/18/2015 | ||||||||||||||||
Boulder, Colorado | ||||||||||||||||||||||||
Residential | 40,200 | 59,059 | 4,989 | 64,048 | (4,363 | ) | 1984 | 1/22/2016 | ||||||||||||||||
Centennial, Colorado | ||||||||||||||||||||||||
Residential | 27,634 | 55,466 | 5,351 | 60,817 | (4,187 | ) | 2001 | 3/23/2016 | ||||||||||||||||
Austin, Texas | ||||||||||||||||||||||||
Column A | Column B | Column C | Column D | Column E | Column F | Column G | Column H | |||||||||||||||||
Description | Encumbrances | Initial cost to Company | Cost capitalized subsequent to acquisition | Gross Amount at which carried at close of period | Accumulated Depreciation | Date of Construction | Date Acquired | |||||||||||||||||
Residential | 52,975 | 80,155 | 2,889 | 83,044 | (4,611 | ) | 1985 | 5/17/2016 | ||||||||||||||||
Portland, Oregon | ||||||||||||||||||||||||
Residential | 45,700 | 68,454 | 5,066 | 73,520 | (4,149 | ) | 1991 | 6/28/2016 | ||||||||||||||||
Irving, Texas | ||||||||||||||||||||||||
Residential | 38,320 | 47,817 | 279 | 48,096 | (1,787 | ) | 1986 | 12/22/2016 | ||||||||||||||||
Buffalo Grove, Illinois | ||||||||||||||||||||||||
Residential | 38,250 | 49,775 | 408 | 50,183 | (2,005 | ) | 1984 | 12/23/2016 | ||||||||||||||||
Burnsville, Minnesota | ||||||||||||||||||||||||
Residential | 40,789 | 54,057 | 335 | 54,392 | (1,444 | ) | 1998 | 4/4/2017 | ||||||||||||||||
Glendale, Arizona | ||||||||||||||||||||||||
Residential | 29,990 | 37,205 | 6 | 37,211 | (210 | ) | 1989 | 10/31/2017 | ||||||||||||||||
Lombard, Illinois | ||||||||||||||||||||||||
$ | 565,921 | $ | 837,857 | $ | 60,871 | $ | 898,729 | $ | (61,758 | ) |
Years Ended December 31, | ||||||||
2017 | 2016 | |||||||
(in thousands) | ||||||||
Investments in real estate: | ||||||||
Balance at beginning of the year | $ | 781,595 | $ | 392,620 | ||||
Additions during the year: | — | — | ||||||
Acquisitions | 91,262 | 361,558 | ||||||
Improvements, etc. | 26,956 | 31,334 | ||||||
Dispositions during the year: | (1,084 | ) | (3,917 | ) | ||||
Balance at end of year | $ | 898,729 | $ | 781,595 | ||||
Accumulated Depreciation: | ||||||||
Balance at beginning of year | $ | (27,007 | ) | $ | (5,295 | ) | ||
Depreciation | (35,071 | ) | (21,870 | ) | ||||
Disposals | 320 | 158 | ||||||
Balance at the end of year | $ | (61,758 | ) | $ | (27,007 | ) |
RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC. | ||
By: | /s/ Alan F. Feldman | |
Alan F. Feldman, Chief Executive Officer | ||
RESOURCE REAL ESTATE OPPORTUNITY ADVISOR II, LLC | ||
By: | /s/ George E. Carleton, | |
George E. Carleton, President and Chief Operating Officer | ||
Subsidiaries |
RRE Opportunity Holdings II, LLC |
RRE Opportunity OP II, LP |
RRE Bear Creek Holdings, LLC |
RRE Oak Hill Holdings, LLC |
RRE Buckhead Holdings, LLC |
RRE Farrington Holdings, LLC |
RRE Mayfair Chateau Holdings, LLC |
RRE Fairways of Bent Tree Holdings, LLC |
RRE Spalding Crossing Holdings, LLC |
RRE Montclair Terrace Holdings, LLC |
RRE Grand Reserve Holdings, LLC |
RRE Canterwood Holdings, LLC |
RRE Fox Ridge Holdings, LLC |
RRE Riverlodge Holdings, LLC |
RRE Breckenridge Holdings, LLC |
RRE Santa Rosa Holdings, LLC |
RRE Windbrooke Holdings, LLC |
RRE Woods Holdings, LLC |
RRE Indigo Creek Holdings, LLC |
RRE Martin's Point Holdings, LLC |
1) | I have reviewed this annual report on Form 10-K for the year ended December 31, 2017 of Resource Real Estate Opportunity REIT II, Inc.; |
2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4) | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5) | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC. | ||
March 29, 2018 | By: | /s/ Alan F. Feldman |
Alan F. Feldman | ||
Chief Executive Officer | ||
(Principal Executive Officer) |
1) | I have reviewed this annual report on Form 10-K for the year ended December 31, 2017 of Resource Real Estate Opportunity REIT II, Inc.; |
2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4) | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5) | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC. | ||
March 29, 2018 | By: | /s/ Steven R. Saltzman |
Steven R. Saltzman | ||
Chief Financial Officer | ||
(Principal Financial Officer) |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC. | ||
March 29, 2018 | By: | /s/ Alan F. Feldman |
Alan F. Feldman | ||
Chief Executive Officer | ||
(Principal Executive Officer) |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC. | ||
March 29, 2018 | By: | /s/ Steven R. Saltzman |
Steven R. Saltzman | ||
Chief Financial Officer | ||
(Principal Financial Officer) |
/s/ Duff & Phelps, LLC |
Duff & Phelps, LLC |
March 29, 2018 |
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Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Mar. 23, 2018 |
Jun. 30, 2017 |
|
Document and Entity Information [Abstract] | |||
Entity Registrant Name | Resource Real Estate Opportunity REIT II, Inc. | ||
Entity Central Index Key | 0001559484 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Document Fiscal Year Focus | 2017 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Common Stock, Shares Outstanding | 61,185,365 | ||
Entity Public Float | $ 0 |
Consolidated Balance Sheets (Parentheticals) - $ / shares |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|---|
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) | 60,782,019 | 59,160,177 | |
Common stock, shares outstanding (in shares) | 60,782,019 | 59,160,177 | |
Convertible stock | |||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | |
Common stock, shares authorized (in shares) | 50,000 | 50,000 | |
Common stock, shares issued (in shares) | 50,000 | 50,000 | |
Common stock, shares outstanding (in shares) | 50,000 | 50,000 | 50,000 |
Nature of Business and Operations |
12 Months Ended |
---|---|
Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business and Operations | NATURE OF BUSINESS AND OPERATIONS Resource Real Estate Opportunity REIT II, Inc. (the “Company”) was organized in Maryland on September 28, 2012. During the primary portion of the offering, the Company offered up to 100,000,000 shares of common stock for $10 per share, with volume discounts available to certain categories of investors. The primary portion of the offering closed on February 6, 2016. The Company is currently offering up to 10,000,000 shares pursuant to the Company’s distribution reinvestment plan at a purchase price equal to $8.63 per share ($8.65 per share prior to March 30, 2018). The Company has adopted a fiscal year ending December 31. Resource Real Estate Opportunity Advisor II, LLC (the "Advisor”) is a wholly owned subsidiary of Resource Real Estate, LLC (the "Sponsor") and an indirect wholly owned subsidiary of Resource America, Inc. (“RAI”). The Advisor acts as the Company's external advisor and manages the Company's day-to-day operations and its portfolio of real estate investments and provides asset-management, marketing, investor relations and other administrative services on the Company's behalf, all subject to the supervision of the Company's Board of Directors. RAI is a wholly owned subsidiary of C-III Capital Partners, LLC ("C-III"), a leading commercial real estate investment management and services company engaged in a broad range of activities. C-III controls our Advisor and Resource Real Estate Opportunity Manager II, LLC, the Company's property manager (the "Manager"). C-III also controls all of the shares of the Company's common stock held by the Advisor. As of December 31, 2017, a total of 60,782,019 shares, including shares purchased by the Advisor and shares issued through the distribution reinvestment plan, have been issued resulting in gross offering proceeds of $598.0 million. As of December 31, 2017, the Company had issued 5,675,748 shares valued at $49.9 million pursuant to its distribution reinvestment plan. The Company’s objective is to take advantage of the Sponsor's dedicated multifamily investing and lending platforms to invest in multifamily assets across the entire spectrum of investments in order to provide stockholders with growing cash flow and increasing asset values. The Company has acquired and may continue to acquire commercial real estate assets, principally underperforming multifamily rental properties which the Company will renovate and stabilize in order to increase rents, and may acquire, to a lessor extent, real estate related debt. The Company is organized and conducts its operations in a manner intended to allow it to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes under Subchapter M of the Internal Revenue Code of 1986, as amended. The Company also operates its business in a manner intended to maintain its exemption from registration under the Investment Company Act of 1940, as amended. |
Summary of Significant Accounting Policies |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows: Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with the accounting principles generally accepted in the United States of America ("GAAP"). Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries as follows:
N/A - Not Applicable All intercompany accounts and transactions have been eliminated in consolidation. Segment Reporting The Company does not evaluate performance on a relationship specific or transactional basis and does not distinguish its principal business or group its operations on a geographical basis for purposes of measuring performance. Accordingly, the Company believes it has a single operating segment for reporting purposes in accordance with GAAP. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Concentration of Credit Risk Financial instruments, which potentially subject the Company to concentration of credit risk, consist of periodic temporary deposits of cash. At December 31, 2017, the Company had $78.8 million of deposits at various banks, $69.8 million of which were over the insurance limit of the Federal Deposit Insurance Corporation. No losses have been experienced on such deposits. Rental Properties The Company records acquired real estate at fair value on their acquisition date. The Company considers the period of future benefit of an asset to determine its appropriate useful life, and depreciates the asset using the straight line method. The Company's estimated useful lives of its assets by class are as follows:
