10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

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

For the transition period from __________ to __________

Commission file number 000-55430

Resource REIT, Inc.

(Exact name of registrant as specified in its charter)

Maryland	80-0854717
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1845 Walnut Street, 17th Floor, Philadelphia, PA 19103

(Address of principal executive offices) (Zip code)

(215) 231-7050

(Registrant's telephone number, including area code)

Resource Real Estate Opportunity REIT II, Inc.

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of exchange on which registered
None	None	None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.01 per share

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑  No ☐

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

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

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

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

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Yes ☐  No ☑

There is no established market for the registrant’s shares of common stock.  On March 24, 2021, the board of directors of the Registrant approved an estimated value per share of the Registrant’s common stock of $9.06. For a full description of the methodologies used to calculate the Registrant’s estimated value per share as of January 28, 2021, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information.” There were 60,051,682 shares of common stock held by non-affiliates as of June 30, 2020, the last business day of the registrant's most recently completed second fiscal quarter, for an aggregate market value of $545,269,273, assuming an estimated value per share of $9.08, which was the Registrant’s estimated value per share as of December 31, 2019 as determined by its board of directors on March 19, 2020.

For a full description of the methodologies used to calculate the Registrant’s estimated value per share as of December 31, 2019, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Market Information” in the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2019. As of March 23, 2021, there were 157,560,096 outstanding shares of common stock of Resource REIT, Inc.  

Registrant incorporates by reference portions of the Resource REIT, Inc. Definitive Proxy Statement for the 2021 Annual Meeting of Stockholders (Items 10, 11, 12, 13, and 14 of Part III).

RESOURCE REIT, INC.

INDEX TO ANNUAL REPORT

ON FORM 10-K

		PAGE
	Forward Looking Statements
PART I
Item 1.	Business	4
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	29
Item 2.	Properties	30
Item 3.	Legal Proceedings	31
Item 4.	Mine Safety Disclosures	31
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32
Item 6	Selected Financial Data	39
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	40
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	59
Item 8.	Financial Statements and Supplementary Data	59
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	60
Item 9A.	Controls and Procedures	60
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	61
Item 11.	Executive Compensation	61
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters	61
Item 13.	Certain Relationships and Related Transactions, and Director Independence	61
Item 14.	Principal Accounting Fees and Services	61
PART IV.
Item 15.	Exhibits and Financial Statement Schedule	62
Item 16.	Form 10-K Summary	64
SIGNATURES		65

Forward-Looking Statements

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

For a discussion of some of the risks and uncertainties, although not all risks and uncertainties, that could cause actual results to differ materially from those presented in our forward-looking statements, see the risks identified in “Summary Risk Factors” below and in Part I, Item 1A of this Annual Report on Form 10-K.

SUMMARY RISK FACTORS

The following is a summary of the principal risks that could adversely affect our business, financial condition, results of operations and cash flows and an investment in our common stock.  This summary highlights certain of the risks that are discussed further in this Annual Report but does not address all the risks that we face.  For additional discussion of the risks summarized below and a discussion of other risks that we face, see “Risk Factors” in Part I, Item 1A of this Annual Report. You should interpret many of the risks identified in this summary and under “Risk Factors” as being heightened as a result of the ongoing and numerous adverse impacts of the novel coronavirus disease (“COVID-19”) pandemic.

• The COVID-19 pandemic, together with the resulting measures imposed to contain the virus, has had a negative impact on the economy and business activity globally. The extent to which the COVID-19 pandemic impacts our operations and those of our tenants remains uncertain and cannot be predicted with confidence, and will depend on the ultimate scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.

• We are a newly self-managed REIT and although we no longer pay fees to our external advisor and property manager, we will be responsible for employee compensation costs and liabilities as well as the overhead expense previously paid by our external advisor.  In addition, we may encounter unforeseen costs, expenses and difficulties associated with providing services related to our operations on a self-managed basis.  If we encounter unexpected costs as a result of our self-management, or we do not successfully integrate the services previously provided by our external advisor, our results of operations could be lower than they otherwise would.

• We rely on key personnel for our future success and the loss of key personnel or inability to attract and retain key personnel could harm our business.  

• We may fund distributions from any source, including, without limitation, offering proceeds or borrowings. Distributions paid through December 31, 2020 have been funded in part with debt financing, cash from dispositions and cash flow from operations. Distributions funded from sources other than our cash flow from operations will reduce funds available for investment in assets, may reduce the overall return to our stockholders, and will result in dilution to subsequent investors.

• Our policies do not limit us from incurring debt until our aggregate borrowings would exceed 75% of the cost (before deducting depreciation or other non-cash reserves) of our tangible assets, and we may exceed this limit with the approval of the conflicts committee of our board of directors. High debt levels could limit the amount of cash we have available to distribute and could result in a decline in the value of our stockholders’ investment.

• We have debt obligations with variable interest rates. The interest and related payments will vary with the movement of LIBOR or other indexes. Increases in the indexes could increase the amount of our debt payments and limit our ability to pay distributions to our stockholders.

• We depend on residents at our multifamily apartments for the revenue generated by our real estate investments and, accordingly, the revenue generated by our real estate investments is dependent upon the financial position of our residents. Revenues from our properties could decrease due to a reduction in occupancy and/or lower rental rates, making it more difficult for us to meet any debt service obligations we have incurred and limiting our ability to pay distributions to our stockholders.

• Our real estate investments may be affected by an unfavorable real estate market and general economic conditions, which could decrease the value of those assets and reduce the investment return to our stockholders. These events could make it more difficult for us to meet debt service obligations and limit our ability to pay distributions to our stockholders.

• Our share redemption program is suspended except with respect to redemptions sought upon a stockholder’s death, “qualifying disability” or confinement to a long-term care facility (each as defined in the share redemption program, and collectively “special redemptions”). The dollar amounts available for such redemptions in a given fiscal quarter are limited to the amount of proceeds received from our distribution reinvestment plan in the immediately preceding fiscal quarter.  Our share redemption program is currently suspended for ordinary redemptions and we can provide no assurances, when, if ever, we will provide for redemptions other than special redemptions.

PART I

ITEM 1. BUSINESS

General

Resource REIT, Inc. (f/k/a Resource Real Estate Opportunity REIT II, Inc.) is a Maryland corporation that has elected to be taxed as a real estate investment trust, or REIT, and to operate as a REIT beginning with our taxable year ended December 31, 2014.  As used herein, the terms “we,” “our” and “us” refer to Resource REIT, Inc. and, as required by context RRE Opportunity OP II, LP (“OP II”), a Delaware limited partnership through which we own our interest in all of our properties, and to its subsidiaries. We focus on multifamily assets, although we may also purchase interests in other types of commercial property assets consistent with our investment objectives. We have acquired and may continue to acquire underperforming apartment communities which we will renovate and optimize in order to increase rents and, to a lesser extent, acquire or originate commercial real estate debt secured by apartments. Our objective is to invest in multifamily assets across the entire spectrum of investments in order to provide stockholders with growing cash flow and increasing asset values.

As of December 31, 2020, we owned 17 multifamily properties, as described further in “Item 2. Properties”. As of January 28, 2021, when we acquired Resource Real Estate Opportunity REIT I, Inc. (“REIT I”) and Resource Apartment REIT III, Inc. (“REIT III”) and their respective subsidiaries, we owned 51 properties in 15 states, comprising a total of 14,995 multifamily units. In the future we may reinvest proceeds from property sales or refinancings to purchase underperforming commercial real estate and real estate-related debt, including properties that, when acquired, may benefit from renovations that may increase their long-term values.

Upon our acquisition of REIT I and its subsidiaries, including the entities that provide our advisory, asset and property management services, we are a self-managed REIT and have 43 employees. Prior to our acquisition of REIT I, we were externally advised by Resource Real Estate Opportunity Advisor II, LLC (our “Advisor”) pursuant to an advisory agreement initially entered in February 2014. 

Through a series of transactions which we refer to as the “Self-Management Transaction,” REIT I acquired our Advisor and Manager on September 8, 2020 from C-III Capital Partners, LLC (“C-III”) and its affiliates.  Previously, our Advisor was an indirect wholly-owned subsidiary of Resource America, Inc. (“RAI”), our initial sponsor and a wholly-owned subsidiary of C-III.  

Mergers with Resource Real Estate Opportunity REIT, Inc. and Resource Apartment REIT III, Inc.

On September 8, 2020, we entered into merger agreements (as described herein) to acquire each of REIT I and REIT III in stock-for-stock transactions whereby each of REIT I and REIT III were to be merged into our wholly-owned subsidiaries. We refer to the REIT I Merger (as defined below) and the REIT III Merger (as defined below) collectively as the Mergers. Each of the Mergers was intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended.  The Mergers were effective as of January 28, 2021.

REIT I Merger

On September 8, 2020, we, OP II, Revolution I Merger Sub, LLC, our wholly-owned subsidiary (“Merger Sub I”), REIT I, and Resource Real Estate Opportunity OP, LP (“OP I”), entered into an Agreement and Plan of Merger (the “REIT I Merger Agreement”).

Effective January 28, 2021, REIT I merged with and into Merger Sub I, with Merger Sub I surviving as our direct, wholly-owned subsidiary (the “REIT I Company Merger”) and (ii) OP I merged with and into OP II (the “REIT I Partnership Merger” and, together with the REIT I Company Merger, the “REIT I Merger”), with OP II surviving the REIT I Partnership Merger. At such time, the separate existence of REIT I and OP I ceased.

At the effective time of the REIT I Company Merger, each issued and outstanding share of REIT I’s common stock (or fraction thereof) converted into the right to receive 1.22423 shares of our common stock, and each issued and outstanding share of REIT I’s convertible stock converted into the right to receive $0.02 in cash (without interest).

At the effective time of the REIT I Partnership Merger, each common unit of partnership interests in OP I outstanding immediately prior to the effective time of the REIT I Partnership Merger converted into the right to receive 1.22423 common units of partnership interest in OP II and each Series A Cumulative Participating Redeemable Preferred Unit in OP I issued and

4

outstanding immediately prior to the effective time of the REIT I Partnership Merger converted into the right to receive one Series A Cumulative Participating Redeemable Preferred Unit in OP II.

REIT III Merger

On September 8, 2020, we, OP II, Revolution III Merger Sub, LLC (“Merger Sub III”), our wholly-owned subsidiary, REIT III, and Resource Apartment OP III, LP (“OP III”), the operating partnership of REIT III, entered into an Agreement and Plan of Merger (the “REIT III Merger Agreement”).

Effective January 28, 2021, REIT III merged with and into Merger Sub III, with Merger Sub III surviving as our direct, wholly-owned subsidiary (the “REIT III Company Merger”) and OP III merged with and into OP II (the “REIT III Partnership Merger” and, together with the REIT III Company Merger, the “REIT III Merger”), with OP II surviving the REIT III Partnership Merger. At such time, the separate existence of REIT III and OP III ceased. The REIT I Merger and the REIT III Merger are hereinafter together referred to as the “Merger”.

At the effective time of the REIT III Company Merger, each issued and outstanding share of REIT III’s common stock (or fraction thereof) converted into the right to receive 0.925862 shares of our common stock.

At the effective time of the REIT III Partnership Merger, each unit of partnership interests in OP III outstanding immediately prior to the effective time of the REIT III Partnership Merger was retired and ceased to exist. In addition, for each share of our common stock issued in the REIT III Company Merger, a common partnership unit was issued to us by OP II. 

Our Offerings

We commenced capital raising activities in February 2014 when we launched our initial public offering, the primary portion of which terminated in February 2016. We continue to offer shares of our common stock to our existing stockholders pursuant to our distribution reinvestment plan offering (the “DRP Offering”). As of December 31, 2020, we had raised $556.2 million in our public offerings, including $88.5 million in the DRP Offering.  Resource Securities, LLC, which was an affiliate of our Advisor and C-III, served as the dealer manager for our primary offering and the DRP Offering through December 31, 2020.

Our Business Strategy

Our business strategy has a particular focus on multifamily assets, although we may also purchase interests in other types of commercial property assets consistent with our investment objectives. We have acquired and may continue to acquire underperforming apartment communities which we will renovate and optimize in order to increase rents and, to a lesser extent, acquire or originate commercial real estate debt secured by apartments. We may make adjustments to our target portfolio based on real estate market conditions and investment opportunities. We will not forego an attractive investment because it does not fit within our targeted asset class or portfolio composition.

Our Operating Policies and Strategies

Our Investment Committee, which includes three of our independent directors, approves proposed real estate property investments and real estate-related debt investments. Our Board of Directors meets regularly to monitor the execution of our investment strategies and our progress in achieving our investment objectives.

We may use leverage for our acquisitions in the form of both REIT level financing and individual investment financing.  Such financing, both at the REIT level and at the individual investment level, may also be obtained from the seller of an investment. Although there is no limit on the amount we can borrow to acquire a single real estate investment, we may not leverage our assets with debt financing such that our total liabilities exceed 75% of the aggregate cost of our assets unless a majority of our Conflicts Committee finds substantial justification for borrowing a greater amount.

Our Advisor and our Property Manager

As of January 28, 2021, when we acquired REIT I, we have acquired our Advisor and Manager, the entities that provided advisory, asset and property management services to us. Our Advisor originally invested approximately $1.2 million in us; however, in conjunction with the Self-Management Transaction, our Advisor transferred its 137,432 shares of our common stock to C-III. As of December 31, 2020, of the 50,000 shares of our convertible stock that are issued and outstanding, 19,968 shares were granted to individuals who were employees of RAI and its subsidiaries and affiliates at the time of the grants. The shares granted vested ratably over three years; 18,096 of the shares have vested as of December 31, 2020 and 1,872 shares have been

5

forfeited.Vested shares of convertible stock will only convert to common stock upon certain triggering events, none of which occurred or are probable to occur as of December 31, 2020.  As of January 28, 2021, 31,904 shares of convertible stock formerly owned by our Advisor are now owned by us. 

Greystar, a third-party, is a property management company that we have subcontracted with to manage most of the real estate assets that we own. The employees of Greystar, with the oversight of our asset management team, assist in providing property management as well as construction management services to us.

Competition

We believe that the current market for properties that meet our investment objectives is extremely competitive and many of our competitors have greater resources than we do. We believe that our multifamily communities are suitable for their intended purposes and adequately covered by insurance. There are a number of comparable properties located in the same submarkets that may compete with them. We compete with numerous other entities engaged in real estate investment activities, including individuals, corporations, banks and insurance company investment accounts, other REITs, real estate limited partnerships, the U.S. Government and other entities, to acquire, manage and sell real estate properties and real estate related assets. Many of our competitors enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. In addition, the number of entities and the amount of funds competing for suitable investments may increase.

Environmental

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

Human Capital Resources

Until the effective time of the Merger on January 28, 2021, we were externally advised by our Advisor and engaged our Manager, an affiliated property manager and an unaffiliated property sub-manager, to provide property management services to us.  As an externally advised REIT we relied on the employees of our Advisor, Manager and sub-manager to provide services related to our operations.  

As of January 28, 2021, when we acquired REIT I, we are a self-managed REIT and have 43 employees located in three different cities with the majority based out of our principal office in Philadelphia.  Approximately 44% of our employees are women and approximately 11% of our employees are people of color or minorities.  95% of our employees are full time.  Although we are a newly self-managed REIT with our own employees, our employees have been involved in our operations through their employment with our Advisor, Manager and their affiliates for an average of 9.25 years.  None of our employees are represented by a labor union. We believe that a wide range of opinions and experiences are key to our continued success, and we therefore value racial, gender, and generational diversity throughout our organization.

We believe prioritizing employee well-being is a key element for attracting and retaining the best and most talented associates. Our key human capital management objectives are to attract, recruit, hire, develop and promote a deep and diverse bench of talent that translates into a strong and successful workforce. To support these objectives, our human resources programs are designed to develop talent to prepare them for the critical roles and leadership positions for the future; reward and support employees through competitive pay and benefit programs; enhance our culture through efforts to foster, promote, and preserve a culture of diversity and inclusion; and evolve and invest in technology, tools, and resources to enable employees at work.

In addition to competitive wages and salaries, our compensation programs include cash bonus and equity incentive compensation opportunities, a 401(k) plan with employer matching, medical, dental and vision insurance, health savings and dependent care flexible spending accounts, paid time off, short- and long-term disability insurance, life insurance, a variety of personal and family leave options, life-planning financial and legal resources, and other voluntary supplemental benefits.

We sponsor a number of programs and events that emphasize the health and well-being of our employees, including relational, financial, emotional and physical programs. We promote a culture of health and well-being through employee assistance program services, comprehensive health care benefits and resources for preventative health, such as flu shot clinics and healthy lifestyle programs. Throughout the course of the COVID-19 pandemic, we have put the health and safety of our

6

employees and their families first, supporting comprehensive work-from-home policies, as well as enhanced safety measures and precautions in each of our offices as recommended by the federal, state and local agencies for employees who carry out essential on-site work.

We communicate with our workforce through a variety of channels and encourage open and direct communication, including monthly company-wide calls with executives and frequent corporate email communications. Also, to continuously monitor and improve employee performance and engagement, we conduct annual performance reviews.

We actively support charitable organizations that promote education and social well-being and we encourage our employees to personally volunteer with organizations that are meaningful to them. For example, we proudly sponsor local charities and our employees volunteer in local charitable organizations such as Rebuilding Together Philadelphia which works to transform vulnerable, owner-occupied houses into safe, healthy and energy-efficient homes.

We believe that all individuals should be treated with dignity and respect, and have adopted policies that, among other things, prohibit discrimination and harassment.  

Access to Company Information

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

We make available free of charge, the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports on our website, www.resourcereit.com, or by responding to requests addressed to our investor relations group. These reports are available as soon as reasonably practicable after such material is electronically filed or furnished to the SEC.

7

ITEM 1A. RISK FACTORS

Below are some of the risks and uncertainties that could cause our actual results to differ materially from those presented in our forward-looking statements. The risks and uncertainties described below are not the only ones we face but do represent those risks and uncertainties that we believe are material to our business, operating results, prospects, and financial condition. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business.

Risks Related to an Investment in Us

There is no public trading market for your shares; therefore, it will be difficult for you to sell your shares.

There is no current established public market for our shares and our charter does not require our directors to seek stockholder approval to liquidate our assets by a specified date nor list our shares on an exchange by a specified date. Our charter limits your ability to transfer orsell your shares unless the prospective stockholder meets the applicable suitability and minimum purchase standards. Our charter also prohibits the ownership of more than 9.8% of our stock, unless exempted by our board of directors, which may inhibit large investors from desiring to purchase your shares.  Moreover, our share redemption program is suspended except for redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility and further includes numerous restrictions that limit your ability to sell your shares to us, and our board of directors may amend, suspend or terminate our share redemption program upon 30 days’ notice without stockholder approval. Therefore, it will be difficult for you to sell your shares promptly or at all. If you are able to sell your shares, you would likely have to sell them at a substantial discount to the estimated net asset value. It is also likely that your shares would not be accepted as the primary collateral for a loan.

We are newly self-managed.

On January 28, 2021, upon consummation of the merger with REIT I, we became a self-managed REIT. We will no longer bear the costs of the various fees and expense reimbursements previously paid to our Advisor; however, our expenses will include the compensation and benefits of our officers, employees and consultants, as well as overhead previously paid by our Advisor and their affiliates. Our employees will provide services historically provided by the external advisor and its affiliates. We will be subject to potential liabilities that are commonly faced by employers, such as workers’ disability and compensation claims, potential labor disputes, and other employee-related liabilities and grievances, and we will bear the cost of the establishment and maintenance of any employee compensation plans. In addition, we have not previously operated as a self-managed REIT and may encounter unforeseen costs, expenses and difficulties associated with providing these services on a self-advised basis. If we incur unexpected expenses as a result of our self-management, our results of operations could be lower than they otherwise would have been.

Following the consummation of the Mergers, we may have assumed certain potential and unknown liabilities relating to REIT I and REIT III.

Following the consummation of the Mergers, we have assumed certain potential and unknown liabilities relating to REIT I and REIT III. These liabilities could be significant and have a material adverse effect on our business to the extent we have not identified such liabilities or have underestimated the amount of such liabilities

The loss of or the inability to hire additional or replacement key real estate and debt finance professionals could delay or hinder implementation of our investment strategies, which could limit our ability to make distributions and decrease the value of your investment.

We believe that our future success depends, in large part, upon our ability to retain highly skilled managerial, operational and marketing professionals. Competition for such professionals is intense, and we may be unsuccessful in attracting and retaining such skilled individuals. If we are unable to obtain the services of highly skilled professionals, our ability to implement our investment strategies could be delayed or hindered and the value of your investment may decline.

If we make distributions from sources other than our cash flow from operations, we will have less funds available for the acquisition of properties, your overall return may be reduced and the value of a share of our common stock may be diluted.

For the year ended December 31, 2020, we paid distributions of $6.0 million. We funded these distributions from a combination of cash flows from operations and proceeds from debt financing.  We will declare distributions when our board of directors determines we have sufficient cash flow. Our board of directors considers many factors before authorizing a cash distribution, including current and projected cash flow from operations, capital expenditure needs, general financial conditions

8

and REIT qualification requirements. We expect that our board may declare cash distributions that are paid in advance of our receipt of cash flow that we expect to receive during a later period. In these instances, where we do not have sufficient cash flow to cover our distributions, we expect to use the proceeds from borrowings or asset sales to pay distributions. We may borrow funds or sell assets to make and cover our declared distributions, all or a portion of which could be deemed a return of capital. We may also fund such distributions from third-party borrowings. If we fund cash distributions from borrowings, sales of assets or the net proceeds from securities issuances, we will have less funds available for the acquisition of real estate and real estate-related assets and your overall return may be reduced. Further, to the extent cash distributions exceed cash flow from operations, a stockholder’s basis in our stock will be reduced and, to the extent distributions exceed a stockholder’s basis, the stockholder may recognize capital gain. Our organizational documents do not limit the amount of distributions we can fund from sources other than from cash flows from operations.

The outbreak of widespread contagious disease, such as the novel coronavirus, COVID-19, could adversely impact our operations and the value of our investments.

The recent outbreak of the COVID-19 virus has created considerable instability and disruption in the U.S. and world economies. The extent to which our results of operations or our overall value will be affected by the COVID-19 virus will largely depend on future developments, which remain uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the COVID-19 virus and the actions required to be undertaken to contain the COVID-19 virus or treat its impact. As a result of shutdowns, quarantines or actual viral health issues, tenants at our multifamily apartment communities may experience reduced wages for a prolonged period of time and may be unable to make their rental payments. As of December 31, 2020, a small percent of our multifamily tenants have sought rent deferrals. Not all tenant requests will ultimately result in rent deferrals and rent deferrals to date have not had a significant impact on our operations. We may be unable to evict tenants due to federal, state and/or local laws or regulations or lender requirements implemented as a result of the COVID-19 virus outbreak. Our results of operations have also been partially impacted as a result of waiving late fees and the suspension of evictions at our properties.  In addition, property managers may be limited in their ability to properly maintain our multifamily apartment communities and we have and may continue to defer significant value-add projects. Market fluctuations may affect our ability to obtain necessary funds for our operations from current lenders or new borrowings. In addition, we may be unable to obtain financing for the acquisition of investments on satisfactory terms, or at all. The occurrence of any of the foregoing events or any other related matters could materially and adversely affect our financial performance and our overall value, and investors could lose all or a substantial portion of their investment.

Future interest rate increases in response to inflation may inhibit our ability to conduct our business and acquire or dispose of real property or real estate-related debt investments at attractive prices and your overall return may be reduced.

While we expect a significant amount of our leases to be short term multi-family leases that are not impacted by inflation, we will be exposed to inflation risk with respect to income from any long-term leases on real property and from related real estate debt investments as these may constitute a source of our cash flows from operations. High inflation may in the future tighten credit and increase prices. Further, if interest rates rise, such as during an inflationary period, the cost of acquisition capital to purchasers may also rise, which could adversely impact our ability to dispose of our assets at attractive sales prices. Should we be required to acquire, hold or dispose of our assets during a period of inflation, our overall return may be reduced.

Our rights and the rights of our stockholders to recover claims against our directors and officers are limited, which could reduce your and our recovery against them if they negligently cause us to incur losses.

Maryland law provides that a director has no liability in that capacity if he performs his duties in good faith, in a manner he reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our charter provides that our directors and officers will not be liable to us or our stockholders for monetary damages and that we will generally indemnify them for losses unless our directors are negligent or engage in misconduct or our independent directors are grossly negligent or engage in willful misconduct. As a result, you and we may have more limited rights against our directors and officers than might otherwise exist under common law, which could reduce our and your recovery from these persons if they act in a negligent manner. Our charter also requires us, to the maximum extent permitted by Maryland law, to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of the final disposition of a proceeding to any individual who is a present or former director or officer and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity or any individual who, while a director or officer and at our request, serves or has served as a director, officer, partner, member, manager or trustee of another corporation, partnership, limited liability company, joint venture, trust, employment benefit plan or other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity. We have also entered into indemnification agreements with each of our current independent directors. Under each indemnification agreement, we have agreed, among other things, to indemnify each independent director

9

under the circumstances and to the extent provided for therein, to the maximum extent permitted by Maryland law, including indemnification of expenses such as attorneys’ fees, judgments, penalties, fines and settlement amounts incurred by the director in any action or proceeding arising out of the person’s services as a director. The indemnification agreement also provides for the advancement of expenses relating to the indemnification obligations. The SEC takes the position that indemnification against liabilities arising under the Securities Act is against public policy and unenforceable.

We may change our policies and our operations without stockholder consent.

Our board of directors determines our major policies, including our policies regarding financing, growth, debt capitalization, REIT qualification and distributions. Our board of directors may amend or revise these and other policies without a vote of the stockholders. Under Maryland General Corporation Law and our charter, our stockholders have a right to vote only on limited matters. Our board’s broad discretion in setting policies and our stockholders’ inability to exert control over those policies increases the uncertainty and risks you face as a stockholder.

The estimated value per share of our common stock may not reflect the value that stockholders will receive for their investment and does not take into account how developments subsequent to the valuation date related to individual assets, the financial or real estate markets or other events may have increased or decreased the value of our portfolio.

On March 24, 2021, our board of directors approved an estimated value per share of our common stock of $9.06 based on the estimated market value of our portfolio of investments as of January 28, 2021.  As of the date of this filing, we are not aware of a material change in the value of our investment that would impact the overall estimated value per share. We provided this estimated value per share to assist broker-dealers that participated in our public offerings in meeting their customer account statement reporting obligations under Financial Industry Regulatory Authority (“FINRA”) Rule 2231. This valuation was performed in accordance with the provisions of Practice Guideline 2013-01, Valuations for Publicly Registered Non-Listed REITs, issued by the Institute for Portfolio Alternatives (formerly Investment Program Association) (“IPA”) in April 2013 (the “IPA Valuation Guidelines”).

With the approval of the conflicts committee, we engaged Duff & Phelps, LLC (“Duff & Phelps”) to provide a calculation of the range in estimated value per share of our common stock as of January 28, 2021. Duff & Phelps held discussions with senior management and conducted appraisals, investigations, research, review and analysis as it deemed necessary.  Duff & Phelps based this range in estimated value per share upon its estimates of the “as is” market values of our interests in 51 multifamily properties. Duff & Phelps made adjustments to the aggregate estimated values of our investments to reflect balance sheet assets and liabilities provided by our management before calculating a range of estimated values based on the number of outstanding shares of our common stock as of January 28, 2021.

As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive a different estimated value per share, and these differences could be significant. The estimated value per share is not audited and does not represent the fair value of our assets less the fair value of our liabilities according to U.S. generally accepted accounting principles (“GAAP”), nor does it represent a liquidation value of our assets and liabilities or the amount that our shares of common stock would trade at on a national securities exchange. The estimated value per share does not reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share also does not take into account estimated disposition costs and fees for real estate properties, debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations or the impact of restrictions on the assumption of debt.  Accordingly, with respect to the estimated value per share, we can give no assurance that:

• 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 our 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.

10

Further, the estimated value per share as ofJanuary 28, 2021 is based on the estimated value of our investments as ofJanuary 28, 2021. We did not make any adjustments to the valuation for the impact of other transactions occurring subsequent toJanuary 28, 2021, including, but not limited to, (i) net operating income earned and distributions declared, (ii) the redemption of shares and (iii) the potential conversion of convertible stock into common stock. The value of our shares will fluctuate over time in response to developments related to individual assets in our portfolio and the management of those assets and in response to the real estate and finance markets and due to other factors. In particular, the outbreak of COVID-19, together with the resulting measures imposed to help control the spread of the virus has had a negative impact on the economy and business activity globally, the full impact of which is not yet known and may result in an adverse impact to our operations and investments. The COVID-19 pandemic is negatively impacting almost every industry, including the U.S. multifamily real estate industry and the financial position of our residents, directly or indirectly. While we have considered the impact from COVID-19 on our March 24, 2021 estimated value per share, the extent to which our business, financial condition, results of operations and cash flows may be affected by COVID-19 depends on future developments with respect to the continued spread and treatment of the virus, the various measures imposed to help control the spread the virus and the corresponding economic slowdown, and any long-term impact of this situation, even after an economic rebound, remains unclear. For a full description of the methodologies and assumptions used to value our assets and liabilities in connection with the calculation of the estimated value per share, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Market Information.”

The actual value of shares that we repurchase under our share redemption program may be substantially less than what we pay.

Under our share redemption program, the current maximum price that may be paid under the program is $9.06 per share, which is 100% of the current estimated value per share for special redemptions. Although this is based upon our current estimated value per share, this reported value is likely to differ from the price at which a stockholder could resell his or her shares for the reasons discussed in the risk factor above. Thus, when we repurchase shares of our common stock at $8.61 per share for regular redemptions or $9.06 per share for special redemptions, the actual value of the shares that we repurchase is likely to be less, and the repurchase is likely to be dilutive to our remaining stockholders. Even at lower repurchase prices, the actual value of the shares may be substantially less than what we pay and the repurchase may be dilutive to our remaining stockholders.

We face risks associated with security breaches through cyber-attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology, or IT, networks and related systems.

We will face risks associated with security breaches, whether through cyber-attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization, and other significant disruptions of our IT networks and related systems or the IT systems of our vendors. The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems (including the IT systems of our vendors, such as Greystar, our third-party property manager) are essential to the operation of our business and our ability to perform day-today operations, and, in some cases, may be critical to the operations of certain of our tenants. There can be no assurance that our efforts to maintain the security and integrity of these types of IT networks and related systems will be effective or that attempted security breaches or disruptions would not be successful or damaging. A security breach or other significant disruption involving our, or our vendors, IT networks and related systems could adversely impact our financial condition, results of operations, cash flows, and our ability to satisfy our debt service obligations and to pay distributions to our stockholders.

Risks Related to Our Corporate Structure

Our charter limits the number of shares a person may own, which may discourage a takeover that could otherwise result in a premium price to our stockholders.

Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. To help us comply with the REIT ownership requirements of the Internal Revenue Code, our charter prohibits a person from directly or constructively owning more than 9.8% of our outstanding shares, unless exempted by our board of directors. This restriction may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all, or substantially all, of our assets) that might provide a premium price for holders of our common stock.

11

Our charter permits our board of directors to issue stock with terms that may subordinate the rights of our common stockholders or discourage a third-party from acquiring us in a manner that could result in a premium price to our stockholders.

Our board of directors may increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we have authority to issue and classify or reclassify any unissued common stock or preferred stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms or conditions of redemption of any such stock. Our board of directors could authorize the issuance of preferred stock with terms and conditions that could have priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Such preferred stock could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all, or substantially all, of our assets) that might provide a premium price to holders of our common stock. A majority of our conflicts committee must approve any issuance of preferred stock.

Rapid changes in the values of our assets may make it more difficult for us to maintain our qualification as a REIT or our exception from the definition of an investment company under the Investment Company Act.

If the market value or income potential of our qualifying real estate assets changes as compared to the market value or income potential of our non-qualifying assets, or if the market value or income potential of our assets that are considered “real estate-related assets” under the Investment Company Act or REIT qualification tests changes as compared to the market value or income potential of our assets that are not considered “real estate-related assets” under the Investment Company Act or REIT qualification tests, whether as a result of increased interest rates, prepayment rates or other factors, we may need to modify our investment portfolio in order to maintain our REIT qualification or exception from the definition of an investment company. If the decline in asset values or income occurs quickly, this may be especially difficult, if not impossible, to accomplish. This difficulty may be exacerbated by the illiquid nature of many of the assets that we may own.  We may have to make investment decisions that we otherwise would not make absent REIT and Investment Company Act considerations.

You may not be able to sell your shares under our share redemption program and, if you are able to sell your shares under the program, you may not be able to recover the amount of your investment in our shares.

Our Board of Directors suspended the share redemption program, except for redemptions submitted in connection with a stockholder’s death, qualifying disability or confinement to a long-term care facility (each as defined in the share redemption program) and may further amend, suspend or terminate our share redemption program upon 30 days’ notice without stockholder approval. Our board of directors may reject any request for redemption of shares.  Further, there are many limitations on your ability to sell your shares pursuant to the share redemption program.  Any stockholder requesting repurchase of their shares pursuant to our share redemption program will be required to certify to us that such stockholder acquired the shares by either (1) a purchase directly from us, REIT I or REIT III or (2) a transfer from the original investor by way of (i) a bona fide gift not for value to, or for the benefit of, a member of the stockholder’s immediate or extended family, (ii) a transfer to a custodian, trustee or other fiduciary for the account of the stockholder or his or her immediate or extended family in connection with an estate planning transaction, including by bequest or inheritance upon death or (iii) operation of law.

In addition, our share redemption program contains other restrictions and limitations. We expect to redeem shares on a quarterly basis.  If the Board of Directors determines to fully resume the share redemption program, shares will be redeemed pro rata among all stockholders requesting redemption in such quarter, with a priority given to redemptions upon the death, qualifying disability, or confinement to a long-term care facility of a stockholder; next, to stockholders who demonstrate, in the discretion of our board of directors, another involuntary, exigent circumstance, such as bankruptcy; next, to stockholders subject to a mandatory distribution requirement under such stockholder’s IRA; and, finally, to other redemption requests.

We will not redeem more than 5% of the weighted average number of shares outstanding during the twelve-month period immediately prior to the date of redemption. In addition, the cash available for redemption in a given fiscal quarter will be limited to proceeds from our distribution reinvestment plan during the immediately preceding calendar quarter; provided that, for any quarter in which no proceeds from the distribution reinvestment plan are available, the funding limitation for the quarter will be set by the board of directors upon ten business days’ notice to stockholders. As there were no proceeds from the distribution reinvestment plan available from the fourth quarter of 2020, the board of directors set the funding limitation for redemptions in the first quarter of 2021 at $2.0 million.  

Your interest in us will be diluted if we issue additional shares, which could reduce the overall value of your investment.

Our stockholders do not have preemptive rights to any shares we issue in the future.  Our charter authorizes us to issue 1,010,050,000 shares of capital stock, of which 1,000,000,000 shares are designated as common stock, 50,000 shares are

12

designated as convertible stock and 10,000,000 are designated as preferred stock. Our board of directors may increase the number of authorized shares of capital stock without stockholder approval. Our board may elect to (1) sell additional equity securities in future public or private offerings; (2) issue shares of our common stock upon the exercise of the options we may grant to our independent directors or to employees of our advisor or property manager; (3) issue shares to our Advisor, its successors or assigns, in payment of an outstanding obligation or as consideration in a related-party transaction; (4) issue shares of common stock upon the conversion of our convertible stock; or (5) issue shares of our common stock to sellers of properties we acquire in connection with an exchange of limited partnership interests of our operating partnership. To the extent we issue additional equity interests, your percentage ownership interest in us will be diluted. Further, depending upon the terms of such transactions, most notably the offering price per share, which may be less than the price paid per share in any public offering and the value of our properties, existing stockholders may also experience a dilution in the book value of their investment in us.

Our board of directors could opt into certain provisions of the Maryland General Corporation Law in the future, which may discourage others from trying to acquire control of us and may prevent our stockholders from receiving a premium price for their stock in connection with a business combination.

Under Maryland law, “business combinations” between a Maryland corporation and certain interested stockholders or affiliates of interested stockholders are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. Also under Maryland law, control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter.  Shares owned by the acquirer, an officer of the corporation or an employee of the corporation who is also a director of the corporation are excluded from the vote on whether to accord voting rights to the control shares. Should our board opt into these provisions of Maryland law, it may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.

Because Maryland law permits our board to adopt certain anti-takeover measures without stockholder approval, investors may be less likely to receive a “control premium” for their shares.

In 1999, the State of Maryland enacted legislation that enhances the power of Maryland corporations to protect themselves from unsolicited takeovers. Among other things, the legislation permits our board, without stockholder approval, to amend our charter to:

• 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.

Under Maryland law, a corporation can opt to be governed by some or all of these provisions if it has a class of equity securities registered under the Exchange Act, and has at least three independent directors. Our charter does not prohibit our board from opting into any of the above provisions permitted under Maryland law. Becoming governed by any of these provisions could discourage an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our securities.

Risks Related to Investments in Real Estate

Economic and regulatory changes that impact the real estate market generally may decrease the value of our investments and weaken our operating results.

The properties we acquire and their performance are subject to the risks typically associated with real estate, including:

• 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;

13

• 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.

Any of the above factors, or a combination thereof, could result in a decrease in the value of our investments, which would have an adverse effect on our results of operations, reduce the cash available for distributions and the return on your investment.

Residents of multifamily rental properties who have experienced personal financial problems or a downturn in their business may delay enforcement of our rights, and we may incur substantial costs attempting to protect our investment.

Residents or tenants who have experienced a downturn in their residential or business leases and residents or tenants who have experienced difficulties with their personal financial situations such as a job loss, bankruptcy or bad credit rating, may result in their failure to make timely rental payments or their default under their leases.  In the event of any default by residents or tenants at our properties, we may experience delays in enforcing our rights and may incur substantial costs attempting to protect our investment.

The bankruptcy or insolvency of any resident or tenant also may adversely affect the income produced by our properties.  If any resident or tenant becomes a debtor in a case under the U.S. Bankruptcy Code, our actions may be restricted by the bankruptcy court and our financial condition and results of operations could be adversely affected.

The operating costs of our properties will not necessarily decrease if our income decreases.

Certain expenses associated with ownership and operation of a property may be intentionally increased to enhance the short- and long-term success of the property in the form of capital gain and current income, such as:

• increased staffing levels;

• enhanced technology applications; and

• increased marketing efforts.

Certain expenses associated with the ownership and operation of a property are not necessarily reduced by events that adversely affect the income from the property, such as:

• real estate taxes;

• insurance costs; and

• maintenance costs.

For example, if the leased property loses tenants or rents are reduced, then those costs described in the preceding sentence are not necessarily reduced. As a result, our cost of owning and operating leased properties may, in the future, exceed the income the property generates even though the property’s income exceeded its costs at the time it was acquired. This would decrease the amount of cash available to us to distribute to you and could negatively affect your return on investment.

We compete with third parties in acquiring, managing and selling properties and other investments, which could reduce our profitability and the return on your investment.

We believe that the current market for properties that meet our investment objectives is extremely competitive and many of our competitors have greater resources than we do. We compete with numerous other entities engaged in real estate investment activities, including individuals, corporations, banks and insurance company investment accounts, other REITs, real estate limited partnerships, the U.S. Government and other entities, to acquire, manage and sell real estate and real estate-related assets. Many of our expected competitors enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. In addition, the number of entities and the amount of funds competing for suitable investments may increase.

14

Competition with these entities may result in the following:

• 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.

If such events occur, you may experience a lower return on your investment.

Our joint venture partners could take actions that decrease the value of an investment to us and lower our stockholders’ overall return.

We may enter into joint ventures to acquire properties and other assets. We may also purchase and renovate properties in joint ventures or in partnerships, co‑tenancies or other co‑ownership arrangements. Such investments may involve risks not otherwise present with other methods of investment, including, for example, the following risks:

• 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.

Any of the above might subject a property to liabilities in excess of those contemplated and thus reduce our returns on that investment and therefore your return on investment.

Properties that have significant vacancies may experience delays in leasing up or could be difficult to sell, which could diminish our return on these properties.

A property may incur vacancies either by the expiration of tenant leases or the continued default of tenants under their leases.  Further, our potential investments in underperforming multifamily rental properties may have significant vacancies at the time of acquisition. If vacancies continue for a prolonged period of time beyond the expected lease-up stage that we anticipate will follow any redevelopment or repositioning efforts, we may suffer reduced revenues resulting in less cash available for distributions. In addition, the resale value of the property could be diminished because the market value of a particular property depends principally upon the value of the cash flow generated by the leases associated with that property. Such a reduction on the resale value of a property could also reduce your return on investment.

Because we rely on our Manager and third-party sub-managers to manage the day-to-day affairs of any properties we acquire, should the staff of a particular property perform poorly, our operating results for that property will similarly be hindered and our net income may be reduced.

We depend upon the performance of our property managers to effectively manage our properties and real estate-related assets. Poor performance by those sales, leasing and other management staff members operating a particular property will necessarily translate into poor results of operations for that particular property. Should our Manager or third-party sub-managers fail to identify problems in the day-to-day management of a particular property or fail to take the appropriate corrective action in a timely manner, our operating results may be hindered and our net income reduced.

If we are unable to obtain funding for future capital needs, cash distributions to our stockholders could be reduced and the value of our investments could decline.

If we need additional capital in the future to improve or maintain our properties or for any other reason, we may have to obtain financing from sources beyond our cash flow from operations, such as borrowings, sales of assets or future equity

15

offerings. These sources of funding may not be available on attractive terms or at all. If we cannot procure additional funding for capital improvements, our investments may generate lower cash flows or decline in value, or both, which would limit our ability to make distributions to you and could reduce the value of your investment.

If we are unable to sell a property for the price, on the terms, or within the time frame we desire, it could limit our ability to pay cash distributions to you.

Many factors that are beyond our control affect the real estate market and could affect our ability to sell properties for the price, on the terms, or within the time frame that we desire.  These factors include general economic conditions, the availability of financing, interest rates and other factors, including supply and demand.  Because real estate investments are relatively illiquid, we have a limited ability to vary our portfolio in response to changes in economic or other conditions. Further, before we can sell a property on the terms we want, it may be necessary to expend funds to correct defects or to make improvements. However, we can give no assurance that we will have the funds available to correct such defects or to make such improvements. We may be unable to sell our properties at a profit.  Our inability to sell properties at the time and on the terms we want could reduce our cash flow and limit our ability to make distributions to you and could reduce the value of your investment.

Government entities, community associations and contractors may cause unforeseen delays and increase costs to redevelop and reposition underperforming properties that we may acquire, which may reduce our net income and cash available for distributions to you.

We may seek to or be required to incur substantial capital obligations to redevelop or reposition existing properties that we acquire at a discount as a result of neglect of the previous owners or tenants of the properties and to sell the properties.  Our advisor and its key real estate professionals will do their best to acquire properties that do not require excessive redevelopment or modifications and that do not contain hidden defects or problems. There could, however, be unknown and excessive costs, expenses and delays associated with a discounted property’s redevelopment, repositioning or interior and exterior upgrades.  We will be subject to risks relating to the uncertainties associated with rezoning for redevelopment and other concerns of governmental entities, community associations and our construction manager’s ability to control costs and to build in conformity with plans and the established timeframe. We will pay a construction management fee to a construction manager, which may be our Manager or its affiliates, if new capital improvements are required.

If we are unable to increase rental rates or sell the redeveloped property at a price consistent with our underwritten projections due to local market or economic conditions to offset the cost of the redevelopment or repositioning the property, the return on your investment may suffer. To the extent we acquire discounted properties in major metropolitan areas where the local government has imposed rent controls, we may be prohibited from increasing the rental rates to a level sufficient to cover the particular property’s redevelopment costs and expenses.

Costs of responding to both known and previously undetected environmental contamination and hazardous conditions may decrease our cash flows and limit our ability to make distributions.

Real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to protection of the environment and human health. We could be subject to liability in the form of fines, penalties or damages for noncompliance with these laws and regulations. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, the remediation of contamination associated with the release or disposal of solid and hazardous materials, the presence of toxic building materials, and other health and safety-related concerns.

Some of these laws and regulations may impose joint and several liability on the tenants, current or previous owners or operators of real property for the costs to investigate or remediate contaminated properties, whether the contamination occurred prior to purchase, or whether the acts causing the contamination were legal. These costs could be substantial.  Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Our tenants’ operations, the condition of properties at the time we buy them, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our properties.

16

Environmental laws also may impose liens on a property or restrictions on the manner in which a property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for the release of and exposure to hazardous substances, including asbestos-containing materials and lead-based paint. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances.

The presence of hazardous substances, or the failure to properly manage or remediate these substances, may hinder our ability to sell, rent or pledge such property as collateral for future borrowings. Any material expenditures, fines, penalties, or damages we must pay will reduce our ability to make distributions and may reduce the value of your investment.

Properties acquired by us may have toxic mold that could result in substantial liabilities to us.

Litigation and concern about indoor exposure to certain types of toxic molds has been increasing as the public becomes aware that exposure to mold can cause a variety of health effects and symptoms, including allergic reactions.  It is impossible to eliminate all mold and mold spores in the indoor environment.  There can be no assurance that the properties acquired by us will not contain toxic mold.  The difficulty in discovering indoor toxic mold growth could lead to an increased risk of lawsuits by affected persons and the risk that the cost to remediate toxic mold will exceed the value of the property.  There is a risk that we may acquire properties that contain toxic mold and such properties may negatively affect our performance and your return on investment.

Uninsured losses relating to real property or excessively expensive premiums for insurance coverage could reduce our cash flows and the return on your investment.

There are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Insurance risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. Additionally, mortgage lenders in some cases have begun to insist that commercial property owners purchase coverage against terrorism as a condition for providing mortgage loans. Such insurance policies may not be available at reasonable costs, if at all, which could inhibit our ability to finance or refinance our properties. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We may not have adequate coverage for such losses. If any of our properties incurs a casualty loss that is not fully insured, the value of our assets will be reduced by any such uninsured loss. In addition, other than any working capital reserve or other reserves we may establish, we have no source of funding to repair or reconstruct any uninsured property. Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings that would result in lower distributions.

Our costs associated with and the risk of failing to comply with the Americans with Disabilities Act, the Fair Housing Act and other tax credit programs may adversely affect cash available for distributions.

Our properties are generally expected to be subject to the Americans with Disabilities Act of 1990, as amended.  Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The Disabilities Act has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities.  The Disabilities Act’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages.  We cannot assure you that we will be able to acquire properties that comply with the Disabilities Act or place the burden on the seller or other third-party to ensure compliance with such laws. If we cannot, our funds used for compliance with these laws may affect cash available for distributions and the amount of distributions to you.

The multifamily rental properties we acquire must comply with Title III of the Disabilities Act, to the extent that such properties are “public accommodations” or “commercial facilities” as defined by the Disabilities Act. Compliance with the Disabilities Act could require removal of structural barriers to handicapped access in certain public areas of our apartment communities where such removal is readily achievable. The Disabilities Act does not, however, consider residential properties, such as multifamily rental properties, to be public accommodations or commercial facilities, except to the extent portions of such facilities, such as the leasing office, are open to the public.

17

We also must comply with the Fair Housing Amendment Act of 1988 (“FHAA”), which requires that multifamily rental properties first occupied after March 13, 1991 be accessible to handicapped residents and visitors. Compliance with the FHAA could require removal of structural barriers to handicapped access in a community, including the interiors of apartment units covered under the FHAA.  Recently there has been heightened scrutiny of multifamily rental properties for compliance with the requirements of the FHAA and the Disabilities Act and an increasing number of substantial enforcement actions and private lawsuits have been brought against multifamily rental properties to ensure compliance with these requirements. Noncompliance with the FHAA and the Disabilities Act could result in the imposition of fines, awards of damages to private litigants, payment of attorneys’ fees and other costs to plaintiffs, substantial litigation costs and substantial costs of remediation.

Certain of our properties may be subject to the low income housing tax credits, historic preservation tax credits or other similar tax credit rules at the federal, state or municipal level. The application of these tax credit rules is extremely complicated and noncompliance with these rules may have adverse consequences for us. Noncompliance with applicable tax regulations may result in the loss of future or other tax credits and the fractional recapture of these tax credits already taken. Accordingly, noncompliance with these tax credit rules and related restrictions may adversely affect our ability to distribute any cash to our investors.

Our properties may be dispersed geographically and across various markets and sectors.

We may acquire and operate properties in different locations throughout the United States and in different markets and sectors. The success of our properties will depend largely on our ability to hire various managers and service providers in each area, market and sector where the properties are located or situated. It may be more challenging to manage a diverse portfolio.  Failure to meet such challenges could reduce the value of your investment.

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

As of December 31, 2020, our real estate investments located in Texas, Illinois, Colorado, Oregon, and Georgia, represented approximately 19.5%, 19.0% 15.6%, 14.1% and 9.0% of the portfolio. As a result, the geographic concentration of our portfolio makes it 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 adversely affect our operating results and our ability to make distributions to stockholders.

Newly constructed and existing multifamily rental properties or other properties that compete with any properties we may acquire in any particular location could adversely affect the operating results of our properties and our cash available for distribution.

We may acquire properties in locations that experience increases in construction of multifamily rental or other properties that compete with our properties. This increased competition and construction could:

• 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.

Our efforts to upgrade multifamily rental properties to increase occupancy and raise rental rates through redevelopment and repositioning may fail, which may reduce our net income and the cash available for distributions to you.

The success of our ability to upgrade any multifamily rental properties that we may acquire and realize capital gains and current income for you on these investments materially depends upon the status of the economy where the multifamily rental property is located. Our revenues will be lower if the rental market cannot bear the higher rental rate that accompanies the upgraded multifamily rental property due to job losses or other economic hardships. Should the local market be unable to support a higher rental rate for a multifamily rental property that we upgraded, we may not realize the premium rental we had assumed by a given upgrade and we may realize reduced rental income or a reduced gain or even loss upon the sale of the property. These events could cause us to reduce the cash available for distributions. Further, economic conditions caused by the COVID-19 pandemic may hinder or delay our ability to significantly carry out our value-add programs and thereby increase rents.  

18

Repositioning risks could affect our profitability.

A component of our strategy is to renovate and reposition multifamily communities in order to effect long-term growth. Our renovation and repositioning activities generally entail certain risks, including the following:

• 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.

These risks may reduce the funds available for distribution to our stockholders. Further, the renovation and repositioning of properties is also subject to the general risks associated with real estate investments.

A concentration of our investments in any one property sector may leave our profitability vulnerable to a downturn or slowdown in such sector.

All of our investments are in the multifamily sector.  Vacancy rates in multifamily rental properties and other commercial real estate properties may be related to jobless rates. As a result, we are subject to risks inherent in investments in a single type of property. The potential effects on our revenues, and as a result, on cash available for distribution, resulting from increased jobless rates as well as a general downturn or slowdown in multifamily properties could be more pronounced than if we had more fully diversified our investments.

Increased competition and the increased affordability of single-family and multifamily homes and condominiums for sale or rent could limit our ability to retain residents, lease apartment units or increase or maintain rents.

Any multifamily rental property that we may acquire and own will most likely compete with numerous housing alternatives in attracting residents, including single-family and multifamily homes and condominiums. Due to the current economic conditions, competitive housing in a particular area and the increasing affordability of single-family and multifamily homes and condominiums to buy caused by relatively low mortgage interest rates and generous federal and state government programs to promote home ownership could adversely affect our ability to fully occupy any multifamily rental properties we may acquire. Further, single-family homes and condominiums available for rent could also adversely affect our ability to retain our residents, lease apartment units and increase or maintain rental rates.

Short-term multifamily leases expose us to the effects of declining market rent, which could adversely impact our ability to make cash distributions.

We expect that substantially all of our apartment leases will be for a term of one year or less. Because these leases generally permit the residents to leave at the end of the lease term or earlier in certain situations, such as when a resident loses his/her job, without penalty, our rental revenues may be impacted by declines in market rents more quickly than if our leases were for longer terms.

If we acquire student housing properties, these properties would be subject to an annual leasing cycle, short lease-up period, seasonal cash flows, changing university admission and housing policies and other risks inherent in the student housing industry.

Similar to multifamily rental properties, if we acquire student housing, we expect to generally lease such properties under short-term, 12-month leases, and in certain cases, under nine-month or shorter-term semester leases.  As a result, we may experience significantly reduced cash flows during the summer months at properties leased under leases having terms shorter than 12 months.  Student housing properties are also typically leased during a limited leasing season that usually begins in January and ends in August of each year.  We are therefore highly dependent on the effectiveness of our marketing and leasing efforts and personnel during this season.

19

Changes in university admission policies or overall student enrollment levels could also adversely affect the investment return on student housing properties.  For example, if a university reduces the number of student admissions or requires that a certain class of students, such as freshman, live in a university-owned facility, the demand for beds at our properties may be reduced and our occupancy rates may decline.  We will also be required to form relationships directly or through third parties with colleges and universities for referrals of prospective student-residents or for mailing lists of prospective student-residents and their parents.  Any failure to maintain good relationships with these colleges and universities could therefore have a material adverse effect on us.  Federal and state laws require colleges to publish and distribute reports of on-campus crime statistics, which may result in negative publicity and media coverage associated with crimes occurring on or in the vicinity of our on-campus properties.

If we acquire student housing properties, we may face significant competition from university-owned on-campus student housing, from other off-campus student housing properties and from traditional multifamily housing located within close proximity to universities.

On-campus student housing has certain inherent advantages over off-campus student housing in terms of physical proximity to the university campus and integration of on-campus facilities into the academic community. Colleges and universities can generally avoid real estate taxes and borrow funds at lower interest rates than us and other private sector operators.  Competition from university-owned on-campus housing could adversely affect the performance of any student housing properties we may acquire.

If we invest in senior residential properties, we may incur liability for failing to comply with the FHAA and the Housing for Older Persons Act or certain state regulations.

Any senior residential properties we acquire will be required to qualify as housing for older persons and will be required to comply with the appropriate federal and state laws governing age and owner occupancy.  Noncompliance with the FHAA and the Housing for Older Persons Act and certain state registration requirements could result in fines, awards of damages to private litigants, payment of attorneys’ fees and other substantial costs of remediation.

The condominium industry is subject to extensive regulation and other unique risks.

We may invest in condominium properties to convert the condominiums into multifamily rental units or market and sell the condominium units at discounted prices. These activities are subject to extensive laws and regulations of local, state and federal governments. These laws and regulations vary by municipality and state and their requirements can be burdensome and costly.

Further, condominium associations often serve as mini-governments in the form and manner by which they govern the activities and services impacting the residents of the condominium building. Our lack of control over any condominium association, where we own the building, could raise additional risks of undue delay or unexpected costs to sell the discounted condominium units or convert them into multifamily rental units.  In addition, condominium buildings and their associations may also be subject to litigation from contractors, other condominium owners or other third parties and may be subject to other unknown liabilities not readily discoverable upon initial due diligence.

Changing market conditions, especially in the greater metropolitan areas may adversely impact our ability to sell condominium units at expected prices, or at all, which could hinder our results of operations and reduce our net income.

If we acquire a condominium building for conversion or to sell units at a discount, there could be a significant amount of time before we can redevelop or reposition the condominium units available for conversion or sale. The market value of a condominium unit being redeveloped or repositioned can vary significantly during this time due to changing market conditions.  If we acquire condominiums or attempt to convert multifamily or hotel properties into condominiums, lower prices of condominium units and sales activities in major metropolitan markets or other markets where these properties may be located could adversely affect our results of operations and net income.  Although demand in major metropolitan geographic areas historically has been strong, increased purchase price appreciation may reduce the likelihood of consumers seeking to purchase new residences, which would likely harm our ability to sell units in residential condominium buildings. If the prices of condominium units or sales activity decline in the key markets in which we may operate, our costs may not decline at all or at the same rate and, as a result, our business, results of operations and financial condition would be adversely affected.

20

Condominium purchasers may be unwilling or unable to purchase condominium units at times when mortgage-financing costs are high or as credit quality declines.

The majority of our potential purchasers for discounted condominium units will finance their purchases through third-party lenders. In general, housing demand is adversely affected by increases in interest rates, demand for increased down payments and by decreases in the availability of mortgage financing as a result of declining customer credit quality or other issues.  Further, there are additional constraints on certain government-sponsored entities, such as Fannie Mae and Freddie Mac, for potential condominium purchasers in projects where a substantial number of units remain unsold in a particular condominium project. Even though we closely monitor the mortgage market for prospective buyers for condominium units, if mortgage interest rates increase or the average down payment requirement increases, the ability or willingness of prospective buyers to finance condominium unit purchases may be adversely affected.

If we acquire condominium properties or mixed-use properties that combine hotel, multifamily or condominiums, a fire or other accident could occur in a single unit that causes the entire building to be uninhabitable.

We may experience greater risks in the condominium and mixed-use property investments because there could be a higher likelihood of an accident occurring in a building containing numerous individuals where we do not have the same ability to monitor or review the building as other property classes.  A fire or other accident in a single unit could in turn cause the entire building to be uninhabitable. Even if there is insurance on the building, it may not be enough to cover all of the losses as a result of a fire or other accident.

Risks Related to Investments in Real Estate-Related Debt Assets

Our investments in real estate-related debt investments are subject to the risks typically associated with real estate.

Our investments in mortgage, mezzanine or other real estate loans will generally be directly or indirectly secured by a lien on real property (or the equity interests in an entity that owns real property) that, upon the occurrence of a default on the loan, could result in our acquiring ownership of the property.  We will not know whether the values of the properties ultimately securing our loans will remain at the levels existing on the dates of origination of those loans. If the values of the underlying properties drop, our risk will increase because of the lower value of the security associated with such loans.  In this manner, real estate values could impact the values of our loan investments.  Our investments in other real estate-related debt investments may be similarly affected by real estate property values.  Therefore, our real estate-related debt investments will be subject to the risks typically associated with real estate, which are described above under the heading “-Risks Related to Investments in Real Estate.”

If we make or invest in mortgage, mezzanine, bridge or other real estate loans, our loans will be subject to interest rate fluctuations that will affect our returns as compared to market interest rates; accordingly, the value of our stockholders’ investment would be subject to fluctuations in interest rates.

If we make or invest in fixed rate, long‑term loans and interest rates rise, the loans could yield a return that is lower than then‑current market rates.  If interest rates decrease, we will be adversely affected to the extent that loans are prepaid because we may not be able to reinvest the proceeds at as high of an interest rate.  If we invest in variable‑rate loans and interest rates decrease, our revenues will also decrease. For these reasons, if we invest in mortgage, mezzanine, bridge or other real estate loans, our returns on those loans and the value of our stockholders’ investment will be subject to fluctuations in interest rates.

Delays in liquidating defaulted mortgage loans could reduce our investment returns.

If we make or invest in mortgage loans and there are defaults under those mortgage loans, we may not be able to repossess and sell the underlying properties quickly. The resulting time delay could reduce the value of our investment in the defaulted mortgage loans.  An action to foreclose on a property securing a mortgage loan is regulated by state statutes and regulations and is subject to many of the delays and expenses of other lawsuits if the defendant raises defenses or counterclaims.  In the event of default by a mortgagor, these restrictions, among other things, may impede our ability to foreclose on or sell the mortgaged property or to obtain proceeds sufficient to repay all amounts due to us on the mortgage loan.

Government action may reduce recoveries on defaulted loans.

Legislative or regulatory initiatives by federal, state or local legislative bodies or administrative agencies, if enacted or adopted, could delay foreclosure, provide new defenses to foreclosure or otherwise impair our ability to foreclose on real estate-related debt investments in default. Bankruptcy courts could, if this legislation is enacted, reduce the amount of the principal balance on a mortgage loan that is secured by a lien on the mortgaged property, reduce the interest rate, extend the term to maturity or otherwise modify the terms of a bankrupt borrower’s mortgage loan.

21

Property owners filing for bankruptcy may adversely affect us.

The filing of a petition in bankruptcy automatically stops or “stays” any actions to enforce the terms of all debt of the debtor, including a mortgage loan.  The length of the stay and the costs associated with it will generally have an adverse impact on our profitability.  Further, the bankruptcy court may take other actions that prevent us from foreclosing on the property.  Any bankruptcy proceeding will, at a minimum, delay us in achieving our investment objectives and may adversely affect our profitability.

Investment in non‑conforming and non‑investment-grade loans may involve increased risk of loss.

Loans we may acquire may not conform to conventional loan criteria applied by traditional lenders and may not be rated or may be rated as non‑investment grade.  Non‑investment-grade ratings for these loans typically result from the overall leverage of the loans, the lack of a strong operating history for the properties underlying the loans, the borrowers’ credit history, the properties’ underlying cash flow or other factors. As a result, loans we acquire may have a higher risk of default and loss than conventional loans.  Any loss we incur may reduce distributions to stockholders and adversely affect the value of our common stock.

Investments in subordinated loans may be subject to losses.

We may acquire subordinated loans.  In the event a borrower defaults on a subordinated loan and lacks sufficient capacity to cure the default, we may suffer a loss of principal or interest.  In the event a borrower declares bankruptcy, we may not have full recourse to the assets of the borrower, or the assets of the borrower may not be sufficient to satisfy the loan. If a borrower defaults on our loan or on debt senior to our loan, or in the event of a borrower bankruptcy, our loan will be satisfied only after the senior debt is paid in full.  Where debt senior to our loan exists, the presence of intercreditor arrangements may limit our ability to amend our loan documents, assign our loans, accept prepayments, exercise our remedies (through “standstill periods”), and control decisions made in bankruptcy proceedings relating to borrowers.