Improvements and replacements in excess of $1,000 are capitalized when they have a useful life greater than or equal to one year. The Manager earns a construction management fee of 5.0% of actual aggregate costs to construct improvements, or to repair, rehab or reconstruct a property. These costs are capitalized along with the related asset. Costs of repairs and maintenance are expensed as incurred. As four of the Company's multifamily properties are located in the Dallas-Fort Worth area, three properties are located in the Chicago area, two properties are located in Portland, Oregon, two properties are located in the Atlanta area and two properties are located in the Denver area, the Company's portfolio is currently particularly susceptible to adverse economic developments in these real estate markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for multifamily rentals resulting from the local business climate, could negatively affect the Company's liquidity and adversely affect its ability to fund its ongoing operations. Impairment of Long Lived Assets When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If impairment exists, due to the inability to recover the carrying value of a property, an impairment loss will be recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income. The Company did not recognize any impairment charges during the year ended December 31, 2017 and 2016. Allocation of Purchase Price of Acquired Assets The Company records the acquisition of real properties as business combinations. Upon the acquisition of real properties, the Company allocates the purchase price of properties to acquired tangible assets, consisting of land, buildings, fixtures and improvements, identified intangible lease assets, consisting of the value of above-market and below-market leases, as applicable, the value of in-place leases, the value of tenant relationships, and liabilities, based in each case on their fair values. Fair value estimates are based on information obtained from a number of sources, including information obtained about each property as a result of pre-acquisition due diligence, marketing and leasing activities. In addition, the Company may obtain independent appraisal reports. The information in the appraisal reports, along with the aforementioned information available to the Company's management, is used in allocating the purchase price. The independent appraisers have no involvement in management's allocation decisions other than providing market information. The Company records above-market and below-market in-place lease values for acquired properties based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The Company amortizes any capitalized above-market or below-market lease values as an increase or reduction to rental income over the remaining non-cancelable terms of the respective leases. The Company measures the aggregate value of other intangible assets acquired based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued as if vacant. Management’s estimates of value are expected to be made using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis). Factors to be considered by management in its analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods. Management also estimates costs to execute similar leases including leasing commissions and legal and other related expenses to the extent that such costs have not already been incurred in connection with a new lease origination as part of the transaction. The total amount of other intangible assets acquired is further allocated to customer relationship intangible values based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with that respective tenant. Characteristics considered by management in allocating these values include the nature and extent of the Company’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals (including those existing under the terms of the lease agreement), among other factors. The Company amortizes the value of in-place leases to expense over the remaining term of the respective leases. The value of customer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event do amortization periods for the intangible assets exceed the remaining depreciable life of the building. Should a tenant terminate its lease, the unamortized portion of the in-place lease value and customer relationship intangibles would be charged to expense in that period. The determination of the fair value of the assets and liabilities acquired requires the use of significant assumptions with regard to current market rental rates, discount rates and other variables. These estimates are subject to change until all information is finalized, which is generally within one year of the acquisition date. Revenue Recognition The Company recognizes minimum rent, including rental abatements and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related lease and includes amounts expected to be received in later years. The future minimum rental payments to be received from noncancelable operating leases are approximately $43.1 million and $889,000 for the years ending December 31, 2017 and 2018, and none thereafter. Revenue is primarily derived from the rental of residential housing units, however, included within rental income is other income such as pet fees, parking fees, and late fees, as well as property operating expense reimbursements due from tenants for common area maintenance, real estate taxes and other recoverable costs. The Company records the ancillary charges in the period they are earned or received and records the reimbursements in the period in which the related expenses incurred. Total other income included within rental income was $7.3 million and $2.6 million for the years ended December 31, 2017 and 2016, respectively. Tenant Receivables The Company makes estimates of the collectability of its tenant receivables related to base rents, including straight-line rentals, expense reimbursements and other revenue or income. The Company specifically analyzes accounts receivable and historical bad debts, tenant creditworthiness, current economic trends when evaluating the adequacy of the allowance for doubtful accounts. In addition, with respect to tenants in bankruptcy, the Company makes estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectability of the related receivable. In some cases, the ultimate resolution of these claims can exceed one year. At December 31, 2017 and 2016, there were allowances for uncollectible receivables of $4,674 and $5,009, respectively. Income Taxes The Company elected to be taxed as a REIT, commencing with its taxable year ended December 31, 2014. To maintain its REIT qualification for U.S. federal income tax purposes, the Company is generally required to distribute at least 90% of its taxable net income (excluding net capital gains) to its stockholders as well as comply with other requirements, including certain asset, income and stock ownership tests. As a REIT, the Company is not subject to federal corporate income tax to the extent that it distributes 100% of its REIT taxable income each year. If the Company fails to qualify as a REIT, and does not qualify for certain statutory relief provisions, it is subject to U.S. federal, state and local income taxes and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year in which it fails its REIT qualification. Accordingly, the Company’s failure to qualify as a REIT could have a material adverse impact on its results of operations and amounts available for distribution to its stockholders. The dividends paid deduction of a REIT for qualifying dividends to its stockholders is computed using the Company’s taxable income as opposed to net income reported on the financial statements. Taxable income, generally, will differ from net income reported on the financial statements because the determination of taxable income is based on tax provisions and not financial accounting principles. The Company may elect to treat certain of its subsidiaries as taxable REIT subsidiaries (“TRSs”). In general, the Company’s TRSs may hold assets and engage in activities that the Company cannot hold or engage in directly and generally may engage in any real estate or non-real estate-related business. A TRS is subject to U.S. federal, state and local corporate income taxes. While a TRS may generate net income, a TRS can declare dividends to the Company which will be included in the Company’s taxable income and necessitate a distribution to its stockholders. Conversely, if the Company retains earnings at a TRS level, no distribution is required and the Company can increase book equity of the consolidated entity. As of December 31, 2017 and 2016, the Company had no TRSs. The Company evaluates the benefits from tax positions taken or expected to be taken in its tax return. Only the largest amount of benefits from tax positions that will more likely than not be sustainable upon examination are recognized by the Company. The Company does not have any unrecognized tax benefits, nor interest and penalties, recorded in its consolidated financial statements and does not anticipate significant adjustments to the total amount of unrecognized tax benefits within the next 12 months. Legislation commonly known as the Tax Cuts and Jobs Act ("TCJA") was signed into law on December 22, 2017. The TCJA makes significant changes to the U.S. federal income tax rules for taxation of individuals and corporations (including REIT's), generally effective for taxable years beginning after December 31, 2017. The Company is continuing to evaluate this legislation but it does not expect it to have a significant impact. The Company is subject to examination by the U.S. Internal Revenue Service and by the taxing authorities in other states in which the Company has significant business operations. The Company is not currently undergoing any examinations by taxing authorities. The Company is not subject to IRS examination for the tax return years 2013 and prior. Earnings Per Share Basic earnings (loss) per share is calculated on the basis of weighted-average common shares outstanding during the year. Basic earnings (loss) per is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted to common stock. None of the convertible shares (see Note 11) are included in the diluted earnings per share calculations because the necessary conditions for conversion have not been satisfied as of December 31, 2017 were such date to represent the end of the contingency period). For the years ended December 31, 2017 and 2016, common shares potentially issuable to settle distributions payable are excluded from the calculation of diluted earnings per share calculations, as their inclusion would be anti-dilutive. All common shares and per common share information in the consolidated financial statements have been adjusted retroactively for the effect of one 0.625% stock distribution issued on July 14, 2014, one 1.00% stock distribution issued on October 15, 2014, one 0.83333% stock distribution issued on January 15, 2015, one 0.5% stock distribution issued on April 15, 2015, and one 0.5% stock distribution issued on July 15, 2015. Organization and Offering Costs The Company incurred organizational, accounting, and offering costs in pursuit of its financing. Organization and offering costs (other than selling commissions and dealer-manager fees) of the Company were initially paid by the Advisor on behalf of the Company. Organization costs were expensed as incurred and included all expenses incurred by the Company in connection with the formation of the Company, including but not limited to legal fees and other costs to incorporate the Company. Pursuant to the Amended and Restated Advisory Agreement between the Company and the Advisor dated January 9, 2014 (the “Advisory Agreement”), the Company was obligated to reimburse the Advisor for organizational and offering costs it incurred on the Company's behalf, but only to the extent that such reimbursements would not cause organizational and offering expenses (other than selling commissions and the dealer manager fees) to exceed 2.5% of the gross offering proceeds raised in the offering, when recorded by the Company. The primary portion of the offering closed on February 6, 2016, at which point total organizational and offering costs incurred did not exceed 2.5% of the gross offering proceeds raised in the offering. During the offering period, the Company incurred $11.2 million of offering costs consisting of accounting, advertising, allocated payroll, due diligence, marketing, legal and similar costs. During the offering period, the Advisor paid $7.2 million of these costs on behalf of the Company, all of which have been reimbursed. A portion of these costs were charged to equity upon the sale of each share of common stock sold under the public offering. Similarly, a portion of the proceeds received from the sales of shares in the Company's public offering was paid to the Advisor to reimburse it for the amount incurred on behalf of the Company. Adoption of New Accounting Standards Accounting Standards Issued But Not Yet Effective In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” ("ASU No. 2014-09"), which will replace most existing revenue recognition guidance in GAAP. Under the new standard, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. ASU No. 2014-09 requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The Company will adopt ASU 2014-09 as of January 1, 2018 using the modified retrospective approach. The majority of the Company’s revenue is derived from residential rental income and other lease income, which are scoped out from this standard and included in the current lease accounting framework, and will be accounted for under ASU No. 2016-02, Leases, as discussed below. Revenue streams that are in the scope of the new standards include (but are not limited to) administrative and late fees and revenue sharing arrangements of cable income from contracts with cable providers at our properties. Due to the nature and timing of the Company’s identified revenue streams as of December 31, 2017, the Company does not anticipate the adoption of the new standards will have a material impact on its financial position or results of operations. In February 2016, FASB issued ASU No. 2016-02, "Leases" ("ASU No. 2016-02"), which is intended to improve financial reporting about leasing transactions and requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. In September 2017, FASB issued ASU 2017-13, "Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842)", which provides additional implementation guidance on the previously issued ASU No. 2016-02. ASU No. 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is continuing to evaluate this guidance, however, the Company expects that its operating leases where it is the lessor will be accounted for on its balance sheet similar to its current accounting with the underlying leased asset recognized as real estate. The Company expects that executory costs and certain other non-lease components will need to be accounted for separately from the lease component of the lease with the lease component continuing to be recognized on a straight-line basis over the lease term and the executory costs and certain other non-lease components being accounted for under the new revenue recognition guidance in ASU 2014-09. For leases in which the Company is the lessee, primarily consisting of office equipment leases, the Company expects to recognize a right-of-use asset and a lease liability equal to the present value of the minimum lease payments with rental payments being applied to the lease liability and to interest expense and the right-of-use asset being amortized to expense on a straight-line basis over the term of the lease. In June 2016, FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses” (ASU No. 2016-13"), which requires measurement and recognition of expected credit losses for financial assets held. ASU No. 2016-13 will be effective for the Company beginning January 1, 2019. The Company is evaluating this guidance; however, it does not expect the adoption of ASU No. 2016-13 to have a significant impact on its consolidated financial statements. In August 2016, FASB issued ASU No. 2016-15, "Classification of Certain Cash Receipts and Cash Payments", which addresses eight specific cash flow issues with the objective of reducing existing diversity in practice. ASU No. 2016-15 will be effective for the Company beginning January 1, 2018. Early application is permitted. The Company is evaluating this guidance; however, it does not expect the adoption of ASU No. 2016-15 to have a significant impact on its reporting of consolidated cash flows. In January 2017, FASB issued ASU No. 2017-01, "Business Combinations (Topic 850): Clarifying the Definition of Business" (ASU No. 2017-01"), which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. ASU No. 2017-01 will be effective for the Company beginning January 1, 2018. Early application is permitted. The Company is evaluating this guidance and assessing the impact of this guidance on its consolidated financial statements. In January 2017, FASB issued ASU No. 2017-04, "Intangibles- Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment" (ASU No. 2017-04"), which alters the current goodwill impairment testing procedures. ASU No. 2017-04 will be effective for the Company beginning December 15, 2019. Early application is permitted. The Company is evaluating this guidance and assessing the impact of this guidance on its consolidated financial statements. In August 2017, FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities", which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. The update to the standard is effective for the Company on January 1, 2019, with early adoption permitted in any interim period. The Company is continuing to evaluate this guidance and assessing the impact of this guidance on its consolidated financial statements. |
Supplemental Cash Flow Information |
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Supplemental Cash Flow Information | SUPPLEMENTAL CASH FLOW INFORMATION The following table presents supplemental cash flow information (in thousands):
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Restricted Cash |
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Restricted Cash | RESTRICTED CASH Restricted cash represents escrow deposits with lenders to be used to pay real estate taxes, insurance, and capital improvements. A summary of the components of restricted cash follows (in thousands):
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Rental Properties, Net |
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Rental Properties, Net | RENTAL PROPERTIES, NET The Company’s investments in rental properties consisted of the following (in thousands):
Depreciation expense for the years ended December 31, 2017 and 2016 was $35.1 million and $21.9 million, respectively. |
Acquisitions |
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Acquisitions | ACQUISITIONS As of December 31, 2017, the Company owned 18 properties. In order to finalize the fair values of the acquired assets and liabilities, the Company obtained third-party appraisals. The Company has up to 12 months from the date of acquisition to finalize the valuation for each property. All valuations have been finalized as of December 31, 2017. The table below summarizes the Company's wholly-owned acquisitions during the year ended December 31, 2017 and the respective fair values assigned (in thousands):
The table below summarizes the total revenues, net loss, and acquisition costs of the Company's 2017 acquisitions (in thousands):
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Identified Intangible Assets, Net |
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Goodwill and Intangible Assets Disclosure [Abstract] | |
Identified Intangible Assets, Net | IDENTIFIED INTANGIBLE ASSETS, NET Identified intangible assets, net, consist of in-place rental leases. The gross value of acquired in-place leases totaled $18.5 million and $16.3 million as of December 31, 2017 and 2016, respectively, net of accumulated amortization of $17.7 million and $13.6 million, respectively. The weighted average remaining life of the rental leases is seven months and five months as of December 31, 2017 and 2016, respectively. For the years ended December 31, 2017 and 2016, amortization expense was $4.1 million and $9.1 million, respectively. Expected amortization for the rental leases for the next 12 months is $813,000 and none thereafter. |
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Mortgage Notes Payable, Net | MORTGAGE NOTES PAYABLE, NET The following table presents a summary of the Company's mortgage notes payable, net (in thousands):
The following table presents additional information about the Company's mortgage notes payable, net (in thousands, except percentages):
On August 21, 2015, the Company recorded a fair value adjustment, which represented the fair value of the debt assumed over its principal amount in connection with The Brookwood Apartment Home acquisition. The fair value adjustment (premium) is amortized to interest expense over the term of the related mortgages loans using the effective interest method. As of December 31, 2017, the net unamortized mortgage premium of $429,000 was included as a component of mortgage loans payable in the accompanying consolidated balance sheets. At December 31, 2017, the weighted average interest rate of all our outstanding indebtedness was 3.79% Mortgage notes are collateralized by liens on the assets of the respective properties as named in the table above. The amount outstanding on the mortgages may be prepaid in full during the entire term with a prepayment penalty on the majority of mortgages held. As of December 31, 2017 and 2016, the Company had $7.7 million and $6.6 million of restricted cash related to escrow deposits held by mortgage lenders for real estate taxes, insurance and capital reserves (see Note 4). Annual principal payments on the mortgage notes payable for each of the next five years ending December 31, and thereafter, is as follows (in thousands):
The mortgage notes payable are recourse only with respect to the properties that secure the notes, subject to certain limited standard exceptions, as defined in each mortgage note. The Company has guaranteed the mortgage notes by executing a guarantee with respect to the properties. These exceptions are referred to as “carveouts.” In general, carveouts relate to damages suffered by the lender for a borrower’s failure to pay rents, insurance or condemnation proceeds to lender, failure to pay water, sewer and other public assessments or charges, failure to pay environmental compliance costs or to deliver books and records, in each case as required in the loan documents. The exceptions also require the Company to guarantee payment of audit costs, lender’s enforcement of its rights under the loan documents and payment of the loan if the borrower voluntarily files for bankruptcy or seeks reorganization, or if a related party of the borrower does so with respect to the subsidiary. For the Crosstown at Chapel Hill Mortgage Loan, beginning with the calendar quarter ended December 31, 2017, the property must maintain a certain level of debt service coverage. The Company was in compliance with all covenants related to this loan as of December 31, 2017. Deferred financing costs incurred to obtain financing are amortized over the term of the related debt. As of December 31, 2017 and December 31, 2016, accumulated amortization of deferred financing costs was $2,044,007 and $876,721, respectively. Amortization of deferred financing costs for the next five years ending December 31, and thereafter, are as follows (in thousands):
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Accumulated Other Comprehensive Loss | ACCUMULATED OTHER COMPREHENSIVE LOSS The following table presents the changes in accumulated other comprehensive loss for the year ended December 31, 2017 (in thousands):