To the extent that we make investments in real estate-related securities, a portion of those investments may be illiquid and we may not be able to adjust our portfolio in response to changes in economic and other conditions.

Certain of the real estate-related securities that we may purchase in connection with privately negotiated transactions will not be registered under the relevant securities laws, resulting in a prohibition against their transfer, sale, pledge or other disposition except in a transaction that is exempt from the registration requirements of, or is otherwise in accordance with, those laws.  As a result, our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited.  The mezzanine and certain of the other loans we may purchase will be particularly illiquid investments due to their short life, their unsuitability for securitization and the greater difficulty of recoupment in the event of a borrower’s default.

Investments in non-performing real estate assets involve greater risks than investments in stabilized, performing assets and make our future performance more difficult to predict.

Traditional performance metrics of real estate assets are generally not as reliable for non-performing real estate assets as they are for performing real estate assets. Non-performing properties, for example, do not have stabilized occupancy rates. Similarly, non-performing loans do not have a consistent stream of loan servicing or interest payments. In addition, for non-performing loans, often there is greater uncertainty that the face amount of the note will be paid in full.

In addition, we may pursue more than one strategy to create value in a non-performing real estate investment. With respect to a property, these strategies may include development, redevelopment, or lease-up of such property. With respect to a loan, these strategies may include negotiating with the borrower for a reduced payoff, restructuring the terms of the loan or enforcing our rights as lender under the loan and foreclosing on the collateral securing the loan.

The factors described above make it challenging to evaluate non-performing investments.

Delays in restructuring or liquidating non‑performing real estate securities could reduce the return on our stockholders’ investment.

Real estate securities may become non‑performing after acquisition for a wide variety of reasons.  Such non‑performing real estate investments may require a substantial amount of workout negotiations or restructuring, which may entail, among other things, a substantial reduction in the interest rate and a substantial write‑down of such loan or asset. However, even if a restructuring is successfully accomplished, upon maturity of such real estate security, replacement “takeout” financing may not be available.  We may find it necessary or desirable to foreclose on some of the collateral securing one or more of our investments.  Intercreditor provisions may substantially interfere with our ability to do so.  Even if foreclosure is an option, the foreclosure process can be lengthy and expensive.  Borrowers often resist foreclosure actions by asserting numerous claims, counterclaims and defenses, including, without limitation, lender liability claims and defenses, in an effort to prolong the foreclosure action.  In some states, foreclosure actions can take up to several years or more to litigate.  At any time during the foreclosure proceedings, the borrower may file for bankruptcy, which would have the effect of staying the foreclosure action and further delaying the

22

foreclosure process. Foreclosure litigation tends to create a negative public image of the collateral property and may result in disrupting ongoing leasing and management of the property.  Foreclosure actions by senior lenders may substantially affect the amount that we may earn or recover from an investment.

We will depend on debtors for our revenue, and, accordingly, our revenue and our ability to make distributions to our stockholders will be dependent upon the success and economic viability of such debtors.

The success of our real estate-related debt investments such as loans and debt and derivative securities will materially depend on the financial stability of the debtors underlying such investments. The inability of a single major debtor or a number of smaller debtors to meet their payment obligations could result in reduced revenue or losses.  In the event of a debtor default or bankruptcy, we may experience delays in enforcing our rights as a creditor, and such rights may be subordinated to the rights of other creditors.  These events could negatively affect the cash available for distribution to our stockholders and the value of our stockholders’ investment.

Prepayments can adversely affect the yields on our investments.

Prepayments on debt instruments, where permitted under the debt documents, are influenced by changes in current interest rates and a variety of economic, geographic and other factors beyond our control, and consequently, such prepayment rates cannot be predicted with certainty. If we are unable to invest the proceeds of such prepayments received, the yield on our portfolio will decline. Under certain interest rate and prepayment scenarios, we may fail to recoup fully our cost of acquisition of certain investments.

Risks Associated with Debt Financing

We have incurred, and may continue to incur, mortgage indebtedness and other borrowings, which increases our risk of loss due to foreclosure.

We have incurred mortgage indebtedness and we may obtain additional lines of credit and long-term financing that may be secured by our properties and other assets.  In some instances, we may acquire real properties by financing a portion of the price of the properties and mortgaging or pledging some or all of the properties purchased as security for that debt.  We may also incur mortgage debt on properties that we already own in order to obtain funds to acquire additional properties.  In addition, we may borrow as necessary or advisable to ensure that we maintain our qualification as a REIT for federal income tax purposes, including borrowings to satisfy the REIT requirement that we distribute at least 90% of our annual REIT taxable income to our stockholders (computed without regard to the dividends paid deduction and excluding net capital gain).  We, however, can give you no assurance that we will be able to obtain such borrowings on satisfactory terms.

If we do mortgage a property and there is a shortfall between the cash flow from that property and the cash flow needed to service mortgage debt on that property, then the amount of cash available for distributions to stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss of a property since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions.  In that case, we could lose the property securing the loan that is in default, reducing the value of your investment. For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure even though we would not necessarily receive any cash proceeds. We may give full or partial guaranties to lenders of mortgage debt on behalf of the entities that own our properties. When we give a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity. If any mortgages contain cross-collateralization or cross-default provisions, a default on a single property could affect multiple properties.

We may also obtain recourse debt to finance our acquisitions and meet our REIT distribution requirements.  If we have insufficient income to service our recourse debt obligations, our lenders could institute proceedings against us to foreclose upon our assets.  If a lender successfully forecloses upon any of our assets, our ability to pay cash distributions to our stockholders will be limited and you could lose all or part of your investment.

Our increased indebtedness following completion of the Mergers may present additional risks to our business.

In connection with the Mergers, we assumed and/or refinanced certain indebtedness of REIT I and REIT III and are subject to risks associated with increased debt financing, including a risk that our cash flow could be insufficient to meet required payments on our debt. As of December 31, 2020, we had approximately $584.3 million of outstanding debt, substantially comprised of $580.1 million of mortgage notes payable, net. After giving effect to the Mergers, our total pro forma consolidated indebtedness has increased. Taking into account both our and REIT I and REIT III’s indebtedness, transaction expenses, and the

23

assumption and/or refinancing of indebtedness in the Mergers, our pro forma consolidated indebtedness as of December 31, 2020, after giving effect to the Mergers, would be approximately $1.6 billion, substantially comprised of $1.56 billion of mortgage notes payable, net.Following the Mergers, we have limited near-term debt maturities with approximately 55% leverage based on appraised values.

In addition, our indebtedness could have important consequences to holders of our common stock, including:

• vulnerability to general adverse economic and industry conditions;

• limiting our ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements;

• requiring the use of a substantial portion of our cash flow from operations for the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund working capital, acquisitions, capital expenditures and general corporate requirements;

• limiting our flexibility in planning for, or reacting to, changes in our business and industry;

• putting us at a disadvantage compared to our competitors with less indebtedness; and

• limiting our ability to access capital markets.

High mortgage interest rates may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our net income and the amount of cash distributions we can make.

If mortgage debt is unavailable at reasonable interest rates, we may not be able to finance the purchase of properties. If we place mortgage debt on properties, we run the risk of being unable to refinance the properties when the loans become due, or of being unable to refinance on favorable terms. If interest rates are higher when we refinance the properties, our income could be reduced. If any of these events occur, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to you and may hinder our ability to raise more capital by issuing more stock or by borrowing more money.

We may not be able to access financing sources on attractive terms, which could adversely affect our ability to execute our business plan.

We may finance our assets over the long term through a variety of means, including credit facilities, issuance of commercial mortgage-backed securities, and other structured financings.  Our ability to execute this strategy will depend on various conditions in the markets for financing in this manner that are beyond our control, including lack of liquidity and greater credit spreads. We cannot be certain that these markets will remain an efficient source of long‑term financing for our assets.  If our strategy is not viable, we will have to find alternative forms of long‑term financing for our assets. This could subject us to more recourse indebtedness and the risk that debt service on less efficient forms of financing would require a larger portion of our cash flows, thereby reducing cash available for distribution to our stockholders and funds available for operations, as well as for future business opportunities.

We could be negatively impacted by the condition of Fannie Mae or Freddie Mac and by changes in government support for multifamily housing.

Fannie Mae and Freddie Mac are a major source of financing for multifamily real estate in the United States. We have utilized and expect to continue to utilize loan programs sponsored by these entities as a key source of capital to finance our growth and our operations. In September 2008, the U.S. government increased its control of Fannie Mae and Freddie Mac and placed both companies into a government conservatorship under the Federal Housing Finance Agency (the “FHFA”). Since that time, members of Congress have introduced and Congressional committees have considered a substantial number of bills that include comprehensive or incremental approaches to winding down Fannie Mae and Freddie Mac or changing their purposes, businesses or operations. In 2019, the FHFA for the first time released formal objectives calling for the return of Fannie Mae and Freddie Mac to the private sector. It was also announced during the year that Fannie Mae and Freddie Mac will be permitted to retain a combined $45 billion worth of earnings (Fannie Mae will be allowed to retain $25 billion and Freddie Mac $20 billion). This is a modification of the so-called “net worth sweep” provision that has required Fannie Mae and Freddie Mac to deliver nearly all of their profits to the Treasury; the result being that each organization will have the opportunity to build its net worth.  A decision by the U.S. government to eliminate or downscale Fannie Mae or Freddie Mac or to reduce government support for multifamily housing more generally may adversely affect interest rates, capital availability, development of multifamily communities and the value of multifamily assets and, as a result, may adversely affect our operations. Any potential reduction in

24

loans, guarantees and credit enhancement arrangements from Fannie Mae and Freddie Mac could jeopardize the effectiveness of the multifamily sector’s derivative securities market, potentially causing breaches in loan covenants, and through reduced loan availability, impact the value of multifamily assets, which could impair the value of a significant portion of multifamily communities. Specifically, the potential for a decrease in liquidity made available to the multifamily sector by Fannie Mae and Freddie Mac could (i) hinder our ability to refinance our existing loans; (ii) require us to obtain other sources of debt capital with potentially different terms; and (iii) make it more difficult for potential buyers of our properties to obtain financing.

Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders.

When providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. Loan documents we enter into may contain covenants that limit our ability to further mortgage the property or discontinue insurance coverage. These or other limitations may limit our flexibility and our ability to achieve our operating plans.

Increases in interest rates could increase the amount of our debt payments and adversely affect our ability to make distributions to our stockholders.

As of December 31, 2020, we had total outstanding debt of approximately $584.3 million, including approximately $400.6 million of debt subject to variable interest rates (excluding amounts that were hedged to fix rates), and may incur additional indebtedness in the future. Interest we pay reduces our cash available for distributions. Since we have incurred and may continue to incur variable rate debt, increases in interest rates raise our interest costs, which reduces our cash flows and our ability to make distributions to you. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to sell one or more of our properties at times which may not permit realization of the maximum return on such investments.

We may be adversely affected by the discontinuation of LIBOR after June 2023.

As of December 31, 2020, we had approximately $400.6 million of debt and 11 interest rate caps with an aggregate notional value of $405.3 million that were indexed to the London Interbank Offered Rate (“LIBOR”). In July 2017, the United Kingdom’s Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that it will stop encouraging or requiring banks to submit rates for the calculation of LIBOR after December 31, 2021. On March 5, 2021, the FCA announced that all LIBOR settings will either cease to be provided by any administrator or no longer be representative (i) immediately after December 31, 2021, in the case of the 1-week and 2-month US dollar settings; and (ii) immediately after June 30, 2023, in the case of the remaining US dollar settings. The tenors that were extended to June 30, 2023 are more widely used and are the tenors used in our LIBOR-based debt.

The Alternative Reference Rates Committee (“ARRC”), a steering committee comprised of U.S. financial market participants, published model LIBOR replacement language for use in bilateral and syndicated loan facilities. ARRC selected the Secured Overnight Financing Rate (“SOFR”) as the replacement to LIBOR. SOFR is a broad measure of the cost of borrowing cash in the overnight U.S. treasury repo market and is a rate published by the Federal Reserve Bank of New York. We have been incorporating LIBOR transition language in our existing floating rate loans when they are extended or refinanced. Our new loans typically remain indexed to LIBOR and not SOFR and include LIBOR transition language that generally aligns with ARRC recommendations.

On October 23, 2020, the International Swaps and Derivatives Association (“ISDA”), the trade association for the derivatives marketplace, published the ISDA IBOR Fallbacks Protocol (the “Protocol”) and the ISDA IBOR Fallbacks Supplement (the “Supplement”). The Protocol and the Supplement became effective on January 25, 2021. The Protocol incorporates LIBOR transition provisions into non-cleared derivatives transactions that reference LIBOR and were entered into before January 25, 2021 between parties to derivatives transactions that each have adhered to the Protocol. The Supplement automatically incorporates these LIBOR transition provisions into non-cleared derivatives transactions that reference LIBOR and are entered into on or after January 25, 2021. We currently are not adherents to the Protocol. Any interest rate hedges that reference LIBOR and that we enter into on or after January 25, 2021 will be subject to conversion based on the ISDA methodology set forth in the Supplement. As a result of the FCA announcement, on March 5, 2021, the ISDA separately confirmed that the FCA’s announcement constitutes an index cessation event under the Protocol and the Supplement. Therefore, the spread adjustments to be used in connection with the transition from LIBOR to SOFR under any of our hedging agreements governed by the Protocol or the Supplement were fixed on March 5, 2021.

25

Differences between ARRC and ISDA LIBOR replacement methodology could result in differences in conversion between our debt instruments and corresponding hedges. Mismatches could occur resulting from conversion at different times, into different benchmark replacement rates, or into the same benchmark replacement rates calculated at different times or using different methods of calculation.

Accordingly, the transition from LIBOR to SOFR could result in higher all-in interest costs and could hinder our ability to maintain effective hedges, which could impact our financial performance. Furthermore, the impact or potential impact of LIBOR transition could incentivize us to prepay debt and/or unwind hedge positions earlier than we anticipated when closing the debt facility and/or entering into the hedge position. If we prepay debt, we may owe prepayment penalties or other breakage costs. If we unwind hedge positions, we could owe unwind payments to our counterparties, which could be significant. For hedges entered into before January 25, 2021, if we do not subsequently adhere to the Protocol, negotiate bilateral solutions with our counterparties, or unwind our positions before the discontinuation of LIBOR, it may be impossible for us or our counterparties to perform under these hedges following the discontinuation of LIBOR.

We have broad authority to incur debt, and high debt levels could hinder our ability to make distributions and decrease the value of your investment.

Our charter limits our leverage to 300% of our net assets; we may exceed this limit with the approval of the Conflicts Committee of our Board of Directors.  High debt levels would cause us to incur higher interest charges and higher debt service payments and may also be accompanied by restrictive covenants.  These factors could limit the amount of cash we have available to distribute and could result in a decline in the value of your investment.

Federal Income Tax Risks

Our failure to continue to qualify as a REIT would subject us to federal income tax and reduce cash available for distribution to stockholders.

We elected to be taxed as a REIT under the Internal Revenue Code commencing with our taxable year ended December 31, 2014.  We intend to continue to operate in a manner so as to continue to qualify as a REIT for federal income tax purposes.  Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which only a limited number of judicial and administrative interpretations exist. Even an inadvertent or technical mistake could jeopardize our REIT status.  Our continued qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis.  Moreover, new tax legislation, administrative guidance or court decisions, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to continue to qualify as a REIT.  If we fail to continue to qualify as a REIT in any taxable year, we would be subject to federal and applicable state and local income tax on our taxable income at corporate rates, in which case we might be required to borrow or liquidate some investments in order to pay the applicable tax.  Losing our REIT status would reduce our net income available for investment or distribution to you because of the additional tax liability.  In addition, distributions to stockholders would no longer qualify for the dividends-paid deduction and we would no longer be required to make distributions.  Furthermore, if we fail to qualify as a REIT in any taxable year for which we have elected to be taxed as a REIT, we would generally be unable to elect REIT status for the four taxable years following the year in which our REIT status is lost.

Complying with REIT requirements may force us to borrow funds to make distributions to you or otherwise depend on external sources of capital to fund such distributions.

To continue to qualify as a REIT, we are required to distribute annually at least 90% of our taxable income, subject to certain adjustments, to our stockholders.  To the extent that we satisfy the distribution requirement, but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed taxable income. In addition, we may elect to retain and pay income tax on our net long-term capital gain.  In that case, if we so elect, a stockholder would be taxed on its proportionate share of our undistributed long-term gain and would receive a credit or refund for its proportionate share of the tax we paid.  A stockholder, including a tax-exempt or foreign stockholder, would have to file a federal income tax return to claim that credit or refund. Furthermore, we will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws.

26

From time-to-time, we may generate taxable income greater than our net income for GAAP.  In addition, our taxable income may be greater than our cash flow available for distribution to you as a result of, among other things, investments in assets that generate taxable income in advance of the corresponding cash flow from the assets (for instance, if a borrower defers the payment of interest in cash pursuant to a contractual right or otherwise).

If we do not have other funds available in the situations described in the preceding paragraphs, we could be required to borrow funds on unfavorable terms, sell investments at disadvantageous prices or find another alternative source of funds to make distributions sufficient to enable us to distribute enough of our taxable income to satisfy the REIT distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity.

Because of the distribution requirement, it is unlikely that we will be able to fund all future capital needs, including capital needs in connection with investments, from cash retained from operations. As a result, to fund future capital needs, we likely will have to rely on third-party sources of capital, including both debt and equity financing, which may or may not be available on favorable terms or at all.  Our access to third-party sources of capital will depend upon a number of factors, including our current and potential future earnings and cash distributions.

Despite our qualification for taxation as a REIT for federal income tax purposes, we may be subject to other tax liabilities that reduce our cash flow and our ability to make distributions to you.

Despite our qualification for taxation as a REIT for federal income tax purposes, we may be subject to certain federal, state and local taxes on our income and assets, including taxes on any undistributed income or property.  Any of these taxes would decrease cash available for distribution to you.  For instance:

• 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.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.

To continue to qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to stockholders and the ownership of our stock. As discussed above, we may be required to make distributions to our stockholders at disadvantageous times or when we do not have funds readily available for distribution. Additionally, we may be unable to pursue investments that would be otherwise attractive to us in order to satisfy the requirements for qualifying as a REIT.

We must also ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified real estate assets, including certain mortgage loans and mortgage-backed securities.  The remainder of our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer.  In addition, in general, no more than 5% of the value of our assets can consist of

27

the securities of any one issuer (other than government securities and qualified real estate assets) and no more than 20% of the value of our gross assets (25% for tax years ending before 2018) may be represented by securities of one or more TRSs.  Finally, for the taxable years after 2016, no more than 25% of our assets may consist of debt investments that are issued by “publicly offered REITs” and would not otherwise be treated as qualifying real estate assets.  If we fail to comply with these requirements at the end of any calendar quarter, we must correct such failure within 30 days after the end of the calendar quarter to avoid losing our REIT status and suffering adverse tax consequences, unless certain relief provisions apply.  As a result, compliance with the REIT requirements may hinder our ability to operate solely on the basis of profit maximization and may require us to liquidate investments from our portfolio, or refrain from making, otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to stockholders.

Complying with REIT requirements may limit our ability to hedge effectively.

The REIT provisions of the Internal Revenue Code may limit our ability to hedge our operations effectively.  Our aggregate gross income from non-qualifying hedges, fees and certain other non-qualifying sources cannot exceed 5% of our annual gross income.  As a result, we might have to limit our use of advantageous hedging techniques or implement those hedges through a TRS.  Any hedging income earned by a TRS would be subject to federal, state and local income tax at regular corporate rates. This could increase the cost of our hedging activities or expose us to greater risks associated with interest rate or other changes than we would otherwise incur.

Liquidation of assets may jeopardize our REIT qualification.

To continue to qualify as a REIT, we must comply with requirements regarding our assets and our sources of income.  If we are compelled to liquidate our investments to satisfy our obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% prohibited transaction tax on any resulting gain if we sell assets that are treated as dealer property or inventory.

The prohibited transactions tax may limit our ability to engage in transactions, including disposition of assets and certain methods of securitizing loans, which would be treated as sales for federal income tax purposes.

A REIT’s net income from prohibited transactions is subject to a 100% tax.  In general, prohibited transactions are sales or other dispositions of dealer property, other than foreclosure property, but including loans held primarily for sale to customers in the ordinary course of business.  We might be subject to the prohibited transaction tax if we were to dispose of or securitize loans in a manner that is treated as a sale of the loans, for federal income tax purposes.  In order to avoid the prohibited transactions tax, we may choose not to engage in certain sales of loans and may limit the structures we use for any securitization financing transactions, even though such sales or structures might otherwise be beneficial to us. Additionally, we may be subject to the prohibited transaction tax upon a disposition of real property. Although a safe-harbor exception to prohibited transaction treatment is available, we cannot assure you that we can comply with such safe harbor or that we will avoid owning property that may be characterized as held primarily for sale to customers in the ordinary course of our trade or business. Consequently, we may choose not to engage in certain sales of real property or may conduct such sales through a TRS.

It may be possible to reduce the impact of the prohibited transaction tax by conducting certain activities through a TRS.  However, to the extent that we engage in such activities through a TRS, the income associated with such activities will be subject to a corporate income tax.  In addition, the IRS may attempt to ignore or otherwise recast such activities in order to impose a prohibited transaction tax on us, and there can be no assurance that such recast will not be successful.

We also may not be able to use secured financing structures that would create taxable mortgage pools, other than in a TRS or through a subsidiary REIT.

We may recognize substantial amounts of REIT taxable income, which we would be required to distribute to you, in a year in which we are not profitable under GAAP principles or other economic measures.

We may recognize substantial amounts of REIT taxable income in years in which we are not profitable under GAAP or other economic measures as a result of the differences between GAAP and tax accounting methods.  For instance, certain of our assets will be marked-to-market for GAAP purposes but not for tax purposes, which could result in losses for GAAP purposes that are not recognized in computing our REIT taxable income.  Additionally, we may deduct our capital losses only to the extent of our capital gains in computing our REIT taxable income for a given taxable year.  Consequently, we could recognize substantial amounts of REIT taxable income and would be required to distribute such income to you, in a year in which we are not profitable under GAAP or other economic measures.

28

We may distribute our common stock in a taxable distribution, in which case our stockholders may sell shares of our common stock to pay tax on such distributions, and our stockholders may receive less in cash than the amount of the dividend that is taxable.

We may make taxable distributions that are payable in cash and common stock.  The IRS has issued private letter rulings to other REITs treating certain distributions that are paid partly in cash and partly in stock as taxable distributions that would satisfy the REIT annual distribution requirement and qualify for the dividends paid deduction for federal income tax purposes.  Those rulings may be relied upon only by taxpayers to whom they were issued, but we could request a similar ruling from the IRS.  Accordingly, it is unclear whether and to what extent we will be able to make taxable distributions payable in cash and common stock.  If we made a taxable dividend payable in cash and common stock, taxable stockholders receiving such distributions will be required to include the dividend as taxable income to the extent of our current and accumulated earnings and profits, as determined for federal income tax purposes. As a result, our stockholders may be required to pay income tax with respect to such distributions in excess of the cash distributions received.  If a U.S. stockholder sells the common stock that it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount recorded in earnings with respect to the dividend, depending on the market price of our common stock at the time of the sale.  Furthermore, with respect to certain non-U.S. stockholders, we may be required to withhold U.S. federal income tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in common stock.

REIT distribution requirements could adversely affect our ability to execute our business plan.

We generally 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) in order to continue to qualify as a REIT.  We intend to make distributions to our stockholders to comply with the REIT requirements of the Internal Revenue Code and to avoid corporate income tax and the 4% excise tax.  We may be required to make distributions to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

Distributions paid by REITs do not qualify for the reduced tax rates that apply to other corporate distributions.

The maximum tax rate for “qualified dividends” paid by corporations to non-corporate stockholders is currently 20%.  Distributions paid by REITs, however, generally are taxed at ordinary income rates (subject to a maximum rate of 37% for non-corporate stockholders, provided individuals may be able to deduct 20% of income received as ordinary REIT dividends, thus reducing the maximum effective federal income tax rate on such dividends), rather than the preferential rate applicable to qualified dividends.

You may have current tax liability on distributions you elect to reinvest in our common stock.

If you participate in our distribution reinvestment plan, you will be deemed to have received, and for income tax purposes will be taxed on, the amount reinvested in shares of our common stock to the extent the amount reinvested was not a tax-free return of capital. In addition, you will be treated for tax purposes as having received an additional distribution to the extent the shares are purchased at a discount to fair market value. As a result, unless you are a tax-exempt entity, you may have to use funds from other sources to pay your tax liability on the value of the shares of common stock received.

Retirement Plan Risks Retirement Plan Risks

If the fiduciary of an employee benefit plan subject to ERISA (such as a profit sharing, Section 401(k) or pension plan) or an owner of a retirement arrangement subject to Section 4975 of the Internal Revenue Code (such as an IRA) fails to meet the fiduciary and other standards under ERISA or the Internal Revenue Code as a result of an investment in our stock, the fiduciary could be subject to penalties and other sanctions.

There are special considerations that apply to employee benefit plans subject to ERISA (such as profit sharing, Section 401(k) or pension plans) and other retirement plans or accounts subject to Section 4975 of the Internal Revenue Code (such as an IRA) that are investing in our shares.  Fiduciaries and IRA owners investing the assets of such a plan or account in our common stock should satisfy themselves that:

• 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;

29

• 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.

With respect to the annual valuation requirements described above, we will provide an estimated value for our shares annually. We can make no claim whether such estimated value will or will not satisfy the applicable annual valuation requirements under ERISA and the Internal Revenue Code. The Department of Labor or the Internal Revenue Service may determine that a plan fiduciary or an IRA custodian is required to take further steps to determine the value of our common stock. In the absence of an appropriate determination of value, a plan fiduciary or an IRA custodian may be subject to damages, penalties or other sanctions. See Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities - Market Information” of this Annual Report on Form 10-K.

Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA and the Internal Revenue Code may result in the imposition of civil and criminal penalties and could subject the fiduciary to claims for damages or for equitable remedies, including liability for investment losses.  In addition, if an investment in our shares constitutes a prohibited transaction under ERISA or the Internal Revenue Code, the fiduciary or IRA owner who authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested.  In addition, the investment transaction must be undone.  In the case of a prohibited transaction involving an IRA owner, the IRA may be disqualified as a tax-exempt account and all of the assets of the IRA may be deemed distributed and subjected to tax.

If our assets are deemed to be plan assets, we may be exposed to liabilities under Title I of ERISA and the Internal Revenue Code

In some circumstances where an ERISA plan holds an interest in an entity, the assets of the entity are deemed to be ERISA plan assets unless an exception applies. This is known as the “look-through rule.” Under those circumstances, the obligations and other responsibilities of plan sponsors, plan fiduciaries and plan administrators, and of parties in interest and disqualified persons, under Title I of ERISA or Section 4975 of the Internal Revenue Code, may be applicable, and there may be liability under these and other provisions of ERISA and the Internal Revenue Code. We believe that our assets should not be treated as plan assets because the shares should qualify as “publicly-offered securities” that are exempt from the look-through rules under applicable Treasury Regulations. We note, however, that because certain limitations are imposed upon the transferability of shares so that we may qualify as a REIT, and perhaps for other reasons, it is possible that this exemption may not apply. If that is the case, and if we are exposed to liability under ERISA or the Internal Revenue Code, our performance and results of operations could be adversely affected.

If you invest in our shares through an IRA or other retirement plan, you may be limited in your ability to withdraw required minimum distributions.

If you establish an IRA or other retirement plan through which you invest in our shares, federal law may require you to withdraw required minimum distributions ("RMDs") from such plan in the future. Our share redemption program limits the amount of redemptions that can be made in a given year. As a result, you may not be able to have your shares redeemed at a time in which you need liquidity to satisfy the RMD requirements under your IRA or other retirement plan. Even if you are able to have your shares redeemed, such redemption may be at a price less than the price at which the shares were initially purchased. If you fail to withdraw RMDs from your IRA or other retirement plan, you may be subject to certain tax penalties.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

30

ITEM 2. PROPERTIES

As of December 31, 2020, we owned 17 multifamily properties encompassing approximately 4.9 million rentable square feet and 5,159 units. We acquired these properties from third parties unaffiliated with us or our Advisor. The following is a summary of our real estate properties as of December 31, 2020:

Multifamily Community Name	City and State	Number of Units		Date of Acquisition	Purchase Price (1)		Year of Construction	Average Unit Size (Sq. Ft.)		Physical Occupancy Rate (2)			Effective Monthly Revenue per Unit (3)
Adair off Addison	Dallas, TX		152	6/4/2014	$	9,500	1980		856		95.4	%	$	1,100
Uptown Buckhead	Atlanta, GA		216	3/30/2015		32,500	1989		739		96.3	%		1,273
Crosstown at Chapel Hill	Chapel Hill, NC		411	5/19/2015		46,750	1990/1996		1,005		92.0	%		1,221
The Brookwood	Homewood, AL		274	8/21/2015		30,050	1968/1972		1,051		93.8	%		1,127
Adair off Addison Apartment    Homes	Dallas, TX		200	8/27/2015		21,250	1979		1,098		94.0	%		1,266
1000 Spalding Crossing	Atlanta, GA		252	9/24/2015		41,000	1995		989		95.6	%		1,365
Montclair Terrace	Portland, OR		188	10/29/2015		32,750	1968		918		95.7	%		1,394
Grand Reserve	Naperville, IL		319	12/18/2015		66,700	1997		1,025		95.3	%		1,719
Verdant Apartment Homes	Boulder, CO		216	12/18/2015		65,200	1991		850		93.1	%		1,907
Arcadia Apartment Homes	Centennial, CO		300	1/22/2016		60,250	1984		977		95.3	%		1,554
Ravina Apartment Homes	Austin, TX		498	3/23/2016		57,000	2001		993		96.2	%		1,249
81 Fifty at West Hills    Apartment  Homes	Portland, OR		357	5/17/2016		81,500	1985		763		92.7	%		1,449
The Palmer at Las Colinas	Irving, TX		476	6/28/2016		70,000	1991		966		92.4	%		1,455
Windbrooke	Buffalo Grove, IL		236	12/22/2016		48,250	1986		903		94.5	%		1,607
The Woods of Burnsville	Burnsville, MN		400	12/23/2016		51,000	1984		953		94.3	%		1,274
Indigo Creek	Glendale, AZ		408	4/4/2017		55,200	1998		983		95.6	%		1,142
Martin's Point	Lombard, IL		256	10/31/2017		38,250	1989		789		94.5	%		1,483

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

(2) Physical occupancy rate is defined as the units occupied as of December 31, 2020 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 ofDecember 31, 2020, 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

From time to time, we are party to legal proceedings, which arise in the ordinary course of our business. We are not currently involved in any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by governmental authorities.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

31

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Stockholder Information

As of January 27, 2021, we had approximately 60,026,513 shares of common stock outstanding held by a total of approximately 12,268 stockholders. As a result of the completion of the Mergers on January 28, 2021, we had approximately 157,297,910 shares of common stock issued and outstanding held by a total of approximately 29,199 stockholders.

Estimated Value Per Share

On March 24, 2021, our board of directors approved an estimated value per share of our common stock of $9.06 based on the estimated market value of our portfolio of investments as of January 28, 2021, the effective date of the mergers with REIT I and REIT III. As of the date of this filing, we are not aware of a material change in the value of our investments that would impact the overall estimated value per share. We are providing this estimated value per share to assist broker-dealers that participated in our public offerings in meeting their customer account statement reporting obligations under Financial Industry Regulatory Authority (“FINRA”) Rule 2231. This valuation was performed in accordance with the provisions of Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the Institute for Portfolio Alternatives (“IPA”) (formerly the Investment Program Association) in April 2013 (the “IPA Valuation Guidelines”).

Our Conflicts Committee, composed of all of our independent directors, is responsible for the oversight of the valuation process, including the review and approval of the valuation process and methodology used to determine the estimated value per share, the consistency of the valuation and appraisal methodologies with real estate industry standards and practices and the reasonableness of the assumptions used in the valuations and appraisals. With the approval of the conflicts committee, we engaged Duff & Phelps, LLC (“Duff & Phelps”) to provide a calculation of the range in estimated value per share of our common stock as of January 28, 2021. Duff & Phelps held discussions with senior management, and conducted appraisals, investigations, research, review and analysis as it deemed necessary. Duff & Phelps based this range in estimated value per share upon its estimates of the “as is” market values of our interests in 51 multifamily properties and the value of other assets and liabilities, including goodwill, that were provided by our management team. Duff & Phelps made adjustments to the aggregate estimated values of our investments to reflect balance sheet assets and liabilities provided by our management, before calculating a range of estimated values based on the number of outstanding shares of our common stock as of January 28, 2021. The valuation report Duff & Phelps prepared (the “Valuation Report”) summarized the key inputs and assumptions involved in the appraisal of each of our investments. Duff & Phelps’s valuation was designed to follow the prescribed methodologies of the IPA Valuation Guidelines. The methodologies and assumptions used to determine the estimated value of our investments are described further below.

Upon our Conflicts Committee’s receipt and review of the Valuation Report and in light of other factors considered by our conflicts committee and our conflicts committee’s own extensive knowledge of our assets and liabilities, our conflicts committee concluded that the range in estimated value per share of $8.27 to $9.94, with an approximate midpoint value of $9.06 per share, as indicated in the Valuation Report, was appropriate. Upon recommendation by management, our Conflicts Committee recommended to our board of directors that it adopt $9.06 as the estimated value per share of our common stock, which approximates the midpoint value. Our board of directors unanimously agreed to accept the recommendation of our conflicts committee and approved $9.06 as the estimated value per share of our common stock, which determination is ultimately and solely the responsibility of our board of directors.

32

The following table summarizes the material components ofthe estimated net asset value of the merged entity as ofJanuary 28, 2021(in thousands, except per share amounts):

	Net Asset Value as of January 28, 2021			Net Asset Value as of January 28, 2021 (per share)
Investments	$	2,850,200		$	17.25
Cash		172,879			1.05
Goodwill (Management Company Value)		154,531			0.94
Other Assets		29,234			0.18
Mortgage Notes Payable and Credit Facilities		(1,587,958	)		(9.62	)
Other Liabilities		(57,734	)		(0.35	)
Preferred Operating Partnership Unit Liquidation Value		(63,993	)		(0.39	)
Net Asset Value	$	1,497,159		$	9.06

The table below sets forth the calculation of the estimated net asset value per share of the merged entity as of January 28, 2021, as well as the calculation of our prior estimated net asset value per share (prior to the merger) as of December 31, 2019:

	January 28, 2021 Net Asset Value per Share (1)			December 31, 2019 Net Asset Value per Share (2)			Change in Estimated Value per Share
Investments	$	17.25		$	17.67		$	(0.42	)
Cash		1.05			0.77			0.28
Goodwill (Management Company Value)		0.94			—			0.94
Other Assets		0.18			0.03			0.15
Mortgage Notes Payable and Credit Facilities		(9.62	)		(9.17	)		(0.45	)
Other Liabilities		(0.35	)		(0.22	)		(0.13	)
Preferred Operating Partnership Unit Liquidation Value		(0.39	)		—			(0.39	)
	$	9.06		$	9.08		$	(0.02	)

(1) Denominator adjusted for merger.

(2) For information relating to the December 31, 2019 net asset value per share and the assumptions and methodologies used by Duff & Phelps and our management, see our Annual Report on Form 10-K filed on March 20, 2020.

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

Methodology

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

Real Estate

Independent Valuation Firm

Duff & Phelps was recommended by management and approved by our conflicts committee. Duff & Phelps is engaged in the business of appraising commercial real estate properties and is not affiliated with us. Duff & Phelps and its affiliates may

33

from time to time in the future perform other commercial real estate, appraisal and valuation services for us and our affiliates in transactions related to the properties that are the subjects of the appraisals, so long as such other services do not adversely affect the independence of the applicable Duff & Phelps appraiser as certified in the applicable appraisal reports.

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

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

In performing its analysis of our real estate properties and other investments, Duff & Phelps made numerous other assumptions as of various points in time. The Valuation Report, including the analyses, opinions and conclusions set forth in such report, are qualified by the assumptions, qualifications and limitations set forth in the Valuation Report.

Real Estate Valuation

Duff & Phelps estimated the “as is” market value of each of our real estate properties owned as of January 28, 2021, using various methodologies, including the direct capitalization approach, discounted cash flow analyses and sales comparison approach, and relied primarily on the discounted cash flow analyses for our properties. The sales comparison approach was utilized as a secondary approach to value. The direct capitalization approach applies a current market capitalization rate to the properties’ net operating income. The capitalization rate was based on recent national overall capitalization rates, and the net operating income (NOI) was estimated based on Duff & Phelps’s expertise in appraising commercial real estate. The direct capitalization approach was utilized for seven of our properties that finished renovations and stabilized its operations. The discounted cash flow analyses focus on the operating cash flows expected from the properties and the anticipated proceeds of hypothetical sales at the end of assumed holding periods, which are then discounted to their present value.  Discounted cash flow analyses were utilized for 44 of our properties as they were either recently acquired and either not yet stabilized or are currently undergoing renovations.  Real estate is currently carried in our financial statements at its amortized cost basis. Duff & Phelps performed its appraisals as of January 28, 2021.

The following summarizes the range of terminal capitalization rates and discount rates used to arrive at the estimated market values of our properties:

	Range in Values	Weighted Average Basis
Terminal Capitalization Rate	4.25% to 6.00%		4.97	%
Discount Rate	5.00% to 7.25%		5.64	%

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

34

The total appraised value of our real estate properties using the appraisal methodologies described above was$2.9 billion, compared to an aggregate purchase price, adjusted for related capital expenditures throughJanuary 28, 2021 of $1.8 billion.

The table below illustrates the impact on the estimated value per share if the overall capitalization rates, terminal capitalization rates or discount rates were adjusted by 25 basis points, and assuming all other factors remain unchanged, with respect to the real estate properties referenced in the table above. Additionally, the table below illustrates the impact on the estimated value per share if the overall capitalization rates, terminal capitalization rates or discount rates were adjusted by 5% in accordance with the IPA Valuation Guidelines, assuming all other factors remain unchanged.  The table is only hypothetical to illustrate possible results if only one change in assumptions was made, with all other factors held constant.  Further, each of these assumptions could change by more than 25 basis points or 5%.

	Change in Estimated Value per Share
	Increase of 25 Basis Points		Decrease of 25 Basis Points		Increase of 5%		Decrease of 5%
Terminal Capitalization Rate	$	8.27	$	9.93	$	8.30	$	9.89
Discount Rate	$	8.99	$	9.13	$	8.98	$	9.14

Operating Partnership Units

Our Operating Partnership has common and preferred units outstanding that we take into account in determining our estimated value per share.  The common units are economically equivalent to our shares of common stock.  The preferred units have a liquidation preference that is determined pursuant to the terms of the Amended and Restated Limited Partnership Agreement of the Operating Partnership which is a reduction to the net asset value of our common stock.

Other Assets and Liabilities

Duff & Phelps made adjustments to the aggregate estimated values of our investments to reflect balance sheet assets and liabilities provided by our management.

Limitations of Estimated Value Per Share

As mentioned above, we provided this estimated value per share to assist broker dealers that participated in our public offering in meeting their customer account statement reporting obligations. This valuation was performed in accordance with the provisions of the IPA Valuation Guidelines. The estimated value per share set forth above will first appear on the March 31, 2021 customer account statements that will be mailed in April 2021. As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive a different estimated value per share, and this difference could be significant. The estimated value per share is not audited and does not represent the fair value of our assets or liabilities according to GAAP.

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

• 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 our 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 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.

Further, the estimated value per share as of January 28, 2021 is based on the estimated value of our investments as of January 28, 2021. We did not make any adjustments to the valuation for the impact of other transactions occurring subsequent to January 28, 2021, including, but not limited to, (i) net operating income earned and distributions declared, (ii) the redemption of shares and (iii) the potential conversion of convertible stock into common stock. The value of our shares will fluctuate over time in response to developments related to individual assets in our portfolio and the management of those assets and in response to

35

the real estate and finance markets. In particular, the outbreak of COVID-19, together with the resulting measures imposed to help control the spread of the virus has had a negative impact on the economy and business activity globally, the full impact of which is not yet known and may result in an adverse impact to our operations and investments. The COVID-19 pandemic is negatively impacting almost every industry, including the U.S. multifamily real estate industry and the financial position of our residents, directly or indirectly. While we have considered the impact from COVID-19 on our March 24, 2021 estimated value per share, the extent to which our business, financial condition, results of operations and cash flows may be affected by COVID-19 depends on future developments with respect to the continued spread and treatment of the virus, the various measures imposed to help control the spread the virus and the corresponding economic slowdown, and any long-term impact of this situation, even after an economic rebound, remains unclear. The estimated value per share does not take into account estimated disposition costs and fees for real estate properties, debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations or the impact of restrictions on the assumption of debt.

Historical Estimated Values per Share

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

Estimated Value per Share		Valuation Date	Filing with the Securities and Exchange Commission
$	9.01	December 31, 2015	Annual Report on Form 10-K filed March 30, 2016
$	9.10	December 31, 2016	Annual Report on Form 10-K filed March 31, 2017
$	9.08	December 31, 2017	Annual Report on Form 10-K filed March 29, 2018
$	8.77	December 31, 2018	Annual Report on Form 10-K filed March 22, 2019
$	9.08	December 31, 2019	Annual Report on Form 10-K filed March 20, 2020
$	9.06	January 28, 2021	Annual Report on Form 10-K filed March 25, 2021

Purchase Price for Distribution Reinvestment Plan

In accordance with our distribution reinvestment plan (“DRP”), participants in the DRP acquire shares of common stock under the plan at a price equal to 95% of the current estimated value per share of our common stock. Commencing on March 31, 2021, participants will acquire shares of our common stock under the plan at a price equal to $8.61 per share.

As provided under the DRP, for a participant to terminate participation effective for a particular distribution, we must have received notice of termination from the participant at least ten business days prior to the last day of the month to which the distribution relates. Notwithstanding the ten business day termination notice requirement under the DRP, if a participant wished to terminate participation in the DRP for the March 2021 purchase date, participants must have notified us of such decision and we must have received the notice by the close of business on March 31, 2021, which is four business days following our announcement of an updated estimated value per share in this Annual Report on Form 10-K.

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

Redemption Price for Share Redemption Program

Our share redemption program is currently suspended except for redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility. Such redemptions are made at a purchase price equal to our estimated share value as of the date of the redemption, which is the 15^th day (or the next business day thereafter) of the last month of the calendar quarter.

The complete share redemption program plan document, as amended is filed as Exhibit 99.2 to this the Current Report on Form 8-K filed with the Securities and Exchange Commission on February 5, 2021 and is available at the SEC’s website at http://www.sec.gov.

Unregistered Sale of Equity Securities

All securities sold by us during the year ended December 31, 2020 were sold in an offering registered under the Securities Act of 1933.

36

Redemption of Securities

Our Board of Directors has adopted a share redemption program that may enable stockholders to sell their shares to us, subject to the significant conditions and limitations of the program. The program was initially adopted in February 2014 and has been amended and restated at various times thereafter.  Most recently, on February 3, 2021, our board of directors adopted the Fifth Amended and Restated Share Redemption Program (the “SRP”).  Under the SRP, redemptions will be made quarterly in an amount not to exceed proceeds from the sale of shares in the DRP Offering in the immediately preceding calendar quarter; provided that, for any quarter in which no DRP Offering proceeds are available, the funding limitation for the quarter will be set by the Board of Directors upon ten business days’ notice to stockholders. As there were no DRP Offering proceeds for the fourth quarter of 2020, our Board of Directors set the funding limitation for redemptions in the first quarter of 2021 at $2.0 million.  Previously, the funding limitation was generally limited to proceeds from the DRP Offering, plus, if we had positive operating cash flow from the previous fiscal year, 1% of all operating cash flow from the previous fiscal year.  In addition, we will not redeem in excess of 5% of the weighted average number of shares outstanding during the 12-month period immediately prior to the effective date of redemption. 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 share redemption program has been suspended except for redemptions submitted in connection with a stockholder death, qualifying disability or confinement to a long-term care facility (each as fined in the SRP and collectively, “Special Redemptions”) since the first quarter of 2020.  On September 8, 2020 in connection with the entry into the merger agreements for the Mergers, our Board of Directors fully suspended the SRP; however, it was partially resumed effective November 22, 2020 and our Board of Directors considered requests for Special Redemptions for the fourth quarter of 2020.

Pursuant to our share redemption program, during the quarter ended December 31, 2020, we redeemed shares as follows (in thousands, except per share data):

Period	Total Number of Shares Redeemed (1)		Average Price Paid per Share		Year to Date Number of Shares Purchased as Part of a Publicly Announced Plan or Program (2)		Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
October 2020		—	$	—		—	(2)
November 2020		—	$	—		—	(2)
December 2020		179	$	9.08		439	(2)

(1) All purchases of equity securities in the three months ended December 31, 2020 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.

While the share redemption program is partially suspended, pending and new redemption requests for redemptions submitted other than in connection with a Special Redemption will not be honored or retained, but will be cancelled with the ability to resubmit when, if ever, the share redemption program is fully resumed. 

Our Board of Directors will continue to consider the liquidity available to stockholders going forward, balanced with other long-term interests of us and our stockholders. It is possible that in the future additional liquidity will be made available by us through the full resumption of the SRP, though we can make no assurances as to whether that will happen, or the timing or terms of any resumption.

Distribution Information

For the year ended December 31, 2020, we paid aggregate distributions of $6.0 million, including $2.9 million of distributions paid in cash and $3.1 million of distributions reinvested in shares of common stock through our DRP. Distributions

37

declared, distributions paid and cash flows provided by operating activities were as follows for the year ended December 31, 2020 (in thousands):

	Distributions Paid								Distributions Declared				Sources of Distributions Paid
2020	Cash		Distributions Reinvested (DRP)		Total		Cash Provided By Operating Activities		Total		Per Share per Day		Operating Activities Amount Paid/Percent of Total		Debt Financing Amount Paid/Percent of Total
First Quarter	$	2,873	$	3,131	$	6,004	$	2,278	$	—	$	—	$2,278 / 38%		$3,726 / 62%
Second Quarter		—		—		—		2,339		—		—		—		—
Third Quarter		—		—		—		3,621		—		—		—		—
Fourth Quarter		—		—		—		3,142		—		—		—		—
Total	$	2,873	$	3,131	$	6,004	$	11,380	$	—

We elected to be taxed as a REIT and to operate as a REIT beginning with our taxable year ended December 31, 2014. To maintain our qualification as a REIT, we are required to make aggregate annual distributions to our common stockholders of at least 90% of our REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain). Our Board of Directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our Board of Directors deems relevant.

Our Board of Directors considers many factors before authorizing a cash distribution, including current and projected cash flow from operations, capital expenditure needs, general financial conditions and REIT qualification requirements. To the extent permitted by Maryland law, we may borrow funds, issue new securities or sell assets to make and cover our declared distributions, all or a portion of which could be deemed a return of capital. Our organizational documents do not limit the amount of distributions we can fund from sources other than from cash flows from operations.

Our net loss for the year ended December 31, 2020 was $33.2 million and net cash provided by operating activities was $11.4 million. We have funded our cumulative distributions, which includes net cash distributions and distributions reinvested by stockholders, with cash flow from operating activities, proceeds from debt financing, and proceeds from property sales. To the extent that we pay distributions from sources other than our cash flow from operating activities or gains from asset sales, we will have fewer funds available for investment in commercial real estate and real estate-related debt and the overall return to our stockholders may be reduced.

We have not established a minimum distribution level, and our charter does not require that we make distributions to our stockholders. Our Board of Directors intends to evaluate the current distribution rate and may decrease or suspend the amount of ongoing distributions. We will make distributions with respect to our shares of common stock in the sole discretion of our Board of Directors. No distributions will be made with respect to shares of our convertible stock.

38

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data has been derived from our audited consolidated statements of operations and should be read together with our "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this report and our consolidated financial statements, including the notes, found elsewhere herein. The following table sets forth selected operating and balance sheet data (in thousands, except per share data):

	As of and for the years ended
	December 31,
	2020			2019			2018			2017			2016
Statement of operations data:
Total revenues	$	85,810		$	85,681		$	87,256		$	77,240		$	52,928
Total expenses		99,955			92,815			98,205			95,435			86,533
Loss before net gain on disposition		(14,145	)		(7,134	)		(10,949	)		(18,195	)		(33,605	)
Net gain on disposition of property		—			20,619			—			—			—
(Loss) income before other income (expense)		(14,145	)		13,485			(10,949	)		(18,195	)		(33,605	)
Other income (expense):
Interest income		14			223			157			120			209
Insurance proceeds in excess of cost basis		—			225			115			148			185
Interest expense		(19,093	)		(25,877	)		(24,764	)		(19,764	)		(10,950	)
Total other income (expense)		(19,079	)		(25,429	)		(24,492	)		(19,496	)		(10,556	)
Net loss		(33,224	)		(11,944	)		(35,441	)		(37,691	)		(44,161	)
Basic and diluted net loss per common share:	$	(0.55	)	$	(0.20	)	$	(0.58	)	$	(0.63	)	$	(0.76	)
Dividends declared per common share:	$	—		$	0.45		$	0.60		$	0.60		$	0.60
Balance sheet data:
Total assets	$	776,435		$	784,262		$	860,728		$	916,470		$	871,310
Mortgage notes payable, net	$	580,114		$	547,875		$	573,642		$	560,164		$	455,361
Total equity	$	182,215		$	216,313		$	263,466		$	330,660		$	390,892

39

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (unaudited)

The following discussion and analysis should be read in conjunction with the accompanying financial statements of Resource REIT, Inc. (f/k/a Resource Real Estate Opportunity REIT II, Inc.) and the notes thereto appearing elsewhere in this report.  Statements contained in this “Management's Discussion and Analysis of Financial Condition and Results of Operations” that are not historical facts may be forward-looking statements.  See also “Forward-Looking Statements” preceding Part I.

We have omitted discussion of the earliest of the three years covered by our consolidated financial statements presented in this report because that disclosure was previously included in our Annual Report on Form 10-K for fiscal 2019, filed with the SEC on March 20, 2020. You are encouraged to reference Part II, Item 7, within that report, for a discussion of our financial condition and result of operations for fiscal 2019 compared to fiscal 2018.

Overview

We are a Maryland corporation that invests in multifamily assets across the entire spectrum of investments in order to provide investors with growing cash flow and increasing asset values. We were formed on September 28, 2012. We commenced active real estate operations on June 4, 2014 with the acquisition of our first multi-family property. We have acquired and may continue to acquire underperforming multifamily rental properties which we will renovate and optimize in order to increase rents, and, to a lesser extent, acquire or originate commercial real estate debt secured by apartments. We may make adjustments to our target portfolio based on real estate market conditions and investment opportunities. We will not forego a good investment because it does not fit within our targeted asset class or portfolio composition.  We commenced the public offering of our common stock in February 2014 and terminated the primary portion of the offering in February 2016. We describe this offering in “Liquidity and Capital Resources,” below.

As of January 28, 2021, when we acquired Resource Real Estate Opportunity REIT I, Inc. (“REIT I”) and its subsidiaries, including the entities that provide our advisory, asset and property management services, we are a self-managed REIT and have 43 employees. Prior to our acquisition of REIT I, we were externally advised by Resource Real Estate Opportunity Advisor II, LLC (our “Advisor”) pursuant to an advisory agreement initially entered in February 2014.  Upon acquisition of REIT I and Resource Apartment REIT III, Inc. (“REIT III”) and their respective subsidiaries, we owned 51 properties in 15 states, comprising a total of 14,995 multifamily units.

Through a series of transactions which we refer to as the “Self-Management Transaction,” REIT I acquired our Advisor and Manager on September 8, 2020 from C-III Capital Partners, LLC (“C-III”) and its affiliates.  Previously, our Advisor was an indirect wholly-owned subsidiary of Resource America, Inc. (“RAI”), our initial sponsor and a wholly-owned subsidiary of C-III.  

Mergers with Resource Real Estate Opportunity REIT, Inc. and Resource Apartment REIT III, Inc.

On September 8, 2020, we entered into merger agreements (as described herein) to acquire each of REIT I and REIT III in stock-for-stock transactions whereby each of REIT I and REIT III were to be merged into our wholly owned subsidiary. The REIT I Merger (as defined below) and the REIT III Merger (as defined below) are referred to collectively herein as the Mergers.  Each of the Mergers was intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended. The Mergers were effective as of January 28, 2021.

REIT I Merger

On September 8, 2020, we, RRE Opportunity OP II, LP, our operating partnership (“OP II”), Revolution I Merger Sub, LLC, our wholly-owned subsidiary (“Merger Sub I”), REIT I, and Resource Real Estate Opportunity OP, LP (“OP I”), entered into an Agreement and Plan of Merger (the “REIT I Merger Agreement”).

Effective January 28, 2021, REIT I merged with and into Merger Sub I, with Merger Sub I surviving as our direct, wholly-owned subsidiary (the “REIT I Company Merger”) and OP I merged with and into OP II (the “REIT I Partnership Merger” and, together with the REIT I Company Merger, the “REIT I Merger”), with OP II surviving the REIT I Partnership Merger. At such time, the separate existence of REIT I and OP I ceased.

At the effective time of the REIT I Company Merger, each issued and outstanding share of REIT I’s common stock (or fraction thereof) converted into the right to receive 1.22423 shares of our common stock, and each issued and outstanding share of REIT I’s convertible stock converted into the right to receive $0.02 in cash (without interest).

40

At the effective time of the REIT I Partnership Merger, each common unit of partnership interests in OP I outstanding immediately prior to the effective time of the REIT I Partnership Merger converted into the right to receive 1.22423 common units of partnership interest in OP II and each Series A Cumulative Participating Redeemable Preferred Unit in OP I issued and outstanding immediately prior to the effective time of the REIT I Partnership Merger converted into the right to receive one Series A Cumulative Participating Redeemable Preferred Unit in OP II.

REIT III Merger

On September 8, 2020, we, OP II, Revolution III Merger Sub, LLC (“Merger Sub III”), our wholly-owned subsidiary, REIT III, and Resource Apartment OP III, LP (“OP III”), the operating partnership of REIT III, entered into an Agreement and Plan of Merger (the “REIT III Merger Agreement”).

Effective January 28, 2021, REIT III merged with and into Merger Sub III, with Merger Sub III surviving as our direct, wholly-owned subsidiary (the “REIT III Company Merger”) and OP III merged with and into OP II (the “REIT III Partnership Merger” and, together with the REIT III Company Merger, the “REIT III Merger”), with OP II surviving the REIT III Partnership Merger. At such time, the separate existence of REIT III and OP III ceased. The REIT I Merger and the REIT III Merger are hereinafter together referred to as the “Merger”.

At the effective time of the REIT III Company Merger, each issued and outstanding share of REIT III’s common stock (or fraction thereof) converted into the right to receive 0.925862 shares of our common stock.

At the effective time of the REIT III Partnership Merger, each unit of partnership interests in OP III outstanding immediately prior to the effective time of the REIT III Partnership Merger was retired and ceased to exist. In addition, for each share of our common stock issued in the REIT III Company Merger, a common partnership unit was issued to us by OP II.

COVID-19 Pandemic and Portfolio Outlook

Since initially being reported in December 2019, COVID-19 has spread around the world, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The COVID-19 pandemic has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the pandemic continues to evolve and many countries, including the United States, have reacted with various containment and mitigation efforts including quarantines, mandated business and school closures and travel restrictions. As a result, the COVID-19 pandemic is negatively impacting almost every industry, including the real estate industry, directly or indirectly. The fluidity of the COVID-19 pandemic continues to preclude any prediction as to the ultimate adverse impact the pandemic may have on our business, financial condition, results of operations and cash flows. Many of our tenants have suffered difficulties with their personal financial situations as a result of job loss or reduced income and, depending upon the duration of the measures put in place to mitigate or contain the spread of the virus and the corresponding economic slowdown, some of our tenants have or will seek rent deferrals or become unable to pay their rent.

During the three months ended December 31, 2020, we had received rent payments equal to approximately 95.9%, of the billed rental income for the period as compared to pre-COVID March collections of 98.8%. In addition, we have approved short-term rent relief requests, most often in the form of rent deferral requests, or requests for further discussion. Executed short-term rent relief plans that are outstanding at December 31, 2020 are not significant in terms of either number of requests or dollar value. Not all tenant requests will ultimately result in modified agreements, nor are we forgoing our contractual rights under our lease agreements. Collections and rent relief requests to-date may not be indicative of collections or requests in any future period.  During the year ended December 31, 2020, gross tenant receivables have increased to approximately $634,000 from approximately $150,000 at December 31, 2019. During the year ended December 31, 2020, we modified our provision for bad debts estimate to include a partial allowance for tenant receivables less than 90 days past due. As a result, allowance for doubtful accounts have increased to approximately $333,000 at December 31, 2020 (of which 56% is over 90 days past due) from approximately $44,000 at December 31, 2019.  

Many of our tenants may be the recipients of unemployment benefits or other economic stimulus under the CARES Act which will have aided in the payment of rent due. The extent to which these benefits or benefits from similar government sponsored programs will be available going forward is uncertain. To the extent our tenants do not have access to additional federal or state relief to mitigate the impact of the COVID-19 pandemic on their personal finances our ability to collect rent and our operations would be adversely affected. The impact of the COVID-19 pandemic on our rental revenue cannot, however, be determined at present. In addition, we expect the economic disruptions caused by the COVID-19 pandemic will cause elevated credit losses and impede our ability to increase rental rates. We continue to waive late fees, halt evictions where applicable

41

federal, state or local restrictions are in effect, and offer a payment deferral plan to residents who have been adversely financially impacted by the COVID-19 pandemic. To help mitigate the impact on our operating results of the COVID-19 pandemic, we initiated various operational cost saving initiatives across our portfolio. In addition, we have taken measures to preserve cash, which will help to offset any impact to our liquidity that may occur as a result of the COVID-19 pandemic. 

The COVID-19 pandemic or a future pandemic, epidemic or outbreak of infectious disease affecting states or regions in which we operate and our multifamily tenants reside and work could have material and adverse effects on our business, financial condition, results of operations and cash flows due to, among other factors: reduced economic activity, general economic decline or recession, which may result in job loss or bankruptcy for residents at our properties and may cause our residents to be unable to make rent payments to us timely, or at all, or to otherwise seek modifications of lease obligations; health or other government authorities requiring the closure of offices or other businesses or instituting quarantines of personnel as the result of, or in order to avoid, exposure to a contagious disease; disruption in supply and delivery chains; a general decline in business activity and demand for real estate; difficulty accessing debt and equity capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions, which may affect our access to capital necessary to fund business operations or address maturing liabilities on a timely basis; and the potential negative impact on the health of personnel of our advisor, particularly if a significant number of our employees are impacted, which would result in a deterioration in our ability to ensure business continuity and maintain our properties during a disruption.

The extent to which the COVID-19 pandemic or any other pandemic, epidemic or disease impacts our operations and those of our tenants remain uncertain and cannot be predicted with confidence and will depend on the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. However, notwithstanding the challenging economic circumstances created by the COVID-19 pandemic, we believe our focus on multifamily assets makes us better positioned relative to other classes of real estate to withstand many of the adverse impacts of the COVID-19 pandemic as housing is a basic need, rather than a discretionary expense.  In addition, we have taken several steps to offset any disruptions in rent that may occur as a result of the COVID-19 pandemic. Nevertheless, the COVID-19 pandemic (or a future pandemic, epidemic or disease) presents material uncertainty and risk with respect to our business, financial condition, results of operations and cash flows.

Results of Operations

  As of December 31, 2020, we owned 17 multifamily properties. Since our inception we have acquired 18 multifamily properties. Through December 31, 2020, we had sold one multifamily property.

Through December 31, 2020, the COVID-19 pandemic has not significantly impacted our operating results; however, we have experienced some reductions in revenue during the year as a result of increased bad debt expense, waiving late fees and the suspension of evictions at our properties. We expect, however, that as the impact of COVID-19 continues to be felt, the COVID-19 outbreak will adversely affect our business, financial condition, results of operations and cash flows going forward, including but not limited to, rental revenues and leasing activity, in ways that may vary widely depending on the duration and magnitude of the COVID-19 pandemic and ensuing economic turmoil, as well as numerous factors, many of which are outside of our control, as discussed above.

In addition, our results of operations will be significantly impacted in 2021 due to the REIT I Merger and the REIT III Merger.