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Certain Relationships And Related Party Transactions | NOTE 10 – RELATED PARTY TRANSACTIONS In the ordinary course of its business operations, the Company has ongoing relationships with several related parties. Relationship with the Advisor Pursuant to the terms of the Advisory Agreement, the Advisor provides the Company with the services of its management team, including its officers, along with appropriate support personnel. The Advisor will be reimbursed for the Company’s allocable share of costs for Advisor personnel, including allocable personnel salaries and benefits. Each of the Company’s officers is an employee of the Sponsor or one of its affiliates. The Company does not have any employees. The Advisor is not obligated to dedicate any specific portion of its time or the time of its personnel to the Company’s business. The Advisor is at all times subject to the supervision and oversight of the Company’s Board of Directors and has only such functions and authority as the Company delegates to it. During the course of the offering, the Advisor provided offering-related services to the Company and advanced funds to the Company for both operating costs and organization and offering costs. These amounts were reimbursed to the Advisor from the proceeds from the offering. During the offering period, which closed in 2016, the Advisor had incurred costs on a cumulative basis on behalf of the Company of approximately $7.2 million, all of which had been reimbursed as of December 31, 2016. The Advisory Agreement has a one-year term and renews for an unlimited number of successive one-year terms upon the approval of the Conflicts Committee of the Company's Board of Directors. Under the Advisory Agreement, the Advisor receives fees and is reimbursed for its expenses as set forth below: Acquisition fees. The Advisor earns an acquisition fee of 2.0% of the cost of investments acquired on behalf of the Company, plus any capital expenditure reserves allocated, or the amount funded by the Company to acquire loans, including acquisition expenses and any debt attributable to such investments. Asset management fees. The Advisor earns a monthly asset management fee equal to one-twelfth of 1.0% of the cost of each asset, without deduction for depreciation, bad debts or other non-cash reserves. The asset management fee is based only on the portion of the costs or value attributable to the Company’s investment in an asset if the Company does not own all or a majority of an asset and does not manage or control the asset. Disposition fees. The Advisor earns a disposition fee in connection with of the sale of a property equal to the lesser of one-half of the aggregate brokerage commission paid, or if none is paid, 2.0% of the contract sales price. No properties were sold during the years ended December 31, 2017 and 2016 and, therefore, no disposition fees were earned. Debt financing fees. The Advisor earns a debt financing fee equal to 0.5% of the amount available under any debt financing obtained for which it provided substantial services. Expense reimbursements. The Company also pays directly or reimburses the Advisor for all of the expenses paid or incurred by the Advisor or its affiliates on behalf of the Company or in connection with the services provided to the Company in relation to its public offering, including its distribution reinvestment plan offering. This included all organization and offering costs of up to 2.5% of gross offering proceeds. Reimbursements also include expenses the Advisor incurs in connection with providing services to the Company, including the Company’s allocable share of costs for Advisor personnel and overhead, out-of-pocket expenses incurred in connection with the selection and acquisition of properties or other real estate related debt investments, whether or not the Company ultimately acquires the investment. However, the Company will not reimburse the Advisor or its affiliates for employee costs in connection with services for which the Advisor earns acquisition or disposition fees. Relationship with RAI and C-III Property loss pool: The Company's properties participate in a property loss self-insurance pool with other properties directly and indirectly managed by RAI and C-III, which is backed by a catastrophic insurance policy. Substantially all of the receivables from related parties represent insurance deposits held in escrow by RAI and C-III related to the self-insurance pool which, if unused, will be returned to the Company. The pool covers losses up to $2.5 million, in aggregate, after a $25,000 deductible per incident. Claims beyond the insurance pool limits will be covered by the catastrophic insurance policy, which covers claims up to $250.0 million, after a $100,000 deductible per incident. Therefore, unforeseen or catastrophic losses in excess of the Company's insured limits could have a material adverse effect on the Company's financial condition and operating results. During the year ended December 31, 2017, the Company paid $403,180 into the insurance pools. General liability loss pool: The Company's properties also participated in a general liability pool with other properties directly or indirectly managed by RAI and C-III until April 22, 2017. The pool covered claims up to $50,000 per incident through April 22, 2017. Effective April 23, 2017, the loss pool was eliminated and the Company now participates (with other properties directly or indirectly managed by RAI and C-III) in a general liability policy. The insured limit for the general liability policy was $76.0 million in total claims, after a $25,000 deductible per incident. Directors and officers insurance: The Company participates in a liability insurance program for directors and officers coverage with other C-III managed entities and subsidiaries for coverage up to $100.0 million. The Company paid $204,000 during the year ended December 31, 2017. Internal audit fees. RAI performs internal audit services for the Company. Other expenses. The Company utilizes the services of The Planning and Zoning Resource Company, a subsidiary of C-III, for zoning reports and acquisitions. Relationship with the Manager The Manager manages real estate properties and real estate-related debt investments and coordinates the leasing of, and manages construction activities related to the Company’s real estate property pursuant to the terms of the management agreement with the Manager. Property management fees. The Manager earns a property management fee equal to 4.5% of actual gross cash receipts from the operations of real property investments. Construction management fees. The Manager earns a construction management fee of 5.0% of actual aggregate costs to construct improvements, or to repair, rehab or reconstruct a property. Debt servicing fees. The Manager earns a debt servicing fee of 2.75% on payments received from loans held by the Company for investment. No debt servicing fees were earned during the years ended December 31, 2017 and 2016. Expense reimbursement. During the ordinary course of business, the Manager or other affiliates of RAI may pay certain shared operating expenses on behalf of the Company. Relationship with Resource Securities, LLC. Resource Securities, LLC. (“Resource Securities”), an affiliate of the Advisor, served as the Company’s dealer-manager and was responsible for marketing the Company’s shares during the primary portion of its public offering. Pursuant to the terms of the dealer-manager agreement with Resource Securities, the Company paid Resource Securities a selling commission of up to 7% of gross primary offering proceeds and a dealer-manager fee of up to 3% of gross primary offering proceeds. Resource Securities reallowed all selling commissions earned and a portion of the dealer-manager fee as a marketing fee to participating broker-dealers. No selling commissions or dealer-manager fees are earned by Resource Securities in connection with sales under the distribution reinvestment plan. Relationship with Other Related Parties The Company utilizes the services of a printing company, Graphic Images, LLC (“Graphic Images”), the principal owner of which is the father of RAI’s Chief Financial Officer. The fees earned/expenses incurred and the amounts payable to such related parties are summarized in the following tables (in thousands):
(1) Included in Acquisition costs on the consolidated statements of operations and comprehensive loss. (2) Included in Management fees on the consolidated statements of operations and comprehensive loss. (3) Included in Mortgage notes payable, net on the consolidated balance sheets. (4) Included in Stockholders' equity on the consolidated balance sheets. As of December 31, 2017, all previously deferred offering costs have been reclassified to Stockholders' equity. (5) Included in General and administrative on the consolidated statements of operations and comprehensive loss. (6) Included in Stockholders' equity on the consolidated balance sheets. (7) Included in Rental properties, net on the consolidated balance sheets. (8) Included in Accounts payable and accrued expenses on the consolidated balance sheets. |
Equity |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity | EQUITY Preferred Stock The Company’s charter authorizes the Company to issue 10,000,000 shares of its $0.01 par value preferred stock. As of December 31, 2017 and 2016, no shares of preferred stock were issued or outstanding. Convertible Stock As of December 31, 2017, the Company had 50,000 shares of $0.01 par value convertible stock outstanding, which are owned by the Advisor. The convertible stock will convert into shares of the Company’s common stock upon the occurrence of (a) the Company having paid distributions to common stockholders that in the aggregate equal 100% of the price at which the Company originally sold the shares plus an amount sufficient to produce a 7% cumulative, non-compounded annual return on the shares at that price; or (b) if the Company lists its common stock on a national securities exchange and, on or after the 31st trading day following the listing, the Company’s value based on the average trading price of its common stock since the listing, plus prior distributions, combine to meet the same 7% return threshold. Each of these two events is a “Triggering Event.” Upon a Triggering Event, the Company's convertible stock will, unless its advisory agreement has been terminated or not renewed on account of a material breach by its Advisor, generally be converted into a number of shares of common stock equal to 1/50,000 of the quotient of:
(i) 15% of the amount, if any, by which
(B) the value of the Company divided by the number of outstanding shares of common stock, in each case, as of the date of the event triggering the conversion. No triggering events had occurred as of December 31, 2017. Common Stock As of December 31, 2017, the Company had an aggregate of 60,782,019 shares of $0.01 par value common stock outstanding, including the Advisor's additional purchase of 117,778 shares of common stock for $1.1 million, as follows (dollars in thousands):
Redemptions During the year ended December 31, 2017, the Company redeemed shares of common stock as follows (in thousands, except per share data):
All redemption requests tendered were honored during the year ended December 31, 2017. The Company will not redeem in excess of 5% of the weighted-average number of shares outstanding during the 12 month period immediately prior to the effective date of redemption. Generally, the cash available for redemption will be limited to proceeds from the distribution reinvestment plan plus, if the Company had positive operating cash flow from the previous fiscal year, 1% of all operating cash flow from the previous fiscal year. These limitations apply to all redemptions, including redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility. The Company's board of directors, in its sole discretion, may suspend, terminate or amend the Company's share redemption program without stockholder approval upon 30 days' notice if it determines that such suspension, termination or amendment is in the Company's best interest. The Company's board may also reduce the number of shares purchased under the share redemption program if it determines the funds otherwise available to fund the Company's share redemption program are needed for other purposes. These limitations apply to all redemptions, including redemptions sought upon a stockholder's death, qualifying disability or confinement to a long-term care facility. Distributions For the year ended December 31, 2017, the Company paid aggregate distributions of $35.8 million, including $15.1 million of distributions paid in cash and $20.7 million of distributions reinvested in shares of common stock through the Company's distribution reinvestment plan, as follows (in thousands):
On December 15, 2017, the Company's Board of Directors approved distributions in an amount of $0.00164384 per share of common stock for stockholders of record each day in the period from December 29, 2017 through and including March 29, 2018, payable on January 31, 2018, February 28, 2018 and April 2, 2018. The following is a reconciliation of total aggregate distributions paid to total distributions declared for the year ended December 31, 2017 (in thousands):