42

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

	Years Ended
	December 31,
	2020			2019			2018
Revenues:
Rental income	$	85,810		$	85,681		$	87,256
Expenses:
Rental operating - expenses		15,518			13,205			14,411
Rental operating - payroll		7,334			7,682			7,943
Rental operating - real estate taxes		11,728			11,316			11,992
Subtotal - Rental operating expenses		34,580			32,203			34,346
Acquisition costs		—			—			30
Transaction expenses		3,732			—			—
Management fees		12,894			13,208			13,728
General and administrative		8,339			7,586			8,155
Loss on disposal of assets		215			219			522
Depreciation and amortization expense		40,195			39,599			41,424
Total expenses		99,955			92,815			98,205
Loss before net gain on disposition		(14,145	)		(7,134	)		(10,949	)
Net gain on disposition of property		—			20,619			—
(Loss) income before other income (expense)		(14,145	)		13,485			(10,949	)
Other income (expense):
Interest income		14			223			157
Insurance proceeds in excess of cost basis		—			225			115
Interest expense		(19,093	)		(25,877	)		(24,764	)
Net loss		(33,224	)		(11,944	)		(35,441	)

43

Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019

The following table presents the results of operations separated into three categories: the results of operations of the 17 properties we owned for the entirety of both periods presented, properties purchased or sold during either of the periods presented and company level activity for the years ended December 31, 2020 and 2019 (in thousands):

	For the year ended December 31, 2020												For the year ended December 31, 2019
	Properties owned both periods			Properties purchased/sold during either period			Company level activity			Total			Properties owned both periods			Properties purchased/sold during either period			Company level activity			Total
Revenues:
Minimum rents	$	80,453		$	2		$	—		$	80,455		$	79,173		$	955		$	—		$	80,128
Utility income		4,527			—			—			4,527			4,405			179			—			4,584
Ancillary tenant fees		828			—			—			828			954			15			—			969
Total rental income		85,808			2			—			85,810			84,532			1,149			—			85,681
Expenses:
Rental operating - expenses		15,520			(2	)		—			15,518			13,077			128			—			13,205
Rental operating - payroll		7,334			—			—			7,334			7,517			154			11			7,682
Rental operating - real estate taxes		11,728			—			—			11,728			11,072			244			—			11,316
Subtotal - Rental operating expenses		34,582			(2	)		—			34,580			31,666			526			11			32,203
Management fees		3,813			—			9,081			12,894			3,788			46			9,374			13,208
Transaction expenses		—			—			3,732			3,732			—			—			—			—
General and administrative		2,157			—			6,182			8,339			2,110			64			5,412			7,586
Loss on disposal of assets		215			—			—			215			219			—			—			219
Depreciation and amortization expense		40,195			—			—			40,195			39,599			—			—			39,599
Total expenses		80,962			(2	)		18,995			99,955			77,382			636			14,797			92,815
Income (loss) before net gain on disposition		4,846			4			(18,995	)		(14,145	)		7,150			513			(14,797	)		(7,134	)
Net gain on disposition of property		—			—			—			—			—			20,619			—			20,619
Income (loss) before other income (expense)		4,846			4			(18,995	)		(14,145	)		7,150			21,132			(14,797	)		13,485
Other income (expense):
Interest income		12			—			2			14			219			—			4			223
Insurance proceeds in excess of cost basis		—			—			—			—			225			—			—			225
Interest expense		(19,093	)		—			—			(19,093	)		(25,099	)		(778	)		—			(25,877	)
Net loss	$	(14,235	)	$	4		$	(18,993	)	$	(33,224	)	$	(17,505	)	$	20,354		$	(14,793	)	$	(11,944	)

44

Revenues:  Minimum rents on the 17 properties we owned both periods increased by $1.3 million during the year ended December 31, 2020 as compared to the year ended December 31, 2019. The increase is primarily due to the implementation of our investment strategy to increase monthly rental income and occupancy rates after renovating and stabilizing operations, offset by the impact of COVID-19 and was primarily comprised of:

Multifamily Community	Rental Change (in thousands)			Change in Occupancy %			Change in Effective Monthly Revenue per Unit (in dollars)
Ravina Apartment Homes	$	459			0.5	%	$	75
Indigo Creek		351			0.7	%		68
Crosstown at Chapel Hill		216			-0.5	%		53
The Brookwood		194			-0.1	%		65
The Palmer at Las Colinas		133			-1.5	%		48
81 Fifty at West Hills Apartment Homes		123			-0.4	%		24
Arcadia Apartment Homes		103			1.1	%		13
Verdant Apartment Homes		(195	)		-2.6	%		(27	)
Windbrooke Crossing		(159	)		-0.9	%		(44	)
All other properties	55				-8.2	%	126
	$	1,280

Included in rental income is bad debt expense of $756,000 for the year ended December 31, 2020 as compared to $94,000 for the year ended December 31, 2019.  

Expenses:  Our operating expenses on the 17 properties we owned during both periods increased by $2.9 million during the year ended December 31, 2020 as compared to the year ended December 31, 2019, due to a $586,000 increase in insurance expense, a $515,000 in casualty losses and a $656,000 increase in real estate taxes due to higher property assessments. Our property insurance rates increased by 21% due to both weather-related losses sustained in our portfolio in previous years as well as an increase in insured building values.   

Management fees decreased during the year ended December 31, 2020 as compared to the year ended December 31, 2019 primarily as a result of the sale of Overton Trails in February 2019. As a result of the REIT I Merger, we will no longer pay asset management fees to an advisor.

We incurred $3.7 million of transaction expenses related to our Merger with REIT I and III during the year ended December 31, 2020. General and administrative expenses increased by $753,000 primarily due to an increase in salary allocations from our Advisor.  

Interest expense decreased by $6.8 million during the year ended December 31, 2020 as compared to the year ended December 31, 2019 due to the decrease in LIBOR rates subsequent to December 31, 2019.

Liquidity and Capital Resources

From February 2014 to February 2016, we offered in our primary public offering up to $1.0 billion in shares of common stock, $0.01 par value per share, at $10 per share. At the termination of the primary offering, we had raised $556.2 million in gross proceeds. We also continued to offer shares of our common stock pursuant to our DRP under which our stockholders may elect to have distributions reinvested in additional shares of our common stock at a purchase price equal to 95 % of the estimated net asset value per share. In connection with our initial primary public offering, we registered $95 million in shares of our common stock to be issued pursuant to the DRP. On January 23, 2020, we filed a Form S-3 with the SEC to register an additional 1.5 million shares under the DRP.

We derive the capital required to purchase real estate investments and conduct our operations from the proceeds from our public offerings, secured or unsecured financings from banks or other lenders, from proceeds from the sale of assets and cash flow generated by our operations.

Our ability to derive the capital needed to conduct our operations may be adversely affected by the impact of the COVID-19 pandemic as discussed above.  

45

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

We may seek to obtain REIT-level financing through a line of credit from third-party financial institutions or other commercial lenders. Our assets will serve as collateral for this type of debt incurred to acquire real estate investments.  In addition to debt financing at the REIT-level, we have financed, and may continue to finance, the acquisition costs of individual real estate investments, as well as the acquisition costs of all or a group of real estate investments acquired by us, by causing our subsidiaries to borrow directly from third-party financial institutions or other commercial lenders.  Under these circumstances, we anticipate that certain properties will serve as collateral for the debt we incur to acquire those particular properties and that we will seek to obtain nonrecourse financing for the acquisition of the properties.  However, there is no guarantee that we will be successful in obtaining financing arrangements on a property-by-property basis and that the loans would be nonrecourse to us. We may also obtain mortgage financing which contains cross-collateralization or cross-default provisions whereby a default on a single property could affect multiple properties. Finally, we may also obtain seller financing with respect to specific assets that we acquire.

Capital Expenditures

We deployed a total of $7.3 million during the year ended December 31, 2020 for capital expenditures. The properties in which we deployed the most capital during the year ended December 31, 2020 are listed separately and the capital expenditures made on all other properties are aggregated in "All other properties" below (in thousands):

	Capital deployed during the year ended		Remaining capital
	December 31, 2020		budgeted
Windbrooke Crossing	$	982	$	28
Crosstown at Chapel Hill		942		790
Ravina Apartment Homes		793		2,734
Indigo Creek		755		543
The Palmer at Las Colinas		747		2,219
81 Fifty at West Hills Apartment Homes		612		838
Montclair Terrace		491		1,441
The Brookwood		425		1,819
Woods at Burnsville		377		503
Arcadia Apartment Homes		267		812
All other properties		906		2,704
	$	7,297	$	14,431

Common Stock

As of December 31, 2020, we had an aggregate of 60.0 million shares of $0.01 par value common stock outstanding, as follows (dollars in thousands):

	Shares			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		10,197,726			88,479
Advisor's initial investment, net of 5,000 share conversion		15,000			150
Total		66,250,388		$	644,826
Shares redeemed and retired		(6,223,875	)
Total shares outstanding		60,026,513

Debt

46

The following table presents a summary of our mortgage notes payable, net (in thousands):

	December 31, 2020									December 31, 2019
Collateral	Outstanding borrowings		Premium, net		Deferred Financing Costs, net			Carrying Value		Outstanding borrowings		Premium, net		Deferred Financing Costs, net			Carrying Value
Uptown Buckhead	$	18,876	$	—	$	(144	)	$	18,732	$	19,264	$	—	$	(178	)	$	19,086
Crosstown at Chapel Hill		42,650		—		(264	)		42,386		42,650		—		(325	)		42,325
The Brookwood - Key Bank		16,632		83		(39	)		16,676		17,063		186		(88	)		17,161
The Brookwood - Capital One		2,517		6		(7	)		2,516		2,566		14		(15	)		2,565
Adair off Addison and Adair off Addison Apartment Homes		33,210		—		(317	)		32,893		33,210		—		(380	)		32,830
1000 Spalding Crossing		35,035		—		(329	)		34,706		23,737		—		(113	)		23,624
Montclair Terrace		19,479		—		(127	)		19,352		19,958		—		(182	)		19,776
Grand Reserve		47,845		—		(473	)		47,372		47,845		—		(539	)		47,306
Verdant Apartment Homes		47,146		—		(372	)		46,774		36,913		—		(178	)		36,735
Arcadia Apartment Homes		56,810		—		(494	)		56,316		39,782		—		(195	)		39,587
Ravina Apartment Homes		25,506		—		(93	)		25,413		26,241		—		(165	)		26,076
81 Fifty at West Hills Apartment Homes		50,708		—		(260	)		50,448		51,833		—		(368	)		51,465
The Palmer at Las Colinas		45,700		—		(370	)		45,330		45,700		—		(437	)		45,263
Windbrooke Crossing		36,437		—		(202	)		36,235		37,222		—		(272	)		36,950
Woods of Burnsville		36,918		—		(265	)		36,653		37,744		—		(355	)		37,389
Indigo Creek		39,498		—		(243	)		39,255		40,402		—		(320	)		40,082
Martin's Point		29,283		—		(226	)		29,057		29,944		—		(289	)		29,655
	$	584,250	$	89	$	(4,225	)	$	580,114	$	552,074	$	200	$	(4,399	)	$	547,875

47

The following table presents additional information about our mortgage notes payable, net, as of December 31, 2020 (in thousands, except percentages):

	Maturity Date	Margin over LIBOR			Annual Interest Rate			Average Monthly Debt  Service		Average Monthly Escrow
Uptown Buckhead	7/1/2025		2.22	%		2.36	%	$	70	$	55	(1)(3)(5)(9)
Crosstown at Chapel Hill	7/1/2025		1.77	%		1.91	%		106		68	(1)(3)(4)
The Brookwood - Key Bank	11/1/2021		—			4.73	%		104		66	(2)(6)
The Brookwood - Capital One	11/1/2021		—			5.40	%		16		—	(2)(6)
Adair off Addison and Adair off Addison Apartment Homes	5/1/2026		1.64	%		1.78	%		91		74	(1)(3)(4)(7)(9)
1000 Spalding Crossing	12/1/2027		—			2.51	%		74		60	(2)(4)(8)
Montclair Terrace	6/1/2023		2.45	%		2.59	%		80		30	(1)(3)(6)(9)
Grand Reserve	5/1/2028		1.72	%		1.86	%		76		184	(1)(3)(4)
Verdant Apartment Homes	12/1/2027		—			2.57	%		102		40	(2)(4)(8)
Arcadia Apartment Homes	12/1/2027		—			2.57	%		123		43	(2)(4)(8)
Ravina Apartment Homes	5/1/2022		—			3.76	%		144		148	(2)(6)
81 Fifty at West Hills Apartment Homes	7/1/2023		2.36	%		2.50	%		205		58	(1)(3)(6)(9)
The Palmer at Las Colinas	9/1/2026		2.11	%		2.25	%		104		156	(1)(3)(4)(9)
Windbrooke Crossing	1/1/2024		2.69	%		2.83	%		154		180	(1)(3)(6)
Woods of Burnsville	2/1/2024		2.13	%		2.27	%		145		95	(1)(3)(6)
Indigo Creek	5/1/2024		1.93	%		2.07	%		127		59	(1)(3)(6)
Martin's Point	11/1/2024		1.86	%		2.00	%		111		78	(1)(3)(6)

(1) Variable rate based on one-month LIBOR of 0.14388% (as of December 31, 2020) plus a fixed margin

(2) Fixed rate

(3) Variable rate hedged with interest rate cap cash flow hedge

(4) Monthly interest-only payment currently required

(5) Monthly fixed principal plus interest payment required

(6) Fixed monthly payment of principal and interest payment required

(7) Refinanced during the year ended December 31, 2019

(8) Originated during the year ended December 31, 2020 through refinancing

(9) Loan refinanced with new credit facility in January 2021

On August 21, 2015, we 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 is being amortized to interest expense over the term of the related mortgage loans using the effective interest method. As of December 31, 2020, the net unamortized mortgage premium was $89,307 and was included as a component of mortgage loans payable in the accompanying consolidated balance sheets.

At December 31, 2020, the weighted average interest rate of all our outstanding indebtedness was 2.44%.

Central banks and regulators in a number of major jurisdictions (including both the U.S. and the U.K.) have convened working groups to find, and implement the transition to, suitable replacements for Interbank Offered Rates (IBORs), including LIBOR. The FCA, which regulates LIBOR, has announced that it will not compel panel banks to contribute to LIBOR after 2021.  On March 5, 2021, the FCA announced that all LIBOR settings will either cease to be provided by any administrator or no longer be representative (i) immediately after December 31, 2021, in the case of the 1-week and 2-month US dollar settings; and (ii) immediately after June 30, 2023, in the case of the remaining US dollar settings. The tenors that were extended to June 30, 2023 are more widely used and are the tenors used in our LIBOR-based debt.

We have exposure to IBORs through floating rate mortgage debt with maturity dates beyond 2021 for which the interest rates are tied to LIBOR. There is currently no definitive information regarding the future utilization of LIBOR or of any particular replacement rate. Any changes in benchmark interest rates could increase our cost of capital, which could impact our results of operations, cash flows, and the market value of our real estate investments.

We refinanced the loans on 1000 Spalding Crossing, Verdant Apartment Homes, and Arcadia Apartment Homes during the year ended December 31, 2020. The new loans are in the amounts of $35.0 million, $47.1 million and $56.8 million,

48

respectively, and all three loans mature on December 1, 2027. Loss on extinguishment of debt of approximately $65,000, $132,000, and $145,000, respectively, was included in interest expense on the consolidated statement of operations for the year ended December 31, 2020. Prepayment penalties of approximately $233,000, $363,000, and $513,000, respectively, were included in interest expense on the consolidated statement of operations for the year ended December 31, 2020.

Operating Properties

As of December 31, 2020, our wholly-owned interests in multifamily properties were as follows:

Subsidiary	Apartment Complex	Number of Units		Property Location
RRE Bear Creek Holdings, LLC, or Bear Creek	Adair off Addison	152		Dallas, 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	Ravina Apartment Homes	498		Austin, TX
RRE Breckenridge Holdings, LLC, or Breckenridge	81 Fifty at West Hills Apartment  Homes	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
			5,159

As four of our 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, our 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 our liquidity and adversely affect our ability to fund our ongoing operations.

Acquisition and Asset Management Costs

In addition to making investments in accordance with our investment objectives, we used our capital resources to make payments to our Advisor for the management of our assets and costs incurred by our Advisor in providing services to us. During our acquisition stage, we made payments to our Advisor in connection with the acquisition of real estate investments. As a result of the REIT I Merger, we no longer have an external advisor and will no longer incur these fees. We describe these payments in more detail in Note 10 of the notes to our consolidated financial statements.

49

Operating Expenses

Under our charter, our Advisor must reimburse us the amount by which our aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of our average invested assets or 25% of our net income, unless the Conflicts Committee of the Board of Directors 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 our assets invested, directly or indirectly, in equity interests in and loans secured by real estate during the 12-month period before deducting depreciation, bad debts or other non-cash reserves.  “Total operating expenses” means all expenses paid or incurred by us, as determined under Generally Accepted Accounting Principles ("GAAP"), that are in any way related to our operation, 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 our 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 our assets; and (f) acquisition fees, acquisition expenses (including expenses relating to potential investments that we 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 fiscal quarters ended December 31, 2020 exceeded the charter imposed limitation; however, the conflicts committee of our board of directors determined that the relationship of our operating expenses to our average invested assets was justified for these periods given the non-recurring nature of the expenses incurred during the year ended December 31, 2020 in connection with the mergers with REIT I and REIT III.

As we no longer have an external advisor, this limitation on total operating expenses will not be applicable as of the first quarter of 2021.

Distributions

For the year ended December 31, 2020, we paid aggregate distributions of $6.0 million, including $2.9 million of distributions paid in cash and $3.1 million of distributions reinvested in shares of common stock through our distribution reinvestment plan, as follows (dollars in thousands, except per share data):

Authorization Date	Per Common Share		Record Dates	Distribution Date	Distributions reinvested in shares of Common Stock		Net Cash Distributions		Total Aggregate Distributions
December 11, 2019	$	0.001095890	December 31, 2019 through January 30, 2020	January 31, 2020	$	1,074	$	968	$	2,042
December 11, 2019	$	0.001095890	January 31, 2020 through February 27, 2020	February 28, 2020		965		883		1,848
December 11, 2019	$	0.001095890	February 28, 2020 through March 30, 2020	March 31, 2020		1,092		1,022		2,114
					$	3,131	$	2,873	$	6,004

We announced on March 30, 2020 that we were suspending distributions as of April 1, 2020 in order to preserve cash and offset any impact to our liquidity that may occur as a result of the COVID-19 pandemic on our operations. On February 3, 2021, our board of directors authorized a quarterly distribution for the first quarter of 2021. Future distributions, which are not guaranteed, will be authorized and paid on a quarterly basis.

The following is a reconciliation of total aggregate distributions to total distributions declared for the year ended December 31, 2020 (in thousands):

Total aggregate distributions paid	$	6,004
Less: distribution payable at December 31, 2019		(5,993	)
Add: distribution payable at December 31, 2020		—
True-up of prior year cash distributions declared	$	11

50

Cash distributions paid since inception were as follows (in thousands, except per share data):

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
2018		0.00163438		20,693		16,175		36,868
2019		0.00123288		14,724		12,519		27,243
2020		0.00109589		3,131		2,873		6,004
			$	88,480	$	66,455	$	154,935

Funds from Operations and Modified Funds from Operations

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

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

(1) acquisition fees and expenses;

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

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

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

(5) impairment charges;

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

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

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

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

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

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

51

We believe that MFFO is helpful in assisting management assess the sustainability of operating performancein future periods.

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

• Acquisition expenses. In evaluating investments in real estate, including both business combinations and investments accounted for under the equity method of accounting, management’s investment models and analysis differentiate costs to acquire the investment from the operations derived from the investment. Under GAAP, acquisition costs related to business combinations are expenses and are capitalized for asset acquisitions. Prior to January 1, 2018, all of our acquisitions were accounted for as business combinations and their related costs were expensed. On January 1, 2018, we adopted Financial Accounting Standards Board Accounting Standards Update 2017-01, and we anticipate that most property acquisitions will be treated as asset acquisitions and the related costs will be capitalized. Acquisition costs will continue to be funded from both the proceeds of debt financing and the proceeds of property dispositions, not from cash flows from operations. We believe that 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.

52

By providing MFFO, we believe we are presenting useful information that also assists investors and analysts in the assessment of the sustainability of our operating performance because it excludes non-operating items included in FFO.  We also believe that MFFO is a recognized measure of sustainable operating performance by the real estate industry.  MFFO is useful in evaluating the operating performance of our portfolio relative to the operating performance of other real estate companies that are not as affected by other MFFO adjustments.  

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

Neither FFO, MFFO nor AFFO should be considered as an alternative to net income (loss), nor as an indication of our liquidity, nor are any of these measures indicative of funds available to fund our cash needs, including our ability to fund distributions. Accordingly, FFO, MFFO and AFFO should be reviewed in connection with other GAAP measurements.  Our FFO, MFFO and AFFO as presented may not be comparable to amounts calculated by other REITs.

The following section presents our calculation of FFO, MFFO and AFFO and provides additional information related to our operations (in thousands, except per share amounts). As a result of the timing of our active real estate operations and the general and administrative expenses incurred in connection with these events, FFO, MFFO and AFFO are not relevant to a discussion comparing operations for the periods presented. 

	Years Ended
	December 31,
	2020			2019			2018
Net loss – GAAP	$	(33,224	)	$	(11,944	)	$	(35,441	)
Net gain on disposition of property		—			(20,619	)		—
Depreciation expense		40,195			39,599			40,611
FFO attributable to common stockholders		6,971			7,036			5,170
Adjustments for straight-line rents		457			(43	)		(10	)
Fair value adjustment for cancelable swap		—			—			(287	)
Loss on extinguishment of debt		1,330			—			—
Amortization of intangible lease assets		—			—			813
Debt premium amortization		(111	)		(113	)		(116	)
Acquisition costs		—			—			30
MFFO attributable to common stockholders		8,647			6,880			5,600
Net gains on disposition of property		—			20,619			—
AFFO attributable to common stockholders	$	8,647		$	27,499		$	5,600
Basic and diluted loss per common share - GAAP	$	(0.55	)	$	(0.20	)	$	(0.58	)
FFO per share	$	0.12		$	0.12		$	0.08
MFFO per share	$	0.14		$	0.11		$	0.09
AFFO per share	$	0.14		$	0.45		$	0.09
Weighted average shares outstanding		60,227			60,728			61,110

Critical Accounting Policies

We consider these policies critical because they involve significant management judgments and assumptions, they require estimates about matters that are inherently uncertain, and they are important for understanding and evaluating our reported financial results.  These judgments affect the reported amounts of our assets and liabilities and our disclosure of contingent assets

53

and liabilities on the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods.  With different estimates or assumptions, materially different amounts could be reported in our financial statements.  Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.

Real Estate Assets

Depreciation

We make subjective assessments as to the useful lives of our depreciable assets.  These assessments have a direct impact on our net income, because, if we were to shorten the expected useful lives of our investments in real estate, we would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis throughout the expected useful lives of these investments.  We consider the period of future benefit of an asset to determine its appropriate useful life.  The estimated useful lives of our assets by class are as follows:

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

Improvements and replacements in excess of $1,000 are capitalized when they have a useful life greater than or equal to one year. Our Manager, an affiliate of our Advisor, 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.

Real Estate Purchase Price Allocation

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

Upon the acquisition of real properties, we allocate the purchase price 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.

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

We measure the aggregate value of other intangible assets acquired based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued as if vacant. Management's estimates of value are 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, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods. We also estimate 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.

54

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

We amortize the value of in-place leases to expense over the initial term of the respective leases.  The value of customer relationship intangibles will be amortized to expense over the initial term but in no event will the amortization periods for the intangible assets exceed the remaining depreciable life of the building. Should a tenant terminate its lease, the unamortized portion of the in-place lease value and customer relationship intangibles would be charged to expense in that period.

The determination of the fair value of assets and liabilities acquired requires the use of significant assumptions with regard to current market rental rates, discount rates and other variables. The use of inappropriate estimates would result in an incorrect assessment of the purchase price allocations, which could impact the amount of our reported net income.

Valuation of Real Estate Assets

We periodically evaluate our long-lived assets, primarily investments in rental properties, for impairment indicators. The review considers factors such as past and expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. When circumstances indicate the carrying value of a property may not be recoverable, we review the asset for permanent impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. 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 would be the adjustment to fair value less the estimated cost to dispose of the asset. 

In conjunction with the Merger and for our annual estimated value per share calculation, we engaged with a third-party to provide the estimated fair value of our rental properties as of January 28, 2021. We compared these values to our carrying values and concluded that there was no indication that the carrying value of our investments in real estate were not recoverable as of December 31, 2020.

Revenue Recognition

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

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

The specific timing of a sale will be measured against various criteria related to the terms of the transaction and any continuing involvement associated with the property.  If the criteria for profit recognition under the full-accrual method are not met, we will defer gain recognition and account for the continued operations of the property by applying the percentage-of-completion, reduced profit, deposit, installment or cost recovery methods, as appropriate, until the appropriate criteria are met.

Interest income from performing loans receivable are recognized based on the contractual terms of the loan agreement.  Fees related to any buy-down of the interest rate will be deferred as prepaid interest income and amortized over the term of the loan as an adjustment to interest income.  Closing costs related to the purchase of a performing loan held for investment will be amortized using effective yield method over the term of the loan and accreted as an adjustment against interest income.

55

Adoption of New Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments - Credit Losses”, which requires measurement and recognition of expected credit losses for financial assets held. On January 1, 2020, we adopted ASU No. 2016-13 and the adoption did not have a significant impact on our consolidated financial statements and disclosures since we did not have instruments subject to this guidance at the adoption or at December 31, 2020.

In January 2017, FASB issued ASU No. 2017-04, "Intangibles- Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment", which alters the current goodwill impairment testing procedures. On January 1, 2020, we adopted ASU No. 2017-04 and the adoption did not have a significant impact on our consolidated financial statements due to the fact that we did not have any goodwill subject to this guidance at the adoption or at December 31, 2020.

In August 2018, FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” This update removes, modifies and adds certain disclosure requirements in FASB Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement”. We adopted the standard on January 1, 2020, and the adoption did not have a significant impact on our consolidated financial statements due to the fact that there were no required changes to our disclosures.

In November 2018, FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” ASU No. 2018-19 clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842, Leases. We early adopted the standard on January 1, 2020, and the adoption did not have a significant impact on our consolidated financial statements and disclosures.

In March 2020, FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848).” ASU No. 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in ASU No. 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. During the year ended December 31, 2020, we have elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

In April 2020, FASB issued a Staff Q&A to respond to some frequently asked questions about accounting for lease concessions related to the effects of the COVID-19 pandemic. Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each lease to determine whether enforceable rights and obligations for concessions exist in the lease and can elect to apply or not apply the lease modification guidance to those leases. Entities may make the elections for any lessor-provided concessions related to the effects of the COVID-19 pandemic (e.g., deferrals of lease payments) as long as the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee.We have not elected to apply the lease modification guidance to our leases. To date, the impact of lease concessions granted has not had a material effect on our financial statements. We will continue to evaluate the impact of lease concessions and the appropriate accounting for those concessions.

Accounting Standards Issued But Not Yet Effective

In August 2020, FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”. ASU No. 2020-06 addresses the complexity of guidance for certain financial (convertible) instruments with characteristics of liabilities and equity. ASU No. 2020-06 will be effective for us beginning January 1, 2022. We are continuing to evaluate this guidance; however, we do not expect the adoption of ASU No. 2020-06 to have a material effect on our consolidated financial statements and disclosures due to the fact that we did not have instruments subject to this guidance at December 31, 2020.

56

Contractual Obligations

The following table presents our scheduled contractual obligations required for the next five years and thereafter as of December 31, 2020 (dollars in thousands):

	Payments due by period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Operating Lease Obligations	$	12	$	12	$	—	$	—	$	—

Off-Balance Sheet Arrangements

As of December 31, 2020 and 2019, we did not have any off-balance sheet arrangements or obligations.

Subsequent Events

Mergers with Resource Real Estate Opportunity REIT, Inc. and Resource Apartment REIT III, Inc.

On September 8, 2020, we entered into merger agreements (as described herein) to acquire each of REIT I and REIT III in stock-for-stock transactions whereby each of REIT I and REIT III were to be merged into our wholly-owned subsidiary.

We refer to the REIT I Merger (as defined below) and the REIT III Merger (as defined below) collectively as the Mergers.  Each of the Mergers was intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended.  The Mergers were effective as of January 28, 2021. Upon consummation of the Mergers, we owned 51 properties in 15 states, comprising a total of 14,995 multifamily units.

REIT I Merger

On September 8, 2020, we, OP II, Revolution I Merger Sub, LLC, a wholly-owned subsidiary of us (“Merger Sub I”), REIT I, and OP I, entered into the REIT I Merger Agreement.

Effective January 28, 2021, REIT I merged with and into Merger Sub I, with Merger Sub I surviving as direct, wholly-owned subsidiary (the “REIT I Company Merger”) and OP I merged with and into OP II (the “REIT I Partnership Merger” and, together with the REIT I Company Merger, the “REIT I Merger”), with OP II surviving the REIT I Partnership Merger. At such time, the separate existence of REIT I and OP I ceased.

At the effective time of the REIT I Company Merger, each issued and outstanding share of REIT I’s common stock (or fraction thereof) converted into the right to receive 1.22423 shares of our common stock, and each issued and outstanding share of REIT I’s convertible stock converted into the right to receive $0.02 in cash (without interest).

At the effective time of the REIT I Partnership Merger, each common unit of partnership interests in OP I outstanding immediately prior to the effective time of the REIT I Partnership Merger converted into the right to receive 1.22423 common units of partnership interest in OP II and each Series A Cumulative Participating Redeemable Preferred Unit in OP I issued and outstanding immediately prior to the effective time of the REIT I Partnership Merger converted into the right to receive one Series A Cumulative Participating Redeemable Preferred Unit in OP II.

REIT III Merger

On September 8, 2020, we, OP II, Revolution III Merger Sub, LLC (“Merger Sub III”), our wholly-owned subsidiary, REIT III, and OP III, the operating partnership of REIT III, entered into the REIT III Merger Agreement.

Effective January 28, 2021, REIT III merged with and into Merger Sub III, with Merger Sub III surviving as our direct, wholly-owned subsidiary (the “REIT III Company Merger”) and OP III merged with and into OP II (the “REIT III Partnership Merger” and, together with the REIT III Company Merger, the “REIT III Merger”), with OP II surviving the REIT III Partnership Merger. At such time, the separate existence of REIT III and OP III ceased. The REIT I Merger and the REIT III Merger are hereinafter together referred to as the “Merger”.

At the effective time of the REIT III Company Merger, each issued and outstanding share of REIT III’s common stock (or fraction thereof) converted into the right to receive 0.925862 shares of our common stock.

57

At the effective time of the REIT III Partnership Merger, each unit of partnership interests in OP III outstanding immediately prior to the effective time of the REIT III Partnership Merger was retired and ceased to exist. In addition, for each share of our common stock issued in the REIT III Company Merger, a common partnership unit was issued to us by OP II.