Distributions are payable in cash or reinvested in shares of common stock at the discretion of the shareholder. |
Fair Value Measures and Disclosures |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measures and Disclosures | FAIR VALUE MEASURES AND DISCLOSURES In analyzing the fair value of its investments accounted for on a fair value basis, the Company follows the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company determines fair value based on quoted prices when available or, if quoted prices are not available, through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. The fair values of cash, tenant receivables and accounts payable, approximate their carrying values due to their short nature. The hierarchy followed defines three levels of inputs that may be used to measure fair value: Level 1 - Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date. Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability. Level 3 - Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques. The determination of where an asset or liability falls in the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter; depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare. Derivatives (interest rate caps and swap) which are reported at fair value in the consolidated balance sheets are valued by a third party pricing agent using an income approach with models that use, as their primary inputs, readily observable market parameters. This valuation process considers factors including interest rate yield curves, time value, credit and volatility factors. (Level 2) The following table presents information about the Company's assets measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as follows (in thousands):
Interest rate caps and the cancelable swap are included in Prepaid expenses and other assets on the consolidated balance sheets. The outstanding balance and estimated fair value of the Company’s mortgage notes payable are as follows (in thousands):
The carrying amount of the mortgage notes payable presented is the outstanding borrowings excluding premium and deferred finance costs, net. The fair value of the mortgage notes payable was estimated using rates available to the Company for debt with similar terms and remaining maturities (Level 3). |
Derivatives and Hedging Activities |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives and Hedging Activities | DERIVATIVES AND HEDGING ACTIVITIES Risk Management Objective of Using Derivatives The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings. As a condition of the Company’s mortgage loans, from time to time the Company may be required to enter into certain derivative transactions as may be required by the lender. These transactions would generally be in line with the Company’s own risk management objectives and also serve to protect the lender. Interest Rate Caps The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company entered into interest rate caps that were designated as cash flow hedges. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the year ended December 31, 2017, such derivatives were used to hedge the variable cash flows, indexed to USD-London InterBank Offered Rate ("LIBOR"), associated with an existing variable-rate loan agreement. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the years ended December 31, 2017 and 2016, the Company recorded no hedge ineffectiveness in earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next 12 months, the Company estimates that an additional $112,646 will be reclassified as an increase to interest expense. Cancelable swaps To manage its exposure to interest rate movements, the Company has also entered into a cancelable interest rate swap that was not designated as a hedging instrument. Interest rate swaps involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements but do not meet the strict hedge accounting requirements. As of December 31, 2017, the Company had the following outstanding interest rate derivatives (dollars in thousands):
Tabular Disclosure of Fair Value of Derivative Instrument on the Balance Sheet The table below presents the fair value of the Company’s derivative financial instruments on the consolidated balance sheets as of December 31, 2017 and 2016 (in thousands):
Interest rate caps and the cancelable swap are included in Prepaid expenses and other assets on the consolidated balance sheets. The table below presents the effect of the Company's derivative financial instruments on the consolidated statements of operations and comprehensive loss for the years ended December 31, 2017 and 2016 (in thousands):
Credit-risk-related Contingent Features The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the company could also be declared in default on its derivative obligations. As of December 31, 2017, the Company has not posted any collateral related to these agreements. |
Operating Expenses |
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Dec. 31, 2017 | |
Other Income and Expenses [Abstract] | |
Operating Expenses | OPERATING EXPENSES As required under the Company's charter, the Advisor must reimburse the Company the amount by which the aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of the average invested assets or 25% of net income, unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. “Average invested assets” means the average monthly book value of assets invested, directly or indirectly, in equity interests in and loans secured by real estate during the 12-month period before deducting depreciation, bad debts or other non-cash reserves. “Total operating expenses” means all expenses paid or incurred by the Company, as determined under GAAP, that are in any way related to operations, including advisory fees, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and stock exchange listing of stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of assets; and (f) acquisition fees, acquisition expenses (including expenses relating to potential investments that do not close), disposition fees on the resale of property and other expenses connected with the acquisition, disposition and ownership of real estate interests, loans or other property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property). Operating expenses for the four quarters ended December 31, 2017 did not exceed the charter imposed limitation. |
Subsequent Events |
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Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | SUBSEQUENT EVENTS On March 28, 2018, the Board of Directors approved the following distributions: daily amount of $0.00164384 per share of common stock for the period from March 30, 2018 through and including June 28, 2018, payable on April 30, 2018, May 31, 2018 and June 29, 2018. The Company has evaluated subsequent events and determined that no events have occurred, other than those disclosed above, which would require an adjustment to the consolidated financial statements. |
Schedule III Real Estate and Accumulated Depreciation |
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SEC Schedule III, Real Estate and Accumulated Depreciation Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEC Schedule III Real Estate and Accumulated Depreciation Disclosure [Text Block] |
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Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with the accounting principles generally accepted in the United States of America ("GAAP"). |
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Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries as follows:
N/A - Not Applicable All intercompany accounts and transactions have been eliminated in consolidation. |
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Segment Reporting | Segment Reporting The Company does not evaluate performance on a relationship specific or transactional basis and does not distinguish its principal business or group its operations on a geographical basis for purposes of measuring performance. Accordingly, the Company believes it has a single operating segment for reporting purposes in accordance with GAAP. |
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Use of Estimates | Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. |
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Concentration of Credit Risk | Concentration of Credit Risk Financial instruments, which potentially subject the Company to concentration of credit risk, consist of periodic temporary deposits of cash. At December 31, 2017, the Company had $78.8 million of deposits at various banks, $69.8 million of which were over the insurance limit of the Federal Deposit Insurance Corporation. No losses have been experienced on such deposits. |
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Real Estate Investments | Rental Properties The Company records acquired real estate at fair value on their acquisition date. The Company considers the period of future benefit of an asset to determine its appropriate useful life, and depreciates the asset using the straight line method. The Company's estimated useful lives of its assets by class are as follows:
Improvements and replacements in excess of $1,000 are capitalized when they have a useful life greater than or equal to one year. The Manager earns a construction management fee of 5.0% of actual aggregate costs to construct improvements, or to repair, rehab or reconstruct a property. These costs are capitalized along with the related asset. Costs of repairs and maintenance are expensed as incurred. As four of the Company's multifamily properties are located in the Dallas-Fort Worth area, three properties are located in the Chicago area, two properties are located in Portland, Oregon, two properties are located in the Atlanta area and two properties are located in the Denver area, the Company's portfolio is currently particularly susceptible to adverse economic developments in these real estate markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for multifamily rentals resulting from the local business climate, could negatively affect the Company's liquidity and adversely affect its ability to fund its ongoing operations. |
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Impairment of Long-Lived Assets | Impairment of Long Lived Assets When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If impairment exists, due to the inability to recover the carrying value of a property, an impairment loss will be recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income. The Company did not recognize any impairment charges during the year ended December 31, 2017 and 2016. |
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Allocation of Purchase Price of Acquired Assets | Allocation of Purchase Price of Acquired Assets The Company records the acquisition of real properties as business combinations. Upon the acquisition of real properties, the Company allocates the purchase price of properties to acquired tangible assets, consisting of land, buildings, fixtures and improvements, identified intangible lease assets, consisting of the value of above-market and below-market leases, as applicable, the value of in-place leases, the value of tenant relationships, and liabilities, based in each case on their fair values. Fair value estimates are based on information obtained from a number of sources, including information obtained about each property as a result of pre-acquisition due diligence, marketing and leasing activities. In addition, the Company may obtain independent appraisal reports. The information in the appraisal reports, along with the aforementioned information available to the Company's management, is used in allocating the purchase price. The independent appraisers have no involvement in management's allocation decisions other than providing market information. The Company records above-market and below-market in-place lease values for acquired properties based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The Company amortizes any capitalized above-market or below-market lease values as an increase or reduction to rental income over the remaining non-cancelable terms of the respective leases. The Company measures the aggregate value of other intangible assets acquired based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued as if vacant. Management’s estimates of value are expected to be made using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis). Factors to be considered by management in its analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods. Management also estimates costs to execute similar leases including leasing commissions and legal and other related expenses to the extent that such costs have not already been incurred in connection with a new lease origination as part of the transaction. The total amount of other intangible assets acquired is further allocated to customer relationship intangible values based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with that respective tenant. Characteristics considered by management in allocating these values include the nature and extent of the Company’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals (including those existing under the terms of the lease agreement), among other factors. The Company amortizes the value of in-place leases to expense over the remaining term of the respective leases. The value of customer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event do amortization periods for the intangible assets exceed the remaining depreciable life of the building. Should a tenant terminate its lease, the unamortized portion of the in-place lease value and customer relationship intangibles would be charged to expense in that period. The determination of the fair value of the assets and liabilities acquired requires the use of significant assumptions with regard to current market rental rates, discount rates and other variables. These estimates are subject to change until all information is finalized, which is generally within one year of the acquisition date. |
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Revenue Recognition | Revenue Recognition The Company recognizes minimum rent, including rental abatements and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related lease and includes amounts expected to be received in later years. The future minimum rental payments to be received from noncancelable operating leases are approximately $43.1 million and $889,000 for the years ending December 31, 2017 and 2018, and none thereafter. Revenue is primarily derived from the rental of residential housing units, however, included within rental income is other income such as pet fees, parking fees, and late fees, as well as property operating expense reimbursements due from tenants for common area maintenance, real estate taxes and other recoverable costs. The Company records the ancillary charges in the period they are earned or received and records the reimbursements in the period in which the related expenses incurred. Total other income included within rental income was $7.3 million and $2.6 million for the years ended December 31, 2017 and 2016, respectively. |
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Tenant Receivables | Tenant Receivables The Company makes estimates of the collectability of its tenant receivables related to base rents, including straight-line rentals, expense reimbursements and other revenue or income. The Company specifically analyzes accounts receivable and historical bad debts, tenant creditworthiness, current economic trends when evaluating the adequacy of the allowance for doubtful accounts. In addition, with respect to tenants in bankruptcy, the Company makes estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectability of the related receivable. In some cases, the ultimate resolution of these claims can exceed one year. At December 31, 2017 and 2016, there were allowances for uncollectible receivables of $4,674 and $5,009, respectively. |
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Income Taxes | Income Taxes The Company elected to be taxed as a REIT, commencing with its taxable year ended December 31, 2014. To maintain its REIT qualification for U.S. federal income tax purposes, the Company is generally required to distribute at least 90% of its taxable net income (excluding net capital gains) to its stockholders as well as comply with other requirements, including certain asset, income and stock ownership tests. As a REIT, the Company is not subject to federal corporate income tax to the extent that it distributes 100% of its REIT taxable income each year. If the Company fails to qualify as a REIT, and does not qualify for certain statutory relief provisions, it is subject to U.S. federal, state and local income taxes and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year in which it fails its REIT qualification. Accordingly, the Company’s failure to qualify as a REIT could have a material adverse impact on its results of operations and amounts available for distribution to its stockholders. The dividends paid deduction of a REIT for qualifying dividends to its stockholders is computed using the Company’s taxable income as opposed to net income reported on the financial statements. Taxable income, generally, will differ from net income reported on the financial statements because the determination of taxable income is based on tax provisions and not financial accounting principles. The Company may elect to treat certain of its subsidiaries as taxable REIT subsidiaries (“TRSs”). In general, the Company’s TRSs may hold assets and engage in activities that the Company cannot hold or engage in directly and generally may engage in any real estate or non-real estate-related business. A TRS is subject to U.S. federal, state and local corporate income taxes. While a TRS may generate net income, a TRS can declare dividends to the Company which will be included in the Company’s taxable income and necessitate a distribution to its stockholders. Conversely, if the Company retains earnings at a TRS level, no distribution is required and the Company can increase book equity of the consolidated entity. As of December 31, 2017 and 2016, the Company had no TRSs. The Company evaluates the benefits from tax positions taken or expected to be taken in its tax return. Only the largest amount of benefits from tax positions that will more likely than not be sustainable upon examination are recognized by the Company. The Company does not have any unrecognized tax benefits, nor interest and penalties, recorded in its consolidated financial statements and does not anticipate significant adjustments to the total amount of unrecognized tax benefits within the next 12 months. Legislation commonly known as the Tax Cuts and Jobs Act ("TCJA") was signed into law on December 22, 2017. The TCJA makes significant changes to the U.S. federal income tax rules for taxation of individuals and corporations (including REIT's), generally effective for taxable years beginning after December 31, 2017. The Company is continuing to evaluate this legislation but it does not expect it to have a significant impact. The Company is subject to examination by the U.S. Internal Revenue Service and by the taxing authorities in other states in which the Company has significant business operations. The Company is not currently undergoing any examinations by taxing authorities. The Company is not subject to IRS examination for the tax return years 2013 and prior. |
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Earnings Per Share | Earnings Per Share Basic earnings (loss) per share is calculated on the basis of weighted-average common shares outstanding during the year. Basic earnings (loss) per is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted to common stock. None of the convertible shares (see Note 11) are included in the diluted earnings per share calculations because the necessary conditions for conversion have not been satisfied as of December 31, 2017 were such date to represent the end of the contingency period). For the years ended December 31, 2017 and 2016, common shares potentially issuable to settle distributions payable are excluded from the calculation of diluted earnings per share calculations, as their inclusion would be anti-dilutive. All common shares and per common share information in the consolidated financial statements have been adjusted retroactively for the effect of one 0.625% stock distribution issued on July 14, 2014, one 1.00% stock distribution issued on October 15, 2014, one 0.83333% stock distribution issued on January 15, 2015, one 0.5% stock distribution issued on April 15, 2015, and one 0.5% stock distribution issued on July 15, 2015. |
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Organization and Offering Costs | Organization and Offering Costs The Company incurred organizational, accounting, and offering costs in pursuit of its financing. Organization and offering costs (other than selling commissions and dealer-manager fees) of the Company were initially paid by the Advisor on behalf of the Company. Organization costs were expensed as incurred and included all expenses incurred by the Company in connection with the formation of the Company, including but not limited to legal fees and other costs to incorporate the Company. Pursuant to the Amended and Restated Advisory Agreement between the Company and the Advisor dated January 9, 2014 (the “Advisory Agreement”), the Company was obligated to reimburse the Advisor for organizational and offering costs it incurred on the Company's behalf, but only to the extent that such reimbursements would not cause organizational and offering expenses (other than selling commissions and the dealer manager fees) to exceed 2.5% of the gross offering proceeds raised in the offering, when recorded by the Company. The primary portion of the offering closed on February 6, 2016, at which point total organizational and offering costs incurred did not exceed 2.5% of the gross offering proceeds raised in the offering. During the offering period, the Company incurred $11.2 million of offering costs consisting of accounting, advertising, allocated payroll, due diligence, marketing, legal and similar costs. During the offering period, the Advisor paid $7.2 million of these costs on behalf of the Company, all of which have been reimbursed. A portion of these costs were charged to equity upon the sale of each share of common stock sold under the public offering. Similarly, a portion of the proceeds received from the sales of shares in the Company's public offering was paid to the Advisor to reimburse it for the amount incurred on behalf of the Company. |