Employment Agreements

In connection with the REIT I Merger, we assumed from REIT I, the employment agreements dated September 8, 2020 for the following executive officers: Alan F. Feldman, Chief Executive Officer and President, Thomas C. Elliott, Executive Vice President, Chief Financial Officer and Treasurer, and Michele (“Shelle”) R. Weisbaum, Senior Vice President and Chief Legal Officer. We assumed REIT I’s obligations under the employment agreements in their entirety. Information about the REIT I employment agreements is included under Item 5.02 in the Current Report on Form 8-K for REIT I as filed with the SEC on September 11, 2020. In addition, the employment agreements for Messrs. Feldman and Elliott and Ms. Weisbaum were filed as exhibits to the Current Report on Form 8-K filed by us on January 29, 2021.

Long-Term Incentive Plan

As of the effective time of the REIT I Merger, we assumed the 2020 Long-Term Incentive Plan of REIT I as amended to replace all references to REIT I to the company. In addition, upon the effective time of the REIT I Merger, the shares of restricted stock of REIT I granted to Alan F. Feldman, Thomas C. Elliott, Steven R. Saltzman and Michele R. Weisbaum under the 2020 Long-Term Incentive Plan of REIT I were cancelled and converted into the right to receive 1.22423 shares of our common stock. Each such share of our common stock issued has, and is subject to, the same terms and conditions (including with respect to vesting) set forth in the 2020 Long-Term Incentive Plan of REIT I (which has been assumed and adopted by us as our own) and the related restricted stock agreements as in effect immediately prior to the REIT I Merger. The terms of the restricted stock are described under Item 5.02 in the Current Report on Form 8-K for REIT I as filed with the SEC on September 11, 2020. In addition, a copy of the form of restricted stock agreement (time based) is filed as an exhibit to our Current Report on Form 8-K filed by us on January 29, 2021 and a copy of the form of restricted stock agreement (performance based) is filed as an exhibit to our Current Report on Form 8-K filed by us on February 23, 2021. The compensation committee of the board of directors granted time-based and performance-based equity incentive awards to employees of the company, including its executive officers effective February 17, 2021.

Structured Credit Facility Transaction

On January 28, 2021, subsidiaries of the Company (collectively, “Borrower”) entered into a structured credit facility transaction with CBRE Multifamily Capital, Inc. for delivery of loans and/or advances to Fannie Mae (the “Facility”) for a term of 15 years (the “Facility Termination Date”). Pursuant to the terms of the loan documents for the Facility, the lender agreed to make fixed advances and variable advances to Borrower during the term of the Facility provided that Borrower satisfies certain customary conditions as set forth in the Facility loan documents (the “Loan Documents”), including debt service coverage tests and loan-to-value tests. The fixed advances in the Facility may have terms not less than five or more than 15 years from the closing of such advance and variable advances in the Facility may have terms not less than five or more than 10 years from the closing of such advance. All advances must have maturity dates that do not exceed the Facility Termination Date. Borrower has the option to convert variable advances to fixed advances beginning on the first day of the second year of the variable advance term and ending seven years prior to the Facility Termination Date, subject to the satisfaction of customary requirements set forth in the Loan Documents.

The Facility is non-recourse to the Borrower except for the customary exceptions to non-recourse provisions of the Loan Documents (“carve-outs”). The Borrower’s obligations for the carve-outs are guaranteed solely by the Borrowers. The Company is the key principal under the Facility and as such must continue to indirectly own an interest in each Borrower and is subject to certain transfer restrictions with respect to its ownership interest in each Borrower as provided in the Loan Documents. In addition, the Facility contains customary representations and warranties, financial and other covenants, events of default and remedies typical for this type of facility.

The initial advance of $495.2 million under the Facility occurred on January 28, 2021 and is secured by mortgages on the following twelve multifamily properties located in Arizona, Colorado, Georgia, Oregon and Texas: Estates at Johns Creek, Heritage Pointe, Providence in the Park, South Lamar Village, Verona Apartments, Westside, 81 Fifty at West Hills, Adair off Addison I & II, Montclair Terrace, Palmer at Las Colinas, and Uptown Buckhead. The mortgages contain cross-collateralization and cross-default provisions so a default on a single property could affect multiple properties securing the Facility. The proceeds from the initial advance were used to refinance or pay off $462.0 million of the Borrower’s debt. Additional information about the initial advance is as follows:

58

Advance	Loan Amount	Term (years)	Interest Only	Total Rate	Payments
Fixed Advance 1	$      235,205,000	10	Yes	2.79%	Monthly
Fixed Advance 2	$      235,205,000	7	Yes	2.62%	Monthly
Variable Advance 1	$        24,760,000	10	Yes	2.15%	Monthly

Amended and Restated Share Redemption Program

On February 3, 2021, our board of directors adopted the Fifth Amended and Restated Share Redemption Program (the “Amended SRP”) pursuant to which, subject to significant conditions and limitations of the program, our stockholders can have their shares repurchased by us. The Amended SRP provides that redemptions will continue to be made quarterly but in an amount not to exceed proceeds from the sale of shares in the DRP in the immediately preceding calendar quarter; provided that, for any quarter in which no DRP proceeds are available, the funding limitation for the quarter will be set by the board of directors upon ten business days’ notice to stockholders. As there were no DRP proceeds for the fourth quarter of 2020, the board of directors has set the funding limitation for redemptions in the first quarter of 2021 at $2.0 million. Additional changes to the share redemption program in the Amended SRP clarify the timing of redemption procedures. The share redemption program remains suspended except with respect to redemptions sought up on a stockholder’s death, disability, or confinement to a long-term care facility (each as defined in the Amended SRP).

Distributions Declared

On February 3, 2021, the board of directors authorized a quarterly distribution for the first quarter of 2021 in the amount of $0.07 per share of common stock to stockholders of record as of the close of business on March 30, 2021, which we expect to pay on March 31, 2021. Investors may choose to receive cash distributions or purchase additional shares through the DRP.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk from our financial instruments primarily from changes in market interest rates.  We do not have exposure to any other significant market risks.  We monitor interest rate risk as an integral part of our overall risk management, which recognizes the unpredictability of financial markets and seeks to reduce the potentially adverse effect on our results of operations.  Our operating results are affected by changes in interest rates, primarily changes in LIBOR, as a result of borrowings under our outstanding mortgage loans.

We enter into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates.  Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements.  To accomplish this objective, we entered into a total of 17 interest rate caps that were designated as cash flow hedges during the years 2016 through 2020. 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.

As of December 31, 2020 and December 31, 2019, we had $400.6 million and $405.8 million, respectively, in variable rate debt outstanding.  If interest rates on the variable rate debt had been 100 basis points higher during the years ended December 31, 2020 and 2019, our annual interest expense would have increased by approximately $4.1 million for both years.

In addition, changes in interest rates affect the fair value of our fixed rate mortgage notes payable. As of December 31, 2020 and December 31, 2019, we had $183.7 million and $146.3 million, respectively, in fixed rate debt outstanding.  As of December 31, 2020 and December 31, 2019, this fixed rate debt had fair values of $180.5 million and $144.6 million, respectively.  Fair values are computed using rates available to us for debt with similar terms and remaining maturities.  If interest rates had been 100 basis points higher as of December 31, 2020 and December 31, 2019, the fair value of this fixed rate debt would have decreased by $8.8 million and $3.7 million, respectively.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

59

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There were no disagreements with our independent registered public accountants during the year ended December 31, 2020.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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

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

Management's Report on Internal Control over Financial Reporting

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

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, management used the criteria set forth in the 2013 version of the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon this assessment, management believes that our internal control over financial reporting is effective as of December 31, 2020.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred in the quarter ended December 31, 2020 that has materially affected, or is reasonable likely to materially affect, our internal control over financial reporting.

60

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Code of Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics that applies to all of our executive officers and directors, including but not limited to, our chief executive officer and chief financial officer. Our Code of Business Conduct and Ethics may be found at http://www.resourcereit.com, on the Investors/Corporate Governance page. Any amendment to, or a waiver from, a provision of the Code of Conduct and Ethics that would require disclosure under Item 5.05 of Form 8-K will be posted on our website.

The other information required by this Item is incorporated by reference from our 2021 Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference from our 2021 Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated by reference from our 2021 Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated by reference from our 2021 Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is incorporated by reference from our 2021 Proxy Statement.

61

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this Annual Report on Form 10-K:

(a) Financial Statements

1. See the Index to Consolidated Financial Statements at page F-1 of this report.

(b) Financial Statement Schedule

i. Our financial statement schedule is included in a separate section of this Annual Report on Form 10-K commencing on page F-31.

(c) Exhibits

62

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated as of September 8, 2020, by and among the Company, OP II, Revolution I Merger Sub, LLC, OP I and REIT I (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed September 11, 2020)
2.2	Agreement and Plan of Merger, dated as of September 8, 2020, by and among the Company, OP II, Revolution III Merger Sub, LLC, OP III and REIT III (incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed September 11, 2020)
3.1	Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Pre-Effective Amendment No. 3 to the Registration Statement on Form S-11 (No. 333-184476) filed December 20, 2013)
3.2	Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed February 5, 2021)
3.3	Articles of Amendment of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed January 29, 2021)
4.1	Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates) (incorporated by reference to the Company’s Registration Statement on Form S-11 (No. 333-184476) filed October 17, 2012)
4.2	Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Appendix A to the prospectus included in the Company’s Post-Effective Amendment no. 9 to the Registration Statement on Form S-11 on Form S-3 (No. 333-184476) filed February 16, 2016)
4.3	Description of the Company’s Common Stock Registered Pursuant to Section 12 of the Exchange Act of 1934 (incorporated by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K filed March 20, 2020)
10.1	Second Amended and Restated Advisory Agreement dated September 8, 2020 between the Company and the Resource Real Estate Opportunity Advisor (incorporated by reference to Exhibit 10.4 on the Company’s Current Report on Form 8-K filed on September 11, 2020)
10.2	Management Agreement by and among Resource Real Estate Opportunity REIT II, Inc., RRE Opportunity OP II, LP and Resource Real Estate Opportunity Manager II, LLC, dated December 20, 2013 (incorporated by reference to Exhibit 10.3 to the Company's Annual Report on Form 10-K filed March 30, 2015)
10.3	Renewal Agreement by and between Resource Real Estate Opportunity REIT II, Inc. and Resource Real Estate Opportunity Advisor II, LLC, dated December 20, 2020
10.4	Voting Agreement dated September 8, 2020, between the Company and Resource Real Estate (incorporated by reference to Exhibit 10.1 on the Company’s Current Report on Form 8-K filed on September 11, 2020)
10.5	Voting Agreement dated September 8, 2020, between the Company and Alan Feldman (incorporated by reference to Exhibit 10.2 on the Company’s Current Report on Form 8-K filed on September 11, 2020)
10.6	Resource REIT, Inc. 2020 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed January 29, 2021)
10.7	Form of Restricted Stock Agreement (Time Based) (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed January 29, 2021)
10.8	Form of Restricted Stock Agreement (Performance-Based) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 23, 2021)
10.9	Employment Agreement dated September 8, 2020 between REIT I and Mr.  Feldman (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed by REIT I on September 11, 2020)
10.10	Employment Agreement dated September 8, 2020 between REIT I and Mr.  Elliott (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed by REIT I on September 11, 2020)
10.11	Employment Agreement dated September 8, 2020 between REIT I and Ms. Weisbaum (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K filed by REIT I on September 11, 2020)
10.12	Form of Indemnification Agreement between the Company and each independent director of the Company (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed March 16, 2020)
10.13	Amended and Restated Limited Partnership Agreement of RRE Opportunity OP II, LP, dated January 28, 2021
10.14	Master Credit Facility Agreement, dated as of January 28, 2021, by and among RRE Addison Place Holdings, LLC, RRE Gilbert Holdings, LLC, RRE Providence Holdings, LLC, RRE Woodmoor Holdings, LLC, RRE Centennial Holdings, LLC, RRE Brentdale Holdings, LLC, RRE Breckenridge Holdings, LLC, RRE Bear Creek Holdings, LLC, RRE Fairways of Bent Tree Holdings, LLC, RRE Montclair Terrace Holdings, LLC, RRE Santa Rosa Holdings, LLC, RRE Buckhead Holdings, LLC, RRE FNM1 LLC, RRE FNM2 LLC, RRE FNM3 LLC, RRE FNM4 LLC, (collectively, the “Borrowers”) and CBRE Multifamily Capital, Inc. (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed January 29, 2021)

63

21.1	Subsidiaries of the Company
23.1	Consent of Grant Thornton
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1	Consent of Duff & Phelps
99.2	Fifth Amended and Restated Share Redemption Program (incorporated by reference to Exhibit 99.2 to the Company’s Form 8-K filed February 5, 2021)
101.1	The following information from the Company's Quarterly Report on Form 10-K for the year ended December 31, 2020, 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

ITEM 16.FORM 10-K SUMMARY

None.

64

SIGNATURES

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

	RESOURCE REIT, INC. (f/k/a RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.)
March 25, 2021	By:	/s/ Alan F. Feldman
		Alan F. Feldman
		Chief Executive Officer, President and Director

Pursuant to the requirements of the Securities Act of 1933, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date
/s/ Robert C. Lieber	Director	March 25, 2021
ROBERT C. LIEBER
/s/ Gary Lichtenstein	Director	March 25, 2021
GARY LICHTENSTEIN
/s/ Thomas J. Ikeler	Director	March 25, 2021
THOMAS J. IKELER
/s/ Lee Shlifer	Director	March 25, 2021
LEE SHLIFER
/s/ Andrew Ceitlin	Director	March 25, 2021
ANDREW CEITLIN
/s/ Alan F. Feldman	Chief Executive Officer, President and Director	March 25, 2021
ALAN F. FELDMAN	(Principal Executive Officer)
/s/ Thomas C. Elliott	Chief Financial Officer, Executive Vice President and Treasurer	March 25, 2021
THOMAS C. ELLIOTT	(Principal Financial Officer)
/s/ Steven R. Saltzman	Chief Accounting Officer, and Vice President (Principal Accounting Officer)	March 25, 2021
STEVEN R. SALTZMAN

65

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements	Page
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets at December 31, 2020 and 2019	F-2
Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2020, 2019 and 2018	F-3
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 2020, 2019 and 2018	F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018	F-5
Notes to Consolidated Financial Statements - December 31, 2020	F-6

66

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Resource REIT, Inc.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Resource REIT, Inc. (a Maryland corporation) and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule included under Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

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

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

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

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of events or changes in circumstances that indicate rental properties may be impaired

As discussed in Note 2 to the financial statements, the Company periodically evaluates its investments in rental properties for impairment indicators. The review considers factors such as operating income, market and other applicable trends, as well as the effects of leasing demand. Additionally, for a separate purpose, the Company engaged a third-party to prepare an estimate of the fair value of its rental properties as of January 28, 2021. The Company compared these values to its December 31, 2020 carrying value and concluded that there was no indication that the carrying values of the Company’s investments in rental properties were not recoverable as of December 31, 2020. We identified the evaluation of events or changes in circumstances that indicate rental properties may be impaired as a critical audit matter.

Auditing the Company's process to evaluate long-lived assets for impairment was complex due to the high degree of subjectivity in determining whether indicators of impairment were present, including the fair value of the rental properties as determined by the Company’s third-party specialist.

Our audit procedures to address this critical audit matter included the following procedures, among others:

F-1

• We evaluated the reasonableness of management’s impairment indicator analysis through discussions with management and through performing an independent trend analysis on property net operating income,occupancyand market rents.

• We tested the reasonableness of the rental property valuations utilized by management in its impairment analysis, which involved the assistance of professionals with specialized skill and knowledge. This included evaluating the appropriateness of the valuation methodology used by the Company’s specialist and comparing the fair value estimates to recent market transactions for similar properties.

/s/ GRANT THORNTON LLP

We have served as the Company's auditor since 2012.

Philadelphia, Pennsylvania

March 25, 2021

F-2

RESOURCE REIT, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	December 31,
	2020			2019
ASSETS
Investments:
Rental properties, net	$	700,905		$	735,530
Cash		63,487			39,647
Restricted cash		9,475			6,534
Subtotal - cash and restricted cash		72,962			46,181
Tenant receivables		301			107
Due from related parties		—			297
Prepaid expenses and other assets		2,255			2,109
Operating lease right-of-use assets		12			38
Total assets	$	776,435		$	784,262
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Mortgage notes payable, net	$	580,114		$	547,875
Accounts payable and accrued expenses		4,402			6,435
Accrued real estate taxes		5,508			5,029
Due to related parties		1,915			432
Tenant prepayments		618			634
Security deposits		1,651			1,513
Distribution payable		—			5,993
Operating lease liabilities		12			38
Total liabilities		594,220			567,949
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, 60,026,513    and 60,094,623 issued and outstanding, respectively)		599			600
Additional paid-in capital		527,644			528,464
Accumulated other comprehensive loss		(231	)		(189	)
Accumulated deficit		(345,798	)		(312,563	)
Total stockholders’ equity		182,215			216,313
Total liabilities and stockholders’ equity	$	776,435		$	784,262

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

F-3

RESOURCE REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share data)

	Years Ended December 31,
	2020			2019			2018
Revenues:
Rental income	$	85,810		$	85,681		$	87,256
Expenses:
Rental operating - expenses		15,518			13,205			14,411
Rental operating - payroll		7,334			7,682			7,943
Rental operating - real estate taxes		11,728			11,316			11,992
Subtotal - Rental operating expenses		34,580			32,203			34,346
Acquisition costs		—			—			30
Transaction expenses		3,732			—			—
Management fees		12,894			13,208			13,728
General and administrative		8,339			7,586			8,155
Loss on disposal of assets		215			219			522
Depreciation and amortization expense		40,195			39,599			41,424
Total expenses		99,955			92,815			98,205
Loss before net gain on disposition		(14,145	)		(7,134	)		(10,949	)
Net gain on disposition of property		—			20,619			—
(Loss) income before other income (expense)		(14,145	)		13,485			(10,949	)
Other income (expense):
Interest income		14			223			157
Insurance proceeds in excess of cost basis		—			225			115
Interest expense		(19,093	)		(25,877	)		(24,764	)
Net loss		(33,224	)		(11,944	)		(35,441	)
Other comprehensive income (loss):
Designated derivatives, fair value adjustment		(42	)		190			65
Comprehensive loss	$	(33,266	)	$	(11,754	)	$	(35,376	)
Weighted average common shares outstanding, basic and diluted		60,227			60,728			61,110
Basic and diluted net loss per common share	$	(0.55	)	$	(0.20	)	$	(0.58	)

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

F-4

RESOURCE REIT, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2020, 2019, AND 2018

(in thousands)

	Common Stock						Convertible Stock				Additional Paid-in			Accumulated Other Comprehensive			Accumulated
	Shares			Amount			Shares		Amount		Capital			Loss			Deficit			Total
Balance, at January 1, 2018		60,782		$	606			50	$	1	$	534,683		$	(444	)	$	(204,186	)	$	330,660
Common stock issued through distribution reinvestment plan		2,397			24			—		—		20,669			—			—			20,693
Distributions declared		—			—			—		—		—			—			(36,634	)		(36,634	)
Common stock redemptions		(1,800	)		(18	)		—		—		(15,859	)		—			—			(15,877	)
Designated derivatives, fair value adjustment		—			—			—		—		—			65			—			65
Net loss		—			—			—		—		—			—			(35,441	)		(35,441	)
Balance, at December 31, 2018		61,379		$	612			50	$	1	$	539,493		$	(379	)	$	(276,261	)	$	263,466
Common stock issued through distribution reinvestment plan		1,754			18			—		—		14,706			—			—			14,724
Distributions declared		—			—			—		—		—			—			(24,358	)		(24,358	)
Common stock redemptions		(3,038	)		(30	)		—		—		(25,735	)		—			—			(25,765	)
Designated derivatives, fair value adjustment		—			—			—		—		—			190			—			190
Net loss		—			—			—		—		—			—			(11,944	)		(11,944	)
Balance, at December 31, 2019		60,095		$	600			50	$	1	$	528,464		$	(189	)	$	(312,563	)	$	216,313
Common stock issued through distribution reinvestment plan		371			4			—		—		3,127			—			—			3,131
True-up of prior year cash distributions declared		—			—			—		—		—			—			(11	)		(11	)
Common stock redemptions		(439	)		(5	)		—		—		(3,947	)		—			—			(3,952	)
Designated derivatives, fair value adjustment		—			—			—		—		—			(42	)		—			(42	)
Net loss		—			—			—		—		—			—			(33,224	)		(33,224	)
Balance, at December 31, 2020		60,027		$	599			50	$	1	$	527,644		$	(231	)	$	(345,798	)	$	182,215

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

F-5

RESOURCE REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2020			2019			2018
Cash flows from operating activities:
Net loss	$	(33,224	)	$	(11,944	)	$	(35,441	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss on disposal of assets		215			219			522
Net gain on disposition of property		—			(20,619	)		—
Casualty gain		4			552			—
Depreciation and amortization		40,195			39,599			41,424
Amortization of deferred financing costs		1,398			1,104			1,318
Amortization of mortgage premiums		(111	)		(113	)		(116	)
Change in fair value of interest rate caps		95			—			55
Changes in operating assets and liabilities:
Tenant receivables		(194	)		(33	)		14
Due from related parties		297			(240	)		—
Prepaid expenses and other assets		(130	)		(1	)		(2	)
Due to related parties		1,483			(151	)		46
Accounts payable and accrued expenses		751			2,008			(1,414	)
Accrued real estate taxes		479			(1,473	)		(599	)
Tenant prepayments		(16	)		16			67
Security deposits		138			98			158
Net cash provided by operating activities		11,380			9,022			6,032
Cash flows from investing activities
Proceeds from disposal of property, net of closing costs		—			32,882			—
Capital expenditures		(7,297	)		(8,156	)		(15,097	)
Net cash (used in) provided by investing activities		(7,297	)		24,726			(15,097	)
Cash flows from financing activities:
Redemptions of common stock		(3,952	)		(25,765	)		(15,877	)
Payment of deferred financing costs		—			(445	)		(503	)
Increase in borrowings		37,797			8,946			17,439
Repayments on borrowings		(8,121	)		(5,760	)		(4,660	)
Purchase of interest rate caps		(153	)		(11	)		(66	)
Distributions paid on common stock		(2,873	)		(12,520	)		(16,175	)
Net cash provided by (used in) financing activities		22,698			(35,555	)		(19,842	)
Net increase (decrease) in cash and restricted cash		26,781			(1,807	)		(28,907	)
Cash and restricted cash at beginning of year		46,181			47,988			76,895
Cash and restricted cash at end of year	$	72,962		$	46,181		$	47,988
Reconciliation of cash and restricted cash
Cash	$	63,487		$	39,647		$	40,175
Restricted cash		9,475			6,534			7,813
Cash and restricted cash at end of year	$	72,962		$	46,181		$	47,988

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

F-6

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020

NOTE 1 - NATURE OF BUSINESS AND OPERATIONS

Resource REIT, Inc. (f/k/a Resource Real Estate Opportunity REIT II, Inc.) (the “Company”) was organized in Maryland on September 28, 2012. The Company launched an initial public offering in February 2014, the primary portion of which terminated in February 2016.  The Company continues to offer shares pursuant to its distribution reinvestment plan at a purchase price equal to 95% of the estimated net asset value per share.  The Company has adopted a fiscal year ending December 31.  

Prior to the execution of the REIT I Merger Agreement (as defined below), on September 8, 2020, Resource Real Estate Opportunity REIT, Inc. ("REIT I"), a non-traded real estate investment trust ("REIT") sponsored by Resource America, Inc. (“RAI”), the Company’s initial sponsor, entered into a series of transactions to become self-managed (the “Self-Management Transaction”) and succeeded to the advisory, asset management and property management arrangements in place for the Company. Accordingly, the sponsor of the Company changed from RAI to Resource Real Estate Opportunity OP, LP, the operating partnership of REIT I, while the REIT I Merger (defined below) was pending.

Following the Self-Management Transaction, Resource Real Estate Opportunity Advisor II, LLC (the “Advisor”) is indirectly owned by REIT I.  Prior to September 8, 2020, the Advisor was an indirect wholly-owned subsidiary of RAI.  Pursuant to the advisory agreement initially entered into in February 2014 and renewed annually thereafter but prior to the occurrence of the REIT I Merger, the Advisor has acted 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. The advisory agreement was amended and restated on September 8, 2020.

RAI is a wholly-owned subsidiary of C-III Capital Partners, LLC ("C-III”). Prior to September 8, 2020, C-III controlled the Advisor, Resource Securities LLC ("Resource Securities"), the Company's dealer manager, and Resource Real Estate Opportunity Manager II, LLC (the "Manager"), the Company's property manager. C-III also controlled all of the shares of the Company's common stock held by RAI and the Advisor.

As of December 31, 2020, a total of 60,026,513 shares, including shares purchased by the Advisor and shares issued through the distribution reinvestment plan, remain outstanding. As of December 31, 2020, the Company had issued 10,197,726 shares valued at $88.5 million pursuant to its distribution reinvestment plan.

The Company’s objective is to take advantage of the multifamily investing and lending platforms available to it to invest in apartment communities in order to provide the investor with growing cash flow and increasing asset values. The Company has acquired and may continue to acquire underperforming apartments which it will renovate and stabilize in order to increase rents. To a lesser extent, the Company may acquire or originate commercial real estate debt secured by apartments. The Company elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes under the provisions of the Internal Revenue Code of 1986, as amended, commencing with its taxable year ending December 31, 2014. As such, to maintain its REIT qualification for U.S. federal income tax purposes, the Company is generally required to distribute at least 90% of its net income (excluding net capital gains) to its stockholders as well as comply with certain other requirements. Accordingly, the Company generally will not be subject to U.S. federal income taxes to the extent that it annually distributes all of its REIT taxable income to its stockholders. The Company also operates its business in a manner that will permit it to maintain its exemption from registration under the Investment Company Act of 1940, as amended.

Mergers with Resource Real Estate Opportunity REIT, Inc. and Resource Apartment REIT III, Inc.

On September 8, 2020, the Company entered into merger agreements (as described herein) to acquire each of REIT I and Resource Apartment REIT III, Inc. (“REIT III”) in stock-for-stock transactions whereby each of REIT I and REIT III were to be merged into the Company’s wholly owned subsidiary. The REIT I Merger (as defined below) and the REIT III Merger (as defined below) are referred to collectively herein as the Mergers. Each of the Mergers was intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended.  The Mergers were effective as of January 28, 2021.

Effective as of the close of the REIT I Merger, the Company acquired the Advisor and is a self-managed REIT.  Much of the historical information regarding the Company’s structure and agreements presented in this Note 1 and throughout the rest

F-7

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

of these Notes to Consolidated Financial Statements has materially changed as a result of the Mergers,but did apply as of December 31, 2020.

Based on an evaluation of the relevant factors and the guidance in Accounting Standards Codification (‘‘ASC’’) 805, Business Combinations, all of which required significant management judgment, the entity in the Mergers considered the acquirer for accounting purposes (REIT I) is not the legal acquirer (The Company). In order to make this determination, various factors have been analyzed, including which entity issued its equity interests, relative voting rights, existence of minority interests (if any), control of the board of directors, management composition, relative size, transaction initiation, and other factors such as operational structure, and relative composition of employees, and other factors. The strongest factors identified were the relative size of the companies and management composition. Based on financial measures, REIT I is a larger entity than the Company and REIT III. REIT I has more common stock outstanding at a higher net asset value than the Company and REIT III and upon the consummation of the Mergers will be issued more shares of the Company than are currently held by the Company’s stockholders or than will be issued to REIT III stockholders in the REIT III Merger. Based on these factors, REIT I was concluded to be the accounting acquirer.

REIT I Merger

On September 8, 2020, the Company, RRE Opportunity OP II, LP (“OP II”), Revolution I Merger Sub, LLC, a wholly-owned subsidiary of the Company (“Merger Sub I”), REIT I, and Resource Real Estate Opportunity OP, LP (“OP I”), entered into an Agreement and Plan of Merger (the “REIT I Merger Agreement”).

Effective January 28, 2021, REIT I merged with and into Merger Sub I, with Merger Sub I surviving as direct, wholly-owned subsidiary of the Company (the “REIT I Company Merger”) and OP I merged with and into OP II (the “REIT I Partnership Merger” and, together with the REIT I Company Merger, the “REIT I Merger”), with OP II surviving the REIT I Partnership Merger. At such time, the separate existence of REIT I and OP I ceased. At the effective time of the REIT I Company Merger, each issued and outstanding share of REIT I’s common stock (or fraction thereof) converted into the right to receive 1.22423 shares of the Company’s common stock, and each issued and outstanding share of REIT I’s convertible stock converted into the right to receive $0.02 in cash (without interest).

At the effective time of the REIT I Partnership Merger, each common unit of partnership interests in OP I outstanding immediately prior to the effective time of the REIT I Partnership Merger converted into the right to receive 1.22423 common units of partnership interest in OP II and each Series A Cumulative Participating Redeemable Preferred Unit in OP I issued and outstanding immediately prior to the effective time of the REIT I Partnership Merger converted into the right to receive one Series A Cumulative Participating Redeemable Preferred Unit in OP II.

REIT III Merger

On September 8, 2020, the Company, OP II, Revolution III Merger Sub, LLC (“Merger Sub III”), the Company’s wholly-owned subsidiary, REIT III, and Resource Apartment OP III, LP (“OP III”), the operating partnership of REIT III, entered into an Agreement and Plan of Merger (the “REIT III Merger Agreement”).

Effective January 28, 2021, REIT III merged with and into Merger Sub III, with Merger Sub III surviving as its direct, wholly-owned subsidiary (the “REIT III Company Merger”) and (ii) OP III merged with and into OP II (the “REIT III Partnership Merger” and, together with the REIT III Company Merger, the “REIT III Merger”), with OP II surviving the REIT III Partnership Merger. At such time, the separate existence of REIT III and OP III ceased. The REIT I Merger and the REIT III Merger are hereinafter together referred to as the “Merger”.

At the effective time of the REIT III Company Merger, each issued and outstanding share of REIT III’s common stock (or fraction thereof) converted into the right to receive 0.925862 shares of the Company’s common stock. At the effective time of the REIT III Partnership Merger, each common unit of partnership interests in OP III outstanding immediately prior to the effective time of the REIT III Partnership Merger was retired and ceased to exist. In addition, for each share of the Company’s common stock issued in the REIT III Company Merger, a common unit of partnership interest was issued to the Company by OP II. 

F-8

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

COVID-19 Pandemic

One of the most significant risks and uncertainties facing the Company and the real estate industry generally continues to be the effect of the ongoing public health crisis of the novel coronavirus disease (COVID-19) pandemic. The Company continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business, including how the pandemic is impacting its tenants. The Company did not incur significant disruptions from the COVID-19 pandemic during the year ended December 31, 2020; however, a small percentage of its tenants have requested rent deferral as a result of the pandemic. The Company is evaluating each tenant rent relief request on an individual basis, considering a number of factors. Not all tenant requests will ultimately result in modified agreements, nor is the Company forgoing its contractual rights under its lease agreements. Executed short-term rent relief plans that are outstanding at December 31, 2020 are not significant in terms of either number of requests or dollar value.

The extent to which the COVID-19 pandemic impacts the Company’s operations and those of its tenants depends on future developments, which cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures. The Company is unable to predict the ultimate impact that the pandemic will have on its financial condition, results of operations and cash flows due to numerous uncertainties.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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").

F-9

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

Principles of Consolidation

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

Subsidiary	Apartment Complex	Number of Units		Property Location
RRE Opportunity Holdings II, LLC	N/A	N/A		N/A
RRE Opportunity OP II, LP	N/A	N/A		N/A
RRE Oak Hill Holdings, LLC ("Oak Hill")	N/A (1)	N/A		N/A
RRE Bear Creek Holdings, LLC ("Bear Creek")	Adair off Addison	152		Dallas, TX
RRE Buckhead Holdings, LLC ("Buckhead")	Uptown Buckhead	216		Atlanta, GA
RRE Farrington Holdings, LLC ("Farrington")	Crosstown at Chapel Hill	411		Chapel Hill, NC
RRE Mayfair Chateau Holdings, LLC ("Mayfair Chateau")	The Brookwood	274		Homewood, AL
RRE Fairways of Bent Tree Holdings, LLC ("Fairways of Bent Tree")	Adair off Addison Apartment Homes	200		Dallas, TX
RRE Montclair Terrace Holdings, LLC ("Montclair Holdings")	Montclair	188		Portland, OR
RRE Spalding Crossing Holdings, LLC ("Spalding Crossing")	1000 Spalding Crossing	252		Atlanta, GA
RRE Grand Reserve Holdings, LLC ("Grand Reserve")	Grand Reserve	319		Naperville, IL
RRE Canterwood Holdings, LLC ("Canterwood")	Verdant Apartment Homes	216		Boulder, CO
RRE Fox Ridge Holdings, LLC ("Fox Ridge")	Arcadia Apartment Homes	300		Centennial, CO
RRE Riverlodge Holdings, LLC ("Riverlodge")	Ravina Apartment Homes	498		Austin, TX
RRE Breckenridge Holdings, LLC ("Breckenridge")	81 Fifty at West Hills Apartment Homes	357		Portland, OR
RRE Santa Rosa Holdings, LLC ("Santa Rosa")	The Palmer at Las Colinas	476		Irving, TX
RRE Windbrooke Holdings, LLC ("Windbrooke Crossing")	Windbrooke Crossing	236		Buffalo Grove, IL
RRE Woods Holdings, LLC ("The Woods of Burnsville")	The Woods of Burnsville	400		Burnsville, MN
RRE Indigo Creek Holdings, LLC ("Indigo Creek")	Indigo Creek	408		Glendale, AZ
RRE Martin's Point Holdings, LLC ("Martin's Point"	Martin's Point	256		Lombard, IL
			5,159

N/A - Not Applicable

(1) Property was sold on February 28, 2019

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, 2020, the Company had $73.1 million of deposits at various banks, $64.9 million

F-10

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

of which were over the insurance limit of the Federal Deposit Insurance Corporation.  No losses have been experienced on such deposits.

Contractual Obligations

The Company leases equipment under leases with varying expiration dates through 2023. As of December 31, 2020, the total payments due under these obligations were approximately $12,000.

	Payments due by period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Operating Lease Obligations	$	12,000	$	12,000	$	—	$	—	$	—

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:

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

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 of December 31, 2020, the Company's real estate investments located in Texas, Illinois, Colorado, Oregon and Georgia represent approximately 19.5%, 19.0%, 15.6%, 14.1% and 9.0% of the portfolio. This makes it 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

The Company periodically evaluates its long-lived assets, primarily investments in rental properties, for impairment indicators. The review considers factors such as past and expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for permanent impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. 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 would be the adjustment to fair value less the estimated cost to dispose of the asset. 

In conjunction with the Merger and for the Company’s annual estimated value per share calculation, the Company engaged with a third-party to provide the estimated fair value of its rental properties as of January 28, 2021. The Company compared these values to its carrying values and concluded that there was no indication that the carrying value of the Company’s investments in real estate were not recoverable as of December 31, 2020. There were no impairment losses recorded on long lived assets during the years ended December 31, 2020, 2019 and 2018.

F-11

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

Allocation of Purchase Price of Acquired Assets

On January 1, 2018, the Company adopted ASU No. 2017-01, Business Combinations (Topic 805):  Clarifying the Definition of a Business ("ASU No. 2017-01"). Acquisitions that do not meet the definition of a business under this guidance are accounted for as asset acquisitions.  In most cases, the Company believes that acquisitions of real estate will no longer be considered a business combination as in most cases substantially all of the fair value is concentrated in a single identifiable asset or group of tangible assets that are physically attached to each other (land and building).   However, if the Company determines that substantially all of the fair value of the gross assets acquired is not concentrated in either a single identifiable asset or in a group of similar identifiable assets, the screen is not met, and the Company will then perform an assessment to determine whether the set is a business by using the framework outlined in the ASU. If the Company determines that the acquired asset is not a business, the Company will allocate the cost of the acquisition including transaction costs to the assets acquired or liabilities assumed based on their related fair value.

Upon the acquisition of real properties, the Company allocates the purchase price to 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.

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 determined by independent appraisers (e.g., discounted cash flow analysis). Factors to be considered in the analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions and costs to execute similar leases.

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 underlying 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 does amortization periods for the intangible assets exceed the remaining depreciable life of the building.

The determination of the fair value of the assets and liabilities acquired requires the use of significant assumptions with regard to current market rental rates, discount rates and other variables.  The use of inappropriate estimates would result in an incorrect assessment of the fair value of these assets and liabilities, which could impact the Company's reported net income (loss).

Revenue Recognition and Receivables

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, which is accounted for in accordance with ASC

F-12

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

842, Leases (“ASC 842”).The future minimum rental payments to be received from noncancelable operating leases are approximately $42.8 million and $674,775 for the years ending December 31, 2021 and 2022, and none thereafter.

Revenue is primarily derived from the rental of residential housing units for which the Company receives minimum rents and utility reimbursements pursuant to underlying tenant lease agreements. The Company also receives other ancillary fees for administration of leases, late payments, amenities, and revenue sharing arrangements for cable income from contracts with cable providers at the Company's properties (discussed below). A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. The Company records the utility reimbursement income and ancillary charges in the period when the performance obligation is completed, either at a point in time or on a monthly basis as the service is utilized.

The Company has revenue sharing arrangements of cable income from contracts with cable providers at the Company's properties. Included in accrued expenses and other liabilities on the consolidated balance sheets at December 31, 2020 and 2019 is a contract liability related to deferred revenue from contracts with cable providers of approximately $499,000 and $573,000, respectively. The Company recognizes income from these contracts on a straight line basis over the contract period of 10 years to 12 years. During the years ended December 31, 2020 and 2019, approximately $102,000 and $138,000, respectively of revenue from the contract liability was recognized as income.

The Company evaluates its portfolio of operating leases for collectability at both the onset of the underlying leases and on an ongoing basis. Tenant receivables include amounts for which collectability was assessed as probable in accordance with the guidance in ASC 842-30. For tenant receivables, which include base rents, straight-line rentals, expense reimbursements and other revenue or income, the Company also estimates a general allowance for uncollectible accounts under ASC 450-20. The Company determines the collectability of its receivables related to rental revenue by considering a number of factors, including the length of time receivables are past due, security deposits held, the Company’s previous loss history, the tenants’ current ability to pay their obligations to the Company, and the condition of the general economy and the industry as a whole. If collectability is not probable, the Company adjusts rental income for the amount of the uncollectible revenue.

Due to the COVID-19 pandemic, some residents have experienced difficulty making rent payments and the Company’s receivables have increased compared to historical levels.  This caused the Company to further evaluate collectability during the year ended December 31, 2020. During the years ended December 31, 2020 and 2019, the Company recorded approximately $333,000 and $44,000, respectively, of provisions for bad debts to appropriately reflect management’s estimate for uncollectible accounts. The provision for bad debts was recorded as a reduction to rental income in the Company’s consolidated statements of operations and comprehensive loss. The age of the receivables included in the allowance balance at December 31, 2020 was: 21.9% less than 30 days past due, 20.8% 31-60 days past due, 1.3% 61-90 days past due and 56.0% over 90 days past due.

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.

F-13

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

The Company may elect to treat certain of its subsidiaries as taxable REIT subsidiaries (“TRS”). In general, a TRS may hold assets and engage in activities that the Company cannot hold or engage in directly and generally may engage in any real estate or non-real estate-related business.  A TRS is subject to U.S. federal, state and local corporate income taxes. 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, 2020 and2019, the Company did not treat any of its subsidiaries as a TRS.

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

The Company is subject to examination by the U.S. Internal Revenue Service and by the taxing authorities in other states in which the Company has significant business operations. The Company is not currently undergoing any examinations by taxing authorities. The Company is not subject to IRS examination for the tax return years 2016 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 share is computed by dividing income (loss) 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 50,000 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, 2020 (were such date to represent the end of the contingency period).  For the year ended December 31, 2020 and 2019, 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.

Reclassifications

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

Adoption of New Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, “Financial Instruments - Credit Losses”, which requires measurement and recognition of expected credit losses for financial assets held. On January 1, 2020, the Company adopted ASU No. 2016-13 and the adoption did not have a significant impact on its consolidated financial statements and disclosures.  

In August 2018, FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” This update removes, modifies and adds certain disclosure requirements in FASB ASC 820, “Fair Value Measurement” (“ASC 820”). The Company adopted the standard on January 1, 2020, and the adoption did not have a significant impact on its consolidated financial statements due to the fact there were no required changes to the Company’s disclosures.

In November 2018, FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” ASU No. 2018-19 clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842, Leases. The Company early adopted the standard on January 1, 2020, and the adoption did not have a significant impact on its consolidated financial statements and disclosures.

In March 2020, FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848).” ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through

F-14

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

December 31, 2022. During the year ended December 31, 2020, the Company has elected to apply the hedgeaccounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows toassume that the index upon which future hedged transactions will be based matches the index on the correspondingderivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. TheCompany continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changesin the market occur.

In April 2020, FASB issued a Staff Q&A to respond to some frequently asked questions about accounting for lease concessions related to the effects of the COVID-19 pandemic. Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each lease to determine whether enforceable rights and obligations for concessions exist in the lease and can elect to apply or not apply the lease modification guidance to those leases. Entities may make the elections for any lessor-provided concessions related to the effects of the COVID-19 pandemic (e.g., deferrals of lease payments) as long as the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee.The Company has not elected to apply the lease modification guidance to our leases. To date, the impact of lease concessions granted has not had a material effect on the financial statements. The Company will continue to evaluate the impact of lease concessions and the appropriate accounting for those concessions.

Accounting Standards Issued But Not Yet Effective

In August 2020, FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”. ASU 2020-06 addresses the complexity of guidance for certain financial (convertible) instruments with characteristics of liabilities and equity. ASU No. 2020-06 will be effective for the Company beginning January 1, 2022. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU No. 2020-06 to have a material effect on its consolidated financial statements and disclosures due to the fact that the Company did not have instruments subject to this guidance at December 31, 2020.

NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION

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

	Years Ended
	December 31,
	2020		2019		2018
Non-cash financing and investing activities:
Distributions on common stock declared but not yet paid	$	—	$	5,993	$	8,878
Stock issued pursuant to distribution reinvestment plan		3,131		14,724		20,693
Accruals for construction in process		447		1,955		424
Repayments on borrowings through refinancing		98,694		24,469		72,845
Escrow deposits funded through refinancing		3,993		580		—
Deferred financing costs, interest, and fees funded through refinancing		2,852		—		—
Non-cash activity related to sales:
Mortgage notes payable settled directly with proceeds from sale of rental property		—		29,497		—
Cash paid during the period for:
Interest	$	18,285	$	24,930	$	25,508

F-15

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

NOTE 4 - RESTRICTED CASH

Restricted cash represents escrow deposits with lenders to be used to pay real estate taxes, insurance, capital improvements, and other. A summary of the components of restricted cash follows (in thousands):

	December 31, 2020		December 31, 2019
Real estate taxes	$	3,823	$	3,956
Insurance		824		877
Capital improvements		1,570		1,380
Other		3,258		321
Total	$	9,475	$	6,534
Unrestricted cash designated for capital expenditures	$	14,431	$	21,706

NOTE 5 - RENTAL PROPERTIES, NET

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

	December 31, 2020			December 31, 2019
Land	$	119,028		$	119,028
Building and improvements		726,037			720,420
Furniture, fixtures and equipment		26,205			25,906
Construction in progress		1,127			1,955
		872,397			867,309
Less: accumulated depreciation		(171,492	)		(131,779	)
	$	700,905		$	735,530

Depreciation expense for the years ended December 31, 2020, 2019, and 2018 was $40.2 million, $39.6 million, and $40.6 million, respectively.

NOTE 6 – DISPOSITION OF PROPERTY

The Company disposed of one property during the year ended December 31, 2019. There were no dispositions during the years ended December 31, 2020 or 2018. The following table presents details of the Company’s disposition activity during the year ended December 31, 2019 (in thousands):

Multifamily Community	Location	Sale Date	Contract Sales Price		Net Gain on Disposition		Revenue Attributable to Property Sold		Net Loss to Property Sold (1)
Overton Trails	Fort Worth, Texas	February 28, 2019	$	64,000	$	20,619	$	1,143	$	(249	)

(1) Excludes net gain on disposition

F-16

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

NOTE 7 - IDENTIFIED INTANGIBLE ASSETS, NET

Identified intangible assets, net, consist of in-place rental leases. The gross value of acquired in-place leases totaled $17.3 million as of both December 31, 2020 and 2019, which was reported net of accumulated amortization of $17.3 million. For the year ended December 31, 2018, amortization expense was $813,000. Intangible assets were fully amortized as of both December 31, 2020 and 2019.

NOTE 8 - MORTGAGE NOTES PAYABLE, NET

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

	December 31, 2020									December 31, 2019
Collateral	Outstanding borrowings		Premium, net		Deferred Financing Costs, net			Carrying Value		Outstanding borrowings		Premium, net		Deferred Financing Costs, net			Carrying Value
Uptown Buckhead	$	18,876	$	—	$	(144	)	$	18,732	$	19,264	$	—	$	(178	)	$	19,086
Crosstown at Chapel Hill		42,650		—		(264	)		42,386		42,650		—		(325	)		42,325
The Brookwood - Key Bank		16,632		83		(39	)		16,676		17,063		186		(88	)		17,161
The Brookwood - Capital One		2,517		6		(7	)		2,516		2,566		14		(15	)		2,565
Adair off Addison and Adair off Addison Apartment Homes		33,210		—		(317	)		32,893		33,210		—		(380	)		32,830
1000 Spalding Crossing		35,035		—		(329	)		34,706		23,737		—		(113	)		23,624
Montclair Terrace		19,479		—		(127	)		19,352		19,958		—		(182	)		19,776
Grand Reserve		47,845		—		(473	)		47,372		47,845		—		(539	)		47,306
Verdant Apartment Homes		47,146		—		(372	)		46,774		36,913		—		(178	)		36,735
Arcadia Apartment Homes		56,810		—		(494	)		56,316		39,782		—		(195	)		39,587
Ravina Apartment Homes		25,506		—		(93	)		25,413		26,241		—		(165	)		26,076
81 Fifty at West Hills Apartment Homes		50,708		—		(260	)		50,448		51,833		—		(368	)		51,465
The Palmer at Las Colinas		45,700		—		(370	)		45,330		45,700		—		(437	)		45,263
Windbrooke Crossing		36,437		—		(202	)		36,235		37,222		—		(272	)		36,950
Woods of Burnsville		36,918		—		(265	)		36,653		37,744		—		(355	)		37,389
Indigo Creek		39,498		—		(243	)		39,255		40,402		—		(320	)		40,082
Martin's Point		29,283		—		(226	)		29,057		29,944		—		(289	)		29,655
	$	584,250	$	89	$	(4,225	)	$	580,114	$	552,074	$	200	$	(4,399	)	$	547,875

F-17

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

The following table presents additional information about the Company's mortgage notes payable, net (in thousands, except percentages):

	Maturity Date	Margin over LIBOR			Annual Interest Rate			Average Monthly Debt  Service		Average Monthly Escrow
Uptown Buckhead	7/1/2025		2.22	%		2.36	%	$	70	$	55	(1)(3)(5)(9)
Crosstown at Chapel Hill	7/1/2025		1.77	%		1.91	%		106		68	(1)(3)(4)
The Brookwood - Key Bank	11/1/2021		—			4.73	%		104		66	(2)(6)
The Brookwood - Capital One	11/1/2021		—			5.40	%		16		—	(2)(6)
Adair off Addison and Adair off Addison Apartment Homes	5/1/2026		1.64	%		1.78	%		91		74	(1)(3)(4)(7)(9)
1000 Spalding Crossing	12/1/2027		—			2.51	%		74		60	(2)(4)(8)
Montclair Terrace	6/1/2023		2.45	%		2.59	%		80		30	(1)(3)(6)(9)
Grand Reserve	5/1/2028		1.72	%		1.86	%		76		184	(1)(3)(4)
Verdant Apartment Homes	12/1/2027		—			2.57	%		102		40	(2)(4)(8)
Arcadia Apartment Homes	12/1/2027		—			2.57	%		123		43	(2)(4)(8)
Ravina Apartment Homes	5/1/2022		—			3.76	%		144		148	(2)(6)
81 Fifty at West Hills Apartment Homes	7/1/2023		2.36	%		2.50	%		205		58	(1)(3)(6)(9)
The Palmer at Las Colinas	9/1/2026		2.11	%		2.25	%		104		156	(1)(3)(4)(9)
Windbrooke Crossing	1/1/2024		2.69	%		2.83	%		154		180	(1)(3)(6)
Woods of Burnsville	2/1/2024		2.13	%		2.27	%		145		95	(1)(3)(6)
Indigo Creek	5/1/2024		1.93	%		2.07	%		127		59	(1)(3)(6)
Martin's Point	11/1/2024		1.86	%		2.00	%		111		78	(1)(3)(6)

(1) Variable rate based on one-month LIBOR of 0.14388% (as of December 31, 2020) plus a fixed margin

(2) Fixed rate

(3) Variable rate hedged with interest rate cap cash flow hedge

(4) Monthly interest-only payment currently required

(5) Monthly fixed principal plus interest payment required

(6) Fixed monthly payment of principal and interest payment required

(7) Originated during the year ended December 31, 2019 through refinancing

(8) Originated during the year ended December 31, 2020 through refinancing

(9) Loan refinanced with new credit facility in January 2021

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 mortgage loans using the effective interest method. As of December 31, 2020, the net unamortized mortgage premium of $89,307 was included as a component of mortgage loans payable in the accompanying consolidated balance sheets.

As of December 31, 2020, the weighted average interest rate of all the Company’s outstanding indebtedness was 2.44% 

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, 2020 and 2019, the Company had $9.5 million and $6.5 million of restricted cash related to escrow deposits held by mortgage lenders for real estate taxes, insurance and capital reserves (see Note 4).

F-18

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

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):

2021	$	26,486
2022		33,110
2023		75,024
2024		136,526
2025		59,722
Thereafter		253,382
	$	584,250

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 these exceptions under 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 the lender, failure to pay water, sewer and other public assessments or charges, failure to pay environmental compliance costs or to deliver books and records, in each case as required in the loan documents. The exceptions also require the Company to guarantee payment of audit costs, lender’s enforcement of its rights under the loan documents and payment of the loan if the borrower voluntarily files for bankruptcy or seeks reorganization, or if a related party of the borrower does so with respect to the subsidiary.

The Company refinanced the loans on 1000 Spalding Crossing, Verdant Apartment Homes, and Arcadia Apartment Homes during the year ended December 31, 2020. The new loans for in the amounts of $35.0 million, $47.1 million and $56.8 million, respectively, and all three loans mature on December 1, 2027. Loss on extinguishment of debt of approximately $65,000, $132,000, and $145,000, respectively, was included in interest expense on the consolidated statement of operations for the year ended December 31, 2020. Prepayment penalties of approximately $233,000, $363,000, and $391,000, respectively, was included in interest expense on the consolidated statement of operations for the year ended December 31, 2020.

Deferred financing costs incurred to obtain financing are amortized over the term of the related debt. As of December 31, 2020 and 2019, accumulated amortization of deferred financing costs was $3.7 million and $3.4 million respectively.  Amortization of deferred financing costs for the next five years ending December 31, and thereafter, are as follows (in thousands):

2021	$	1,035
2022		927
2023		807
2024		527
2025		398
Thereafter		531
	$	4,225

F-19

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

NOTE 9 – ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents the changes in accumulated other comprehensive loss for the years ended December 31, 2020, 2019 and 2018 (in thousands):

	Net unrealized (loss) gain on derivatives
Balance, January 1, 2018	$	(444	)
Reclassification adjustment for realized loss on designated derivatives		130
Unrealized loss on designated derivatives		(65	)
Balance, December 31, 2018		(379	)
Reclassification adjustment for realized loss on designated derivatives		268
Unrealized loss on designated derivatives		(78	)
Balance, December 31, 2019		(189	)
Reclassification adjustment for realized loss on designated derivatives		95
Unrealized loss on designated derivatives		(137	)
Balance, December 31, 2020	$	(231	)

NOTE 10 – RELATED PARTY TRANSACTIONS

Relationship with the Advisor

Prior to the Self-Management Transaction on September 8, 2020, the Company was externally managed and the Advisor was an indirect wholly-owned subsidiary of RAI. After the Self-Management Transaction, the Advisor became an indirect wholly-owned subsidiary of OP I, the operating partnership of REIT I. As a result of the REIT I Merger on January 28, 2021, the Company no longer has an external advisor.  See Note 16, Subsequent Events, for additional details.

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 is 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 REIT I, our sponsor following the Self-Management Transaction, 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.

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. As a result of the REIT I Merger on January 28, 2021, these fees are now eliminated:

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. Pursuant to the Advisory Agreement, the Advisor agreed to waive an acquisition fee and debt financing fee in connection with the REIT III Merger.  No such waiver was sought with respect to the REIT I Merger because, if owed, it would be paid with OP II funds to an entity that would then be wholly-owned by OP II.

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.

F-20

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

Disposition fees. The Advisor earns a disposition fee in connection with of the sale of a property equal to the lesser of (i) one-half of the aggregate brokerage commission paid, or if none is paid, the amount that customarily would be paid at a market rate or (ii) 2.0% of the contract sales price.

Debt financing fees. The Advisor earns a debt financing fee equal to 0.5% of the amount available under any debt financing obtained. As described above, the Advisor has waived any debt financing fee in connection with the REIT III Merger.

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 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

Prior to the Self-Management Transaction on September 8, 2020, RAI and C-III were related parties of the Company.

Property loss pool:  The Company participates (with other properties directly or indirectly managed by RAI and C-III) in a catastrophic insurance policy, which covers claims up to $250 million, after either a $25,000 or $100,000 deductible per incident, depending on location and/or type of loss. Therefore, unforeseen or catastrophic losses in excess of the Company's insured limits could have a material adverse effect on the Company's financial condition and operating results. This policy will expire on March 1, 2021.

General liability coverage:  The Company (with other properties directly managed by RAI) has an insured and dedicated limit for the general liability policy of $1.0 million per occurrence. Total claims are limited to $2.0 million per premium year. In excess of these limits, the Company participates (with other properties directly or indirectly managed by RAI and C-III) in a $50.0 million per occurrence excess liability program. Therefore, the total insured limit per occurrence is $51.0 million for the general and excess liability program, after a $25,000 deductible per incident. This policy will expire on March 1, 2021.

Internal audit fees. REIT I performs internal audit services for the Company.  Prior to the Self-Management Transaction, RAI performed internal audit services for the Company.

Directors and officers insurance: The Company participates in a liability insurance program for directors and officers coverage with REIT I and REIT III.  Prior to the Self-Management Transaction, the Company participated in a liability insurance program for directors and officers’ coverage with other C-III managed entities and subsidiaries.

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 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. Prior to the Self-Management Transaction on September 8, 2020, the Manager was an indirect wholly-owned subsidiary of RAI. After the Self-Management Transaction, the Manager is an indirect wholly-owned subsidiary of Resource Real Estate Opportunity OP, LP.  See Note 16, Subsequent Events, for additional details.  As a result of the REIT I Merger on January 28, 2021, these fees are now eliminated:

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. The Manager subcontracts certain services to an unaffiliated third-party and pays for those services from its property management fee.  After the REIT I Merger on January 28, 2021, the Company continues to subcontract certain services from the same unaffiliated third-party.

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.

F-21

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

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, 2020, 2019 and 2018.

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

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

	December 31, 2020		December 31, 2019
Due from related parties:
RAI - self-insurance funds held	$	—	$	33
Operating expense reimbursements		—		264
		—	$	297
Due to related parties:
Advisor:
Operating expense reimbursements		1,588		6
Manager:
Property management fees		327		328
Operating expense reimbursements		—		96
Properties
Meridian		—		2
	$	1,915	$	432

F-22

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

	Years Ended
	December 31,
	2020		2019		2018
Fees earned / expenses incurred:
Advisor
Asset management fees (1)(6)(7)	$	9,081	$	9,374	$	9,840
Debt financing fees (2)(11)		184		39		78
Disposition fees (3)		—		274		—
Operating expense reimbursements (4)(9)		3,902		3,462		3,708
Internal audit (10)		106		—		—
Manager
Property management fees (1)(8)	$	3,813	$	3,834	$	3,888
Construction management fees (5)		352		255		859
Construction payroll reimbursements (5)		—		63		121
Operating expense reimbursements (4)		—		70		201

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

(2) Included in Mortgage notes payable, net on the consolidated balance sheets.

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

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

(5) Capitalized and included in Rental properties, net on the consolidated balance sheets.

(6) Net with acquisition fees returned as a result of capital expense reallocation.

(7) After the Self-Management Transaction on September 8, 2020, $2.9 million of this balance was earned by OP I.

(8) After the Self-Management Transaction on September 8, 2020, $1.2 million of this balance was earned by OP I.

(9) After the Self-Management Transaction on September 8, 2020, $1.5 million of this balance was earned by OP I.

(10) After the Self-Management Transaction on September 8, 2020, approximately $33,000 of this balance was earned by OP I.

(11) After the Self-Management Transaction on September 8, 2020, approximately $184,000 of this balance was earned by OP I.

NOTE 11 – 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 both December 31, 2020 and 2019, no shares of preferred stock were issued or outstanding.

Convertible Stock

As of December 31, 2020, 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:

(A) the lesser of

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

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

F-23

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

(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

(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.

As of December 31, 2020, no Triggering Events had occurred or were probable to occur.

Common Stock

As of December 31, 2020, the Company had an aggregate of 60,026,513 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):

	Shares			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		10,197,726			88,479
Advisor's initial investment, net of 5,000 share conversion		15,000			150
Total		66,250,388		$	644,826
Shares redeemed and retired		(6,223,875	)
Total shares outstanding		60,026,513

Redemptions

During the year ended December 31, 2020, the Company redeemed shares of common stock as follows (in thousands, except per share data):

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 2020		—		—		—	(2)
February 2020		—		—		—	(2)
March 2020	140		$	8.77	140		(2)
April 2020		—		—		—	(2)
May 2020		—		—		—	(2)
June 2020		120	$	9.08		260	(2)
July 2020		—		—		—	(2)
August 2020		—		—		—	(2)
September 2020		—		—		—	(2)
October 2020		—		—		—	(2)
November 2020		—		—		—	(2)
December 2020		179	$	9.08		439	(2)

(1) All purchases of equity securities by the Company in the year ended December 31, 2020 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.

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.

F-24

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

Effective November 22, 2020, the share redemption program was suspended except for redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility (collectively, “special redemptions”). On September 8, 2020, the share redemption program was fully suspended in connection with signing the merger agreements with respect to the REIT I Merger and the REIT III Merger and subsequently resumed with respect to special redemptions on October 22, 2020.  While the partial suspension of the share redemption program is in effect, the Company will only accept requests for redemption in connection with a special redemption and all other pending or new requests will not be honored or retained, butwill be cancelled with the ability to resubmit when, if ever, the share redemption program is fully resumed.

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, 2020, the Company paid aggregate distributions of $6.0 million including $2.9 million of distributions paid in cash and $3.1 million of distributions reinvested in shares of common stock through the Company's distribution reinvestment plan, as follows (in thousands):

Authorization Date	Per Common Share		Record Dates	Distribution Date	Distributions reinvested in shares of Common Stock		Net Cash Distributions		Total Aggregate Distributions
December 11, 2019	$	0.001095890	December 31, 2019 through January 30, 2020	January 31, 2020	$	1,074	$	968	$	2,042
December 11, 2019	$	0.001095890	January 31, 2020 through February 27, 2020	February 28, 2020		965		883		1,848
December 11, 2019	$	0.001095890	February 28, 2020 through March 30, 2020	March 31, 2020		1,092		1,022		2,114
					$	3,131	$	2,873	$	6,004

The Company announced on March 30, 2020 that it was suspending distributions as of April 1, 2020 in order to preserve cash and offset any impact to the Company’s liquidity that may occur as a result of the impact of the COVID-19 pandemic on its operations.

The following is a reconciliation of total aggregate distributions paid to total distributions declared for the year ended December 31, 2020 (in thousands):

Total aggregate distributions paid	$	6,004
Less: distribution payable at December 31, 2019		(5,993	)
Add: distribution payable at December 31, 2020		—
True-up of prior year cash distributions declared	$	11

Distributions are payable in cash or reinvested in shares of common stock at the discretion of the shareholder.

F-25

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

NOTE 12 - 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) which are reported at fair value in the consolidated balance sheets are valued by a third-party pricing agent using an income approach with models that use, as their primary inputs, readily observable market parameters. This valuation process considers factors including interest rate yield curves, time value, credit and volatility factors. (Level 2)

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

	Level 1		Level 2		Level 3		Total
December 31, 2020
Assets:
Interest rate caps	$	—	$	25	$	—	$	25
	$	—	$	25	$	—	$	25
December 31, 2019
Assets:
Interest rate caps	$	—	$	9	$	—	$	9
	$	—	$	9	$	—	$	9

Interest rate caps 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):

	December 31, 2020				December 31, 2019
	Outstanding Balance		Estimated Fair Value		Outstanding Balance		Estimated Fair Value
Mortgage notes payable	$	584,250	$	576,693	$	552,074	$	545,249

F-26

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

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).

NOTE 13 - 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, 2020, 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.

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 $83,099 will be reclassified as an increase to interest expense.