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Adoption of New Accounting Standards | Adoption of New Accounting Standards Accounting Standards Issued But Not Yet Effective In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” ("ASU No. 2014-09"), which will replace most existing revenue recognition guidance in GAAP. Under the new standard, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. ASU No. 2014-09 requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The Company will adopt ASU 2014-09 as of January 1, 2018 using the modified retrospective approach. The majority of the Company’s revenue is derived from residential rental income and other lease income, which are scoped out from this standard and included in the current lease accounting framework, and will be accounted for under ASU No. 2016-02, Leases, as discussed below. Revenue streams that are in the scope of the new standards include (but are not limited to) administrative and late fees and revenue sharing arrangements of cable income from contracts with cable providers at our properties. Due to the nature and timing of the Company’s identified revenue streams as of December 31, 2017, the Company does not anticipate the adoption of the new standards will have a material impact on its financial position or results of operations. In February 2016, FASB issued ASU No. 2016-02, "Leases" ("ASU No. 2016-02"), which is intended to improve financial reporting about leasing transactions and requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. In September 2017, FASB issued ASU 2017-13, "Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842)", which provides additional implementation guidance on the previously issued ASU No. 2016-02. ASU No. 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is continuing to evaluate this guidance, however, the Company expects that its operating leases where it is the lessor will be accounted for on its balance sheet similar to its current accounting with the underlying leased asset recognized as real estate. The Company expects that executory costs and certain other non-lease components will need to be accounted for separately from the lease component of the lease with the lease component continuing to be recognized on a straight-line basis over the lease term and the executory costs and certain other non-lease components being accounted for under the new revenue recognition guidance in ASU 2014-09. For leases in which the Company is the lessee, primarily consisting of office equipment leases, the Company expects to recognize a right-of-use asset and a lease liability equal to the present value of the minimum lease payments with rental payments being applied to the lease liability and to interest expense and the right-of-use asset being amortized to expense on a straight-line basis over the term of the lease. In June 2016, FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses” (ASU No. 2016-13"), which requires measurement and recognition of expected credit losses for financial assets held. ASU No. 2016-13 will be effective for the Company beginning January 1, 2019. The Company is evaluating this guidance; however, it does not expect the adoption of ASU No. 2016-13 to have a significant impact on its consolidated financial statements. In August 2016, FASB issued ASU No. 2016-15, "Classification of Certain Cash Receipts and Cash Payments", which addresses eight specific cash flow issues with the objective of reducing existing diversity in practice. ASU No. 2016-15 will be effective for the Company beginning January 1, 2018. Early application is permitted. The Company is evaluating this guidance; however, it does not expect the adoption of ASU No. 2016-15 to have a significant impact on its reporting of consolidated cash flows. In January 2017, FASB issued ASU No. 2017-01, "Business Combinations (Topic 850): Clarifying the Definition of Business" (ASU No. 2017-01"), which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. ASU No. 2017-01 will be effective for the Company beginning January 1, 2018. Early application is permitted. The Company is evaluating this guidance and assessing the impact of this guidance on its consolidated financial statements. In January 2017, FASB issued ASU No. 2017-04, "Intangibles- Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment" (ASU No. 2017-04"), which alters the current goodwill impairment testing procedures. ASU No. 2017-04 will be effective for the Company beginning December 15, 2019. Early application is permitted. The Company is evaluating this guidance and assessing the impact of this guidance on its consolidated financial statements. In August 2017, FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities", which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. The update to the standard is effective for the Company on January 1, 2019, with early adoption permitted in any interim period. The Company is continuing to evaluate this guidance and assessing the impact of this guidance on its consolidated financial statements. |
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Fair value measurement | In analyzing the fair value of its investments accounted for on a fair value basis, the Company follows the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company determines fair value based on quoted prices when available or, if quoted prices are not available, through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. The fair values of cash, tenant receivables and accounts payable, approximate their carrying values due to their short nature. The hierarchy followed defines three levels of inputs that may be used to measure fair value: Level 1 - Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date. Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability. Level 3 - Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques. The determination of where an asset or liability falls in the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter; depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare. Derivatives (interest rate caps and swap) which are reported at fair value in the consolidated balance sheets are valued by a third party pricing agent using an income approach with models that use, as their primary inputs, readily observable market parameters. This valuation process considers factors including interest rate yield curves, time value, credit and volatility factors. (Level 2) |
Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Wholly-Owned Subsidiaries | The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries as follows:
N/A - Not Applicable |
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Real Estate Investments | The Company's estimated useful lives of its assets by class are as follows:
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Supplemental Cash Flow Information (Tables) |
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Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information | The following table presents supplemental cash flow information (in thousands):
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Restricted Cash (Tables) |
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Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Components of Restricted Cash | A summary of the components of restricted cash follows (in thousands):
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Rental Properties, Net (Tables) |
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Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Investments in Rental Properties | The Company’s investments in rental properties consisted of the following (in thousands):
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Acquisitions (Tables) |
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Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Acquisitions and Assigned Fair Values | The table below summarizes the Company's wholly-owned acquisitions during the year ended December 31, 2017 and the respective fair values assigned (in thousands):
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Fair Value of Net Assets Acquired | The table below summarizes the total revenues, net loss, and acquisition costs of the Company's 2017 acquisitions (in thousands):
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Mortgage Notes Payable, Net (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Mortgage Notes Payable | The following table presents a summary of the Company's mortgage notes payable, net (in thousands):
The following table presents additional information about the Company's mortgage notes payable, net (in thousands, except percentages):
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Annual Principal Payments on Mortgage Notes Payable for Next Five Years | Annual principal payments on the mortgage notes payable for each of the next five years ending December 31, and thereafter, is as follows (in thousands):
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Schedule of Deferred Financing Costs | Amortization of deferred financing costs for the next five years ending December 31, and thereafter, are as follows (in thousands):
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Accumulated Other Comprehensive Loss (Tables) |
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Loss | The following table presents the changes in accumulated other comprehensive loss for the year ended December 31, 2017 (in thousands):
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Certain Relationships And Related Party Transactions (Tables) |
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Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fees Earned/Expenses Incurred and Amounts Payable to Related Parties | The fees earned/expenses incurred and the amounts payable to such related parties are summarized in the following tables (in thousands):
(1) Included in Acquisition costs on the consolidated statements of operations and comprehensive loss. (2) Included in Management fees on the consolidated statements of operations and comprehensive loss. (3) Included in Mortgage notes payable, net on the consolidated balance sheets. (4) Included in Stockholders' equity on the consolidated balance sheets. As of December 31, 2017, all previously deferred offering costs have been reclassified to Stockholders' equity. (5) Included in General and administrative on the consolidated statements of operations and comprehensive loss. (6) Included in Stockholders' equity on the consolidated balance sheets. (7) Included in Rental properties, net on the consolidated balance sheets. (8) Included in Accounts payable and accrued expenses on the consolidated balance sheets. |
Equity (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Common Stock | During the year ended December 31, 2017, the Company redeemed shares of common stock as follows (in thousands, except per share data):
As of December 31, 2017, the Company had an aggregate of 60,782,019 shares of $0.01 par value common stock outstanding, including the Advisor's additional purchase of 117,778 shares of common stock for $1.1 million, as follows (dollars in thousands):
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Schedule of Dividends | The following is a reconciliation of total aggregate distributions paid to total distributions declared for the year ended December 31, 2017 (in thousands):
Distributions are payable in cash or reinvested in shares of common stock at the discretion of the shareholder. For the year ended December 31, 2017, the Company paid aggregate distributions of $35.8 million, including $15.1 million of distributions paid in cash and $20.7 million of distributions reinvested in shares of common stock through the Company's distribution reinvestment plan, as follows (in thousands):
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Fair Value Measures and Disclosures (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assets Measured at Fair Value on a Recurring Basis | The following table presents information about the Company's assets measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as follows (in thousands):
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Schedule of Carrying and Fair Values of Assets and Liabilities | The outstanding balance and estimated fair value of the Company’s mortgage notes payable are as follows (in thousands):
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Derivatives and Hedging Activities (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Interest Rate Derivatives | As of December 31, 2017, the Company had the following outstanding interest rate derivatives (dollars in thousands):
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Schedule of Fair Value of Derivative Financial Instruments | The table below presents the fair value of the Company’s derivative financial instruments on the consolidated balance sheets as of December 31, 2017 and 2016 (in thousands):
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Summary of Effects of Derivatives on Consolidated Statements of Operations and Comprehensive Loss | The table below presents the effect of the Company's derivative financial instruments on the consolidated statements of operations and comprehensive loss for the years ended December 31, 2017 and 2016 (in thousands):
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Summary of Significant Accounting Policies - Real Estate Investments (Details) |
12 Months Ended |
---|---|
Dec. 31, 2017 | |
Building | |
Property, Plant and Equipment [Line Items] | |
Real estate investments, useful life | 27 years 6 months |
Building Improvements | Minimum | |
Property, Plant and Equipment [Line Items] | |
Real estate investments, useful life | 5 years |
Building Improvements | Maximum | |
Property, Plant and Equipment [Line Items] | |
Real estate investments, useful life | 27 years 6 months |
Furniture and fixtures | Minimum | |
Property, Plant and Equipment [Line Items] | |
Real estate investments, useful life | 3 years |
Furniture and fixtures | Maximum | |
Property, Plant and Equipment [Line Items] | |
Real estate investments, useful life | 5 years |
Supplemental Cash Flow Information (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Non-cash financing and investing activities: | ||
Distributions on common stock declared but not yet paid | $ 9,112,000 | $ 8,769,000 |
Stock issued from distribution reinvestment plan | 20,685,000 | 20,608,000 |
Rental property and other assets acquired through assumption of mortgage notes payable | 0 | 28,704,000 |
Mortgage note payable used to acquire real property | 29,990,000 | 0 |
Cash paid during the period for: | ||
Interest | $ 20,324,000 | $ 9,082,000 |
Restricted Cash (Details) - USD ($) $ in Thousands |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Restricted cash | $ 7,668 | $ 6,620 |
Unrestricted cash designated for capital expenditures | 42,640 | 71,738 |
Real estate taxes | ||
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Restricted cash | 4,594 | 3,252 |
Insurance | ||
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Restricted cash | 973 | 671 |
Capital improvements | ||
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Restricted cash | 1,693 | 2,697 |
Other | ||
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Restricted cash | $ 408 | $ 0 |
Rental Properties, Net (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Rental Properties, Net | ||
Land | $ 123,863 | $ 108,587 |
Building and improvements | 748,062 | 629,060 |
Furniture, fixtures and equipment | 21,743 | 36,307 |
Construction in progress | 5,061 | 7,641 |
Rental properties, gross | 898,729 | 781,595 |
Less: accumulated depreciation | (61,758) | (27,007) |
Rental properties, net | 836,971 | 754,588 |
Depreciation expense | $ 35,100 | $ 21,900 |
Acquisitions - Summary of Acquisitions (Details) $ in Thousands |
Oct. 31, 2017
USD ($)
|
Apr. 04, 2017
USD ($)
|
Dec. 31, 2017
property
|
---|---|---|---|
Business Acquisition [Line Items] | |||
Number of properties owned | property | 18 | ||
Indigo Creek | |||
Business Acquisition [Line Items] | |||
Contractual Purchase Price | $ 55,200 | ||
Land | 7,202 | ||
Building and Improvements | 46,348 | ||
Furniture, Fixture and Equipment | 508 | ||
Intangible Assets | 1,143 | ||
Debt Assumed | 0 | ||
Other Liabilities | $ (97) | ||
Martin's Point | |||
Business Acquisition [Line Items] | |||
Contractual Purchase Price | $ 38,250 | ||
Land | 8,074 | ||
Building and Improvements | 28,485 | ||
Furniture, Fixture and Equipment | 646 | ||
Intangible Assets | 1,045 | ||
Debt Assumed | 0 | ||
Other Liabilities | $ (786) |
Acquisitions - Summary of Revenues, Net Losses and Acquisition Costs (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Business Acquisition [Line Items] | ||
Total Revenues | $ 77,240 | $ 52,928 |
Net Loss | (37,691) | (44,161) |
Acquisition costs | 2,199 | $ 9,079 |
Indigo Creek | ||
Business Acquisition [Line Items] | ||
Total Revenues | 3,631 | |
Net Loss | (1,877) | |
Acquisition costs | 51 | |
Acquisition Fee | 1,141 | |
Martin's Point | ||
Business Acquisition [Line Items] | ||
Total Revenues | 709 | |
Net Loss | (441) | |
Acquisition costs | 140 | |
Acquisition Fee | $ 780 |
Identified Intangible Assets, Net (Details) - Acquired in-place leases - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
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Finite-Lived Intangible Assets [Line Items] | ||
Acquired in-place leases, net | $ 18,500,000 | $ 16,300,000 |
Acquired in-place leases, accumulated amortization | $ 17,700,000 | $ 13,600,000 |
Weighted-average remaining life of rental leases | 7 months | 5 months |
Amortization | $ 4,100,000 | $ 9,100,000 |
Expected amortization for the rental leases for the next year | 813,000 | |
Expected amortization for the rental lease after year one | $ 0 |
Mortgage Notes Payable, Net - Narrative (Details) - USD ($) $ in Thousands |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Debt Instrument [Line Items] | ||
Weighted average interest rate of debt outstanding | 3.79% | |
Restricted cash | $ 7,668 | $ 6,620 |
The Brookwood | ||
Debt Instrument [Line Items] | ||
Premium, net | $ 429 |
Mortgage Notes Payable, Net - Annual Principal Payments on Mortgage Notes Payable (Details) $ in Thousands |
Dec. 31, 2017
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2018 | $ 6,068 |
2019 | 9,915 |
2020 | 43,206 |
2021 | 54,425 |
2022 | 58,662 |
Thereafter | 393,646 |
Mortgage notes payable | $ 565,922 |
Mortgage Notes Payable, Net - Deferred Financing Costs (Details) - USD ($) |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Amortization of deferred financing costs | $ 2,044,007 | $ 876,721 |
2018 | 1,236,000 | |
2019 | 1,218,000 | |
2020 | 1,142,000 | |
2021 | 952,000 | |
2022 | 772,000 | |
Thereafter | 866,000 | |
Deferred financing costs, net | $ 6,186,000 |
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Balance, beginning of period | $ (390,892) | $ (420,272) |
Designated derivatives, fair value adjustment | 370 | 43 |
Balance, end of period | (330,660) | (390,892) |
Net unrealized (loss) gain on derivatives | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Balance, beginning of period | (74) | (117) |
Balance, end of period | $ 444 | $ (74) |
Equity - Schedule of Common Stock (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Class of Stock [Line Items] | ||
Shares Issued (in shares) | 60,782,019 | 59,160,177 |
Gross Proceeds | $ 606,279 | |
Shares issued before redemption and retirement | 61,728,410 | |
Total shares redeemed and retired (in shares) | (946,391) | |
Total shares redeemed and retired, Gross Proceeds | $ (8,235) | |
Common stock, shares outstanding (in shares) | 60,782,019 | 59,160,177 |
Proceeds from common stock outstanding | $ 598,044 | |
Initial public offering | ||
Class of Stock [Line Items] | ||
Shares Issued (in shares) | 55,791,297 | |
Gross Proceeds | $ 556,197 | |
Stock distribution | ||
Class of Stock [Line Items] | ||
Shares Issued (in shares) | 246,365 | |
Gross Proceeds | $ 0 | |
Distribution reinvestment plan | ||
Class of Stock [Line Items] | ||
Shares Issued (in shares) | 5,675,748.004 | |
Gross Proceeds | $ 49,932 | |
Advisor's Initial Investment | ||
Class of Stock [Line Items] | ||
Shares Issued (in shares) | 15,000 | |
Gross Proceeds | $ 150 | |
Share conversion (in shares) | 5,000 |
Equity - Schedule of Redemptions (Details) - $ / shares shares in Thousands |
1 Months Ended | |||||||||||
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Dec. 31, 2017 |
Nov. 30, 2017 |
Oct. 31, 2017 |
Sep. 30, 2017 |
Aug. 31, 2017 |
Jul. 31, 2017 |
Jun. 30, 2017 |
May 31, 2017 |
Apr. 30, 2017 |
Mar. 31, 2017 |
Feb. 28, 2017 |
Jan. 31, 2017 |
|
Equity [Abstract] | ||||||||||||
Total Number of Shares Redeemed | 128 | 0 | 0 | 336 | 0 | 0 | 188 | 0 | 0 | 121 | 0 | 0 |
Average Price Paid per Share (in dollars per share) | $ 8.68 | $ 0.00 | $ 0.00 | $ 8.59 | $ 0.00 | $ 0.00 | $ 8.60 | $ 0.00 | $ 0.00 | $ 8.74 | $ 0.00 | $ 0.00 |
Cumulative Number of Shares Purchased as Part of a Publicly Announced Plan or Program | 773 | 0 | 645 | 309 | 121 |
Equity - Schedule of Dividends Declared (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Equity [Abstract] | ||
Total Aggregate Distributions | $ 35,780 | |
Distribution payable | 9,112 | $ 8,769 |
Total distributions declared | $ 36,123 |
Derivatives and Hedging Activities - Narrative (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Gain (loss) reclassified to earnings | $ 0 | $ 0 |
Income (loss) related to derivatives that is expected to be reclassified | $ (112,646) |
Derivatives and Hedging Activities - Outstanding Interest Rate Derivatives (Details) $ in Thousands |
Dec. 31, 2017
USD ($)
derivative_contract
|
---|---|
Designated as hedging instruments | Interest rate caps | |
Derivatives, Fair Value [Line Items] | |
Number of Instruments | derivative_contract | 12 |
Notional Amount | $ | $ 388,931 |
Not designated as hedging instruments | Cancelable swap | |
Derivatives, Fair Value [Line Items] | |
Number of Instruments | derivative_contract | 1 |
Notional Amount | $ | $ 31,826 |
Derivatives and Hedging Activities - Fair Value of Derivative Instruments and Balance Sheet Classification (Details) - USD ($) $ in Thousands |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Designated as hedging instruments | Interest rate caps | ||
Derivatives, Fair Value [Line Items] | ||
Asset Derivatives, Fair Value | $ 58 | $ 365 |
Liabilities Derivatives, Fair Value | 0 | 0 |
Not designated as hedging instruments | Cancelable swap | ||
Derivatives, Fair Value [Line Items] | ||
Asset Derivatives, Fair Value | 166 | 43 |
Liabilities Derivatives, Fair Value | $ 0 | $ 0 |
Derivatives and Hedging Activities - Gain (Loss) Recognized in Income (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Interest rate caps | Designated as hedging instruments | Interest expense | ||
Derivative [Line Items] | ||
Amount of Gain (Loss) Recognized in Income | $ 70 | $ 10 |
Cancelable swap | Not designated as hedging instruments | Interest expense | ||
Derivative [Line Items] | ||
Amount of Gain (Loss) Recognized in Income | 135 | 283 |
Interest rate products | Designated as hedging instruments | ||
Derivative [Line Items] | ||
Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) | (440) | 33 |
Interest rate products | Designated as hedging instruments | Interest expense | ||
Derivative [Line Items] | ||
Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | $ (70) | $ (10) |
Operating Expenses - Narrative (Details) |
12 Months Ended |
---|---|
Dec. 31, 2017 | |
Other Income and Expenses [Abstract] | |
Operating support from advisor, required reimbursement when threshold exceeded, commencement period | 12 months |
Limitation on total operating expenses, percentage of average invested assets for the four most recently completed fiscal quarter | 2.00% |
Limitation on total operating expenses, percentage of net income for the four most recently completed fiscal quarter | 25.00% |
Schedule III Real Estate and Accumulated Depreciation - Reconciliations (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Investments in real estate: | ||
Balance at beginning of the year | $ 781,595 | $ 392,620 |
Additions during the year: | 0 | 0 |
Acquisitions | 91,262 | 361,558 |
Improvements, etc. | 26,956 | 31,334 |
Dispositions during the year: | (1,084) | (3,917) |
Balance at end of year | 898,729 | 781,595 |
Accumulated Depreciation: | ||
Balance at beginning of year | (27,007) | (5,295) |
Depreciation | (35,071) | (21,870) |
Disposals | 320 | 158 |
Balance at the end of year | $ (61,758) | $ (27,007) |
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