As of December 31, 2020, the Company had the following outstanding interest rate derivatives (dollars in thousands):

Interest Rate Derivative	Number of Instruments	Notional		Maturity Dates
Interest rate caps	11	$	405,264	July 1, 2021 through September 1, 2024

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, 2020 and 2019 (in thousands):

Asset Derivatives

Liabilities Derivatives

December 31, 2020

December 31, 2019

December 31, 2020

December 31, 2019

Balance Sheet

Fair Value

Balance Sheet

Fair Value

Balance Sheet

Fair Value

Balance Sheet

Fair Value

Interest rate caps

$

25

Interest rate caps

$

9

—

$

—

—

$

—

F-27

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

Interest rate caps 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, 2020 and 2019 (in thousands):

	December 31, 2020		December 31, 2019				December 31, 2020			December 31, 2019
Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivative for the Years Ended					Location of Loss Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Loss Reclassified from Accumulated OCI into Income for the Years Ended
Interest rate caps	$	137	$	(95	)	Interest expense	$	(95	)	$	(285	)

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, 2020, the Company has not posted any collateral related to these agreements.

NOTE 14 - 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 fiscal quarters ended December 31, 2020 exceeded the charter-imposed limitation; however, the conflicts committee of the Company's board of directors determined that the relationship of the Company's operating expenses to its average invested assets was justified for these periods given the non-recurring nature of the expenses incurred during the year ended December 31, 2020 in connection with the mergers with REIT I and REIT III.

F-28

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

NOTE 15 – QUARTERLY FINANCIAL DATA (UNAUDITED)

The following tables present the Company's operating results by quarter (in thousands, except share data):

Quarterly Results for 2020	March 31			June 30			September 30			December 30
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues	$	21,407		$	21,353		$	21,411		$	21,639
Net loss	$	(7,926	)	$	(6,863	)	$	(9,369	)	$	(9,066	)
Basic and diluted net loss per common share	$	(0.13	)	$	(0.11	)	$	(0.16	)	$	(0.15	)
Quarterly Results for 2019	March 31			June 30			September 30			December 30
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues	$	21,959		$	21,222		$	21,312		$	21,188
Net income (loss)	$	11,697		$	(8,109	)	$	(8,688	)	$	(6,844	)
Basic and diluted net income (loss) per common share	$	0.19		$	(0.13	)	$	(0.14	)	$	(0.12	)

NOTE 16 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the filing of this report and determined that there have not been any events that have occurred that would require adjustments to or disclosures in the consolidated financial statements, except for the following:

Mergers with Resource Real Estate Opportunity REIT, Inc. and Resource Apartment REIT III, Inc.

On September 8, 2020, the Company entered into merger agreements (as described herein) to acquire each of REIT I and REIT III in stock-for-stock transactions whereby each of REIT I and REIT III were to be merged into its wholly owned subsidiary. Each of the Mergers was intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended.  The Mergers were effective as of January 28, 2021 and upon consummation of the Mergers, the Company owns 51 properties in 15 states, comprising a total of 14,995 multifamily units.

REIT I Merger

On September 8, 2020, the Company, OP II, Revolution I Merger Sub, LLC, a wholly-owned subsidiary of the Company (“Merger Sub I”), REIT I, and OP I, entered into an Agreement and Plan of Merger (the “REIT I Merger Agreement”).

Effective January 28, 2021, REIT I merged with and into Merger Sub I, with Merger Sub I surviving as direct, wholly-owned subsidiary (the “REIT I Company Merger”) and OP I merged with and into OP II (the “REIT I Partnership Merger” and, together with the REIT I Company Merger, the “REIT I Merger”), with OP II surviving the REIT I Partnership Merger. At such time, the separate existence of REIT I and OP I ceased.

At the effective time of the REIT I Company Merger, each issued and outstanding share of REIT I’s common stock (or fraction thereof) converted into the right to receive 1.22423 shares of the Company’s common stock, and each issued and outstanding share of REIT I’s convertible stock converted into the right to receive $0.02 in cash (without interest).

At the effective time of the REIT I Partnership Merger, each common unit of partnership interests in OP I outstanding immediately prior to the effective time of the REIT I Partnership Merger converted into the right to receive 1.22423 common units of partnership interest in OP II and each Series A Cumulative Participating Redeemable Preferred Unit in OP I issued and

F-29

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

outstanding immediately prior to the effective time of the REIT I Partnership Merger converted into the right to receive one Series A Cumulative Participating Redeemable Preferred Unit in OP II.

REIT III Merger

On September 8, 2020, the Company, OP II, Revolution III Merger Sub, LLC (“Merger Sub III”), the Company’s wholly-owned subsidiary, REIT III, and Resource Apartment OP III, LP (“OP III”), the operating partnership of REIT III, entered into an Agreement and Plan of Merger (the “REIT III Merger Agreement”).

Effective January 28, 2021, REIT III merged with and into Merger Sub III, with Merger Sub III surviving as its direct, wholly-owned subsidiary (the “REIT III Company Merger”) and (ii) OP III merged with and into OP II (the “REIT III Partnership Merger” and, together with the REIT III Company Merger, the “REIT III Merger”), with OP II surviving the REIT III Partnership Merger. At such time, the separate existence of REIT III and OP III ceased. The REIT I Merger and the REIT III Merger are hereinafter together referred to as the “Merger”.

At the effective time of the REIT III Company Merger, each issued and outstanding share of REIT III’s common stock (or fraction thereof) converted into the right to receive 0.925862 shares of the Company’s common stock.

At the effective time of the REIT III Partnership Merger, each unit of partnership interests in OP III outstanding immediately prior to the effective time of the REIT III Partnership Merger was retired and ceased to exist. In addition, for each share of the Company’s common stock issued in the REIT III Company Merger, a common partnership unit was issued to the Company by OP II. 

Employment Agreements

In connection with the REIT I Merger, the Company assumed from REIT I, the employment agreements dated September 8, 2020 for the following executive officers: Alan F. Feldman, Chief Executive Officer and President, Thomas C. Elliott, Executive Vice President, Chief Financial Officer and Treasurer, and Michele (“Shelle”) R. Weisbaum, Senior Vice President and Chief Legal Officer. The Company assumed REIT I’s obligations under the employment agreements in their entirety. Information about the REIT I employment agreements is included under Item 5.02 in the Current Report on Form 8-K for REIT I as filed with the SEC on September 11, 2020.  In addition, the employment agreements for Messrs. Feldman and Elliott and Ms. Weisbaum were filed as exhibits to the Current Report on Form 8-K filed by the Company on January 29, 2021.

Long-Term Incentive Plan

As of the effective time of the REIT I Merger, the Company assumed the 2020 Long-Term Incentive Plan of REIT I as amended to replace all references to REIT I to the Company.  In addition, upon the effective time of the REIT I Merger, the shares of restricted stock of REIT I granted to Alan F. Feldman, Thomas C. Elliott, Steven R. Saltzman and Michele R. Weisbaum under the 2020 Long-Term Incentive Plan of REIT I were cancelled and converted into the right to receive 1.22423 shares of the Company’s common stock. Each such share of common stock issued has, and is subject to, the same terms and conditions (including with respect to vesting) set forth in the 2020 Long-Term Incentive Plan of REIT I (which has been assumed and adopted by the Company as its own) and the related restricted stock agreements as in effect immediately prior to the REIT I Merger. The terms of the restricted stock are described under Item 5.02 in the Current Report on Form 8-K for REIT I as filed with the SEC on September 11, 2020. In addition, a copy of the form of restricted stock agreement (time based) is filed as an exhibit to the Company’s Current Report on Form 8-K filed by the Company on January 29, 2021 and a copy of the form of restricted stock agreement (performance based) is filed as an exhibit to the Company’s Current Report on Form 8-K filed by the Company on February 23, 2021. The compensation committee of the board of directors granted time-based and performance-based equity incentive awards to employees of The Company, including its executive officers effective February 17, 2021.

Structured Credit Facility Transaction

On January 28, 2021, subsidiaries of the Company (collectively, “Borrower”) entered into a structured credit facility transaction with CBRE Multifamily Capital, Inc. for delivery of loans and/or advances to Fannie Mae (the “Facility”) for a term of 15 years (the “Facility Termination Date”). Pursuant to the terms of the loan documents for the Facility, the lender agreed to make fixed advances and variable advances to Borrower during the term of the Facility provided that Borrower satisfies certain customary conditions as set forth in the Facility loan documents (the “Loan Documents”), including debt service coverage tests

F-30

RESOURCE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2020

and loan-to-value tests. The fixed advances in the Facility may have terms not less than five or more than 15 years from the closing of such advance and variable advances in the Facility may have terms not less than five or more than 10 years from the closing of such advance. All advances must have maturity dates that do not exceed the Facility Termination Date. Borrower has the option to convert variable advances to fixed advances beginning on the first day of the second year of the variable advance term and ending seven years prior to the Facility Termination Date, subject to the satisfaction of customary requirements set forth in the Loan Documents.

The Facility is non-recourse to the Borrower except for the customary exceptions to non-recourse provisions of the Loan Documents (“carve-outs”). The Borrower’s obligations for the carve-outs are guaranteed solely by the Borrowers. The Company is the key principal under the Facility and as such must continue to indirectly own an interest in each Borrower and is subject to certain transfer restrictions with respect to its ownership interest in each Borrower as provided in the Loan Documents. In addition, the Facility contains customary representations and warranties, financial and other covenants, events of default and remedies typical for this type of facility.

The initial advance of $495.2 million under the Facility occurred on January 28, 2021 and is secured by mortgages on the following twelve multifamily properties located in Arizona, Colorado, Georgia, Oregon and Texas: Estates at Johns Creek, Heritage Pointe, Providence in the Park, South Lamar Village, Verona Apartments, Westside, 81 Fifty at West Hills, Adair off Addison I & II, Montclair Terrace, Palmer at Las Colinas, and Uptown Buckhead. The mortgages contain cross-collateralization and cross-default provisions so a default on a single property could affect multiple properties securing the Facility. The proceeds from the initial advance were used to refinance or pay off $462.0 million of the Borrower’s debt. Additional information about the initial advance is as follows:

Advance	Loan Amount	Term (years)	Interest Only	Total Rate	Payments
Fixed Advance 1	$      235,205,000	10	Yes	2.79%	Monthly
Fixed Advance 2	$      235,205,000	7	Yes	2.62%	Monthly
Variable Advance 1	$        24,760,000	10	Yes	2.15%	Monthly

Amended and Restated Share Redemption Program

On February 3, 2021, the Board of Directors of the Company (the “Board’) adopted the Fifth Amended and Restated Share Redemption Program (the “Amended SRP”) pursuant to which, subject to significant conditions and limitations of the program, stockholders can have their shares repurchased by the Company. The Amended SRP provides that redemptions will continue to be made quarterly but in an amount not to exceed proceeds from the sale of shares in the DRP in the immediately preceding calendar quarter; provided that, for any quarter in which no DRP proceeds are available, the funding limitation for the quarter will be set by the Board upon ten business days’ notice to stockholders. As there were no DRP proceeds for the fourth quarter of 2020, the Board has set the funding limitation for redemptions in the first quarter of 2021 at $2.0 million.  Additional changes to the share redemption program in the Amended SRP clarify the timing of redemption procedures.  The share redemption program remains suspended except with respect to redemptions sought up on a stockholder’s death, disability, or confinement to a long-term care facility (each as defined in the Amended SRP).

Distributions Declared

On February 3, 2021, the Board authorized a quarterly distribution for the first quarter of 2021 in the amount of $0.07 per share of common stock to stockholders of record as of the close of business on March 30, 2021, which the Company expects to pay on March 31, 2021. Investors may choose to receive cash distributions or purchase additional shares through the DRP.

F-31

RESOURCE REIT, INC.

SCHEDULE III

Real Estate and Accumulated Depreciation

December 31, 2020

(in thousands)

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	$	—	$	9,149	$	3,402	$	12,551	$	(4,655	)	1980	6/4/2014
Dallas, Texas
Residential		18,876		31,856		5,114		36,970		(8,990	)	1989	3/30/2015
Atlanta, Georgia
Residential		42,650		45,653		8,415		54,068		(13,715	)	1990	5/19/2015
Chapel Hill, North Carolina
Residential		19,149		30,003		7,420		37,423		(9,388	)	1968	8/21/2015
Homewood, Alabama
Residential		33,210		20,667		3,349		24,016		(6,077	)	1979	8/27/2015
Dallas, Texas
Residential		35,035		40,194		5,268		45,462		(10,415	)	1995	9/24/2015
Atlanta Georgia
Residential		19,479		32,130		3,789		35,919		(7,555	)	2004	10/29/2015
Portland, Oregon
Residential		47,845		66,213		6,051		72,264		(14,648	)	1991	12/18/2015
Naperville, Illinois
Residential		47,146		64,181		4,373		68,554		(11,072	)	1997	12/18/2015
Boulder, Colorado
Residential		56,810		59,059		5,938		64,997		(12,807	)	1984	1/22/2016
Centennial, Colorado
Residential		25,506		55,466		7,338		62,804		(13,807	)	2001	3/23/2016
Austin, Texas
Residential		50,708		80,155		6,024		86,179		(15,510	)	1985	5/17/2016
Portland, Oregon
Residential		45,700		68,454		8,216		76,670		(14,948	)	1991	6/28/2016
Irving, Texas
Residential		36,437		47,817		1,509		49,326		(7,320	)	1986	12/22/2016
Buffalo Grove, Illinois
Residential		36,918		49,775		1,695		51,470		(8,494	)	1984	12/23/2016
Burnsville, Minnesota
Residential		39,498		54,057		1,740		55,797		(7,876	)	1998	4/4/2017
Glendale, Arizona
Residential		29,283		37,205		722		37,927		(4,215	)	1989	10/31/2017
Lombard, Illinois
	$	584,250	$	792,034	$	80,363	$	872,397	$	(171,492	)

F-32

RESOURCE REIT, INC.

SCHEDULE III

Real Estate and Accumulated Depreciation

December 31, 2020

(in thousands)

	Years Ended December 31,
	2020			2019			2018
Investments in real estate:
Balance at beginning of the year	$	867,309		$	912,534		$	898,729
Improvements, etc.		7,297			8,156			15,486
Disposals during the year		(2,209	)		—			—
Dispositions during the year		—			(53,381	)		(1,681	)
Balance at end of year	$	872,397		$	867,309		$	912,534
Accumulated Depreciation:
Balance at beginning of year	$	(131,779	)	$	(101,933	)	$	(61,758	)
Depreciation		(40,195	)		(39,599	)		(40,611	)
Disposals		482			9,753			436
Balance at end of year	$	(171,492	)	$	(131,779	)	$	(101,933	)

F-33

EX-10.3

Exhibit 10.3

RENEWAL AGREEMENT

THIS RENEWAL AGREEMENT, dated as of December 20, 2020 (the “Agreement”), is entered into between Resource Real Estate Opportunity REIT II, Inc., a Maryland corporation (the “Company”), and Resource Real Estate Opportunity Advisor II, LLC a Delaware limited liability company (the “Advisor”).

WHEREAS, the Company and the Advisor are parties to the Second Amended and Restated Advisory Agreement dated September 8, 2020 (the “Advisory Agreement”);

WHEREAS, the Advisory Agreement expires on December 20, 2020, subject to an unlimited number of successive one-year renewals;

WHEREAS, the Company desires to continue to avail itself of the knowledge, experience, sources of information, advice, assistance and certain facilities available to the Advisor and to have the Advisor undertake the duties and responsibilities set forth in the Advisory Agreement, on behalf of, and subject to the supervision of, the board of directors of the Company (the “Board”); and

WHEREAS, the Advisor is willing to continue to undertake to render such services, subject to the supervision of the Board.

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree as follows:

1. Term. In accordance with the provisions of Section 13.01 of the Advisory Agreement, the term of the Advisory Agreement is hereby renewed for an additional one-year term, and notwithstanding the language in Section 13.01 of the Advisory Agreement, is acknowledged and agreed by the Parties to be a one-year term commencing December 20, 2020 and ending December 19, 2021.

2. Ratification; Effect on Advisory Agreement. The Advisory Agreement shall remain in full force and effect and is hereby confirmed in all respects. On and after the date hereof, each reference in the Advisory Agreement to “this Agreement,” “herein,” “hereof,” or words of similar import will mean and be a reference to the Advisory Agreement as renewed hereby.

3. Modification. This Agreement shall not be changed, modified, terminated, or discharged, in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or assignees.

4. Construction; Consent to Jurisdiction.This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws. Any suit involving any dispute or matter arising under this Agreement may only be brought in the federal or state courts located in the State of Delaware. Each of the parties hereto consents to the exercise of personal jurisdiction by such courts with respect to all such proceedings. EACH OF THE PARTIES HERETO HEREBY KNOWINGLY AND

VOLUNTARILY WAIVES ANY AND ALL RIGHTS TO A JURY TRIAL, TO THE FULLEST EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST, IN ANY PROCEEDING, CLAIM, COUNTER-CLAIM OR OTHER ACTION INVOLVING ANY DISPUTE OR MATTER ARISING UNDER THIS AGREEMENT.

5. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when the counterparts hereof, taken together, bear the signatures of all of the parties reflected hereon as the signatories.

[signature page follows]

IN WITNESS WHEREOF, the parties hereto have executed this Renewal Agreement as of the date and year first above written.

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/ Shelle Weisbaum
	Shelle Weisbaum, Senior Vice President

EX-10.13

Exhibit 10.13

AMENDED AND RESTATED

LIMITED PARTNERSHIP AGREEMENT

OF

RRE Opportunity OP II, LP

RRE Opportunity OP II, LP (the “Partnership”) was formed as a limited partnership under the laws of the State of Delaware, pursuant to a Certificate of Limited Partnership filed with the Office of the Secretary of State of the State of Delaware on October 1, 2012. This Amended and Restated Limited Partnership Agreement (“Agreement”) is entered into effective as of January 28, 2021 among Resource REIT, Inc., a Maryland corporation (the “General Partner”), the Limited Partners set forth on Exhibit A hereto, and such additional Limited Partners party hereto from time to time. Capitalized terms used herein but not otherwise defined shall have the meanings given them in Article 1.

WHEREAS, the General Partner and RRE Opportunity Holdings II, LLC, as the “Initial Limited Partner,” entered into a Limited Partnership Agreement of Resource Real Estate Opportunity OP, LP dated as of January 16, 2014, pursuant to which the Partnership was formed (the “Original Agreement”);

WHEREAS, the General Partner, the Partnership, Revolution I Merger Sub, LLC, a Maryland limited liability company and a wholly owned subsidiary of the General Partner (“Merger Sub”), Resource Real Estate Opportunity REIT, Inc., a Maryland corporation (“REIT I”) and Resource Real Estate Opportunity OP, LP, a Delaware limited partnership and the operating partnership of REIT I (“REIT I Operating Partnership”) entered into an Agreement and Plan of Merger dated as of September 8, 2020 (the “Merger Agreement”), pursuant to which on the date hereof (i) REIT 1 merged with and into Merger Sub, with Merger Sub being the surviving company (the “REIT Merger”), and (ii) second, REIT I Operating Partnership merged with and into the Partnership, with the Partnership being the surviving entity (the “Partnership Merger”);

WHEREAS, on September 8, 2020, before entering into the Merger Agreement, pursuant to that certain Contribution and Exchange Agreement (the “Contribution and Exchange Agreement”) by and among REIT I Operating Partnership, Resource PM Holdings LLC (“PM Holdings”), Resource NewCo LLC (“Advisor Holdings”), C-III Capital Partners LLC (“PM Contributor”), Resource Real Estate, LLC (“Advisor Contributor”), and Resource America, Inc., PM Contributor and Advisor Contributor contributed certain assets to the REIT I Operating Partnership, including all of PM Contributor’s right, title and interest in all of the membership interests in PM Holdings and all of Advisor Contributor’s right, title and interest in all of the membership interests in Advisor Holdings in exchange for a total of 6,158,759Common Units of REIT I Operating Partnership, 319,965Series A Preferred Units of REIT I Operating Partnership and other good and valuable consideration (the “Contribution Transaction”);

WHEREAS, in connection with the Partnership Merger the limited partners of REIT I Operating Partnership became limited partners of the Partnership and in order to preserve the rights and preferences of the such limited partners, the General Partner now desires to amend and restate the Original Agreement to reflect, among other things, the issuance or existence of the Series A Preferred Units, as specified in Exhibit C hereto, the Common Units and the Convertible Units as contemplated pursuant to the Merger Agreement, and to make other amendments deemed necessary or desirable by the General Partner;

NOW, THEREFORE, in consideration of the foregoing, of mutual covenants between the parties hereto, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to amend and restate the Original Agreement in its entirety and continue the Partnership as a limited partnership under the Delaware Revised Uniform Limited Partnership Act, as amended from time to time, as follows:

13632793–7

 

ARTICLE 1

DEFINED TERMS

The following defined terms used in this Agreement shall have the meanings specified below:

Act means the Delaware Revised Uniform Limited Partnership Act, as it may be amended from time to time.

Additional Funds has the meaning set forth in Section 4.3.

Additional Limited Partner means a Person admitted to the Partnership as a Limited Partner pursuant to Section 10.1 hereof and who is shown as a Limited Partner on Exhibit A hereto.

Additional Securities means any additional REIT Shares (other than REIT Shares issued in connection with an exchange pursuant to Section 8.5 hereof) or other interests in the General Partner, or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase REIT Shares or other interests in the General Partner, as set forth in Section 4.2(a)(iii).

Administrative Expenses means (i) all administrative and operating costs and expenses incurred by the Partnership, (ii) those administrative costs and expenses of the General Partner or its Affiliates, including any salaries or other payments to directors, officers or employees of the General Partner or its Affiliates, and any accounting and legal expenses of the General Partner or its Affiliates, which expenses, the Partners have agreed, are expenses of the Partnership and not the General Partner or such Affiliates, and (iii) to the extent not included in clause (ii) above, REIT Expenses.

Advisor Contributor has the meaning provided in the Recitals.

Advisor Holdings has the meaning provided in the Recitals.

Affiliate or Affiliated means, as to any Person, any of the following:

(a) any other Person directly or indirectly owning, controlling or holding, with power to vote, 10% or more of the outstanding voting securities of such Person;

(b) any other Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with power to vote, by such Person;

(c) any other Person directly or indirectly controlling, controlled by or under common control with such Person;

(d) any executive officer, director, manager, trustee or general partner of such Person; and

(e) any legal entity for which such Person acts as an executive officer, director, manager, trustee or general partner.

Agreed Value means the fair market value of a Partner’s non-cash Capital Contribution as of the date of contribution as agreed to by such Partner and the General Partner and as booked-up pursuant to the provisions set forth in this Agreement. The names and addresses of the General Partner and the Additional Limited Partners, the number of Partnership Units issued to each of them, their respective Capital

EAST\180070029.1

Contributions as of the date of contribution and the booked-up value as of the date of this Agreement are set forth onExhibit A.

Agreement means this Amended and Restated Limited Partnership Agreement, as amended, modified, supplemented or restated from time to time, as the context requires.

Articles of Incorporation means the Amended and Restated Articles of Incorporation of the General Partner filed with the Maryland State Department of Assessments and Taxation, as amended, supplemented or restated from time to time.

Book Value means with respect to any asset of the Partnership, the basis of such asset to the Partnership for federal income tax purposes; provided that if an asset is contributed to the Partnership or revalued in accordance with Regulations Section 1.704-1(b)(2)(iv)(f), the Book Value of such asset shall be its fair market value as subsequently adjusted in accordance with Regulations Section 1.704-1(b)(2)(iv)(g).

Capital Account has the meaning provided in Section 4.4 hereof.

Capital Contribution means the total amount of cash, cash equivalents, and the Agreed Value of any Property or other asset (other than cash), net of liabilities assumed, contributed or agreed to be contributed, as the context requires, to the Partnership by each Partner pursuant to the terms of this Agreement. Any reference to the Capital Contribution of a Partner shall include the Capital Contribution made by a predecessor holder of the Partnership Interest of such Partner.

Cash Amount means an amount of cash equal to the product of the Value of one REIT Share and the REIT Shares Amount on the date of receipt by the General Partner of a Notice of Exchange.

Certificate means any instrument or document that is required under the laws of the State of Delaware, or any other jurisdiction in which the Partnership conducts business, to be signed and sworn to by the Partners of the Partnership (either by themselves or pursuant to the power-of-attorney granted to the General Partner in Section 8.2 hereof) and filed for recording in the appropriate public offices within the State of Delaware or such other jurisdiction to perfect or maintain the Partnership as a limited partnership, to effect the admission, withdrawal, or substitution of any Partner of the Partnership, or to protect the limited liability of the Limited Partners as limited partners under the laws of the State of Delaware or such other jurisdiction.

Code means the Internal Revenue Code of 1986, as amended, and as hereafter amended from time to time. Reference to any particular provision of the Code shall mean that provision in the Code as of the date hereof and any successor provision thereto.

Common Unit means a Partnership Unit that is not a Preferred Unit or a Convertible Unit (unless or until the Convertible Unit is converted into a Common Unit).

Contribution Common Units means the Common Units issued in connection with the Contribution Transaction.

Contribution and Exchange Agreement has the meaning provided in the Recitals.

Contribution Transaction has the meaning provided in the Recitals.

EAST\180070029.1

Conversion Factor means 1.0, provided that, subject to Section 4.2(a)(ii), in the event that the General Partner (i) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a Distribution to all holders of its outstanding REIT Shares in REIT Shares, (ii) subdivides its outstanding REIT Shares, or (iii) combines its outstanding REIT Shares into a smaller number of REIT Shares, the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of REIT Shares issued and outstanding on the record date for such dividend, distribution, subdivision or combination (assuming for such purpose that such dividend, distribution, subdivision or combination has occurred as of such time) and the denominator of which shall be the actual number of REIT Shares (determined without the above assumption) issued and outstanding on such date and, provided further, that in the event that an entity other than an Affiliate of the General Partner shall become General Partner pursuant to any merger, consolidation or combination of the General Partner with or into another entity (the “Successor Entity”), the Conversion Factor shall be adjusted by multiplying the Conversion Factor by the number of shares of the Successor Entity into which one REIT Share is converted pursuant to such merger, consolidation or combination, determined as of the date of such merger, consolidation or combination.  Any adjustment to the Conversion Factor shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event; provided, however, that if the General Partner receives a Notice of Exchange after the record date, but prior to the effective date of such dividend, distribution, subdivision or combination, the Conversion Factor shall be determined as if the General Partner had received the Notice of Exchange immediately prior to the record date for such dividend, distribution, subdivision or combination.

Convertible Stock has the meaning set forth in Exhibit D hereof.

Convertible Unit has the meaning set forth in Exhibit D hereof.

Defaulting Limited Partner has the meaning provided in Section 5.2(b) hereof.

Distributions means any dividends or other distributions of money or other property paid by the General Partner to the holders of its REIT Shares or preferred stock, including distributions that may constitute a return of capital for federal income tax purposes.

Event of Bankruptcy as to any Person means the filing of a petition for relief as to such Person as debtor or bankrupt under the Bankruptcy Code of 1978 or similar provision of law of any jurisdiction (except if such petition is contested by such Person and has been dismissed within 90 days); insolvency or bankruptcy of such Person as finally determined by a court proceeding; the filing by such Person of a petition or application to accomplish the same or for the appointment of a receiver or a trustee for such Person or a substantial part of his assets; the commencement of any proceedings relating to such Person as a debtor under any other reorganization, arrangement, insolvency, adjustment of debt or liquidation law of any jurisdiction, whether now in existence or hereinafter in effect, either by such Person or by another, provided that if such proceeding is commenced by another, such Person indicates his approval of such proceeding, consents thereto or acquiesces therein, or such proceeding is contested by such Person and has not been finally dismissed within 90 days.

Exchange Right has the meaning provided in Section 8.5(a) hereof.

Exchanging Partner has the meaning provided in Section 8.5(a) hereof.

General Partner means Resource REIT, Inc., a Maryland corporation, and any Person who becomes a substitute or additional General Partner as provided herein, and any of their successors as General Partner.

EAST\180070029.1

General Partner Loan has the meaning provided in Section 5.2(b) hereof.

General Partnership Interest means a Partnership Interest held by the General Partner that is a general partnership interest. The number of Common Units held by the General Partner equal to one percent (1%) of all outstanding Common Units from time to time is hereby designated as the General Partnership Interest.

Indemnitee means (i) the General Partner or a director, officer or employee of the General Partner or Partnership, (ii) such other Persons (including Affiliates of the General Partner or the Partnership) as the General Partner may designate from time to time, in its sole and absolute discretion.

Joint Venture or Joint Ventures means those joint venture, general partnership or similar arrangements in which the Partnership is a co-venturer or general partner, and which are established to acquire Properties.

Limited Partner means any Person named as a Limited Partner on Exhibit A attached hereto, and any Person who becomes a Substitute Limited Partner or Additional Limited Partner, in such Person’s capacity as a Limited Partner in the Partnership. A Limited Partner may hold Common Units, Preferred Units, or Convertible Units, or all of them.

Limited Partnership Interest means the ownership interest of a Limited Partner in the Partnership at any particular time, including the right of such Limited Partner to any and all benefits to which such Limited Partner may be entitled as provided in this Agreement and in the Act, together with the obligations of such Limited Partner to comply with all the provisions of this Agreement and the Act.

Liquidation Preference means, with respect to any Preferred Unit as of any date of determination, the amount (including distributions accumulated, due, or payable through the date of determination) payable with respect to such Preferred Unit (as established by the instrument designating such Preferred Unit) upon the voluntary or involuntary dissolution or winding up of the Partnership as a preference over distributions to Partnership Units ranking junior to such Preferred Unit.

Listing means the approval of the REIT Shares, issued by the General Partner pursuant to an effective registration statement, on a National Securities Exchange. Upon Listing, the shares shall be deemed Listed.

Loss has the meaning provided in Section 5.1(f) hereof.

Merger Agreement has the meaning provided in the Recitals.

Merger Sub has the meaning provided in the Recitals.

National Securities Exchange means any securities exchange registered with the SEC pursuant to Section 6 of the Securities Exchange Act of 1934, as amended.

Net Asset Value Per REIT Share means the most recently determined net asset value per share of the REIT Shares as determined on a quarterly basis (or more or less frequently) and published by the General Partner in a filing with the SEC pursuant to the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

EAST\180070029.1

Notice of Exchange means the Notice of Exercise of Exchange Right substantially in the form attached as Exhibit B hereto.

Offer has the meaning set forth in Section 7.1(b)(ii) hereof.

Offering means an offering of Stock that is either (a) registered with the SEC, or (b) exempt from such registration, excluding Stock offered under any employee benefit plan.

Opt-Out Election has the meaning set forth in Section 11.5(c) hereof.

Original Agreement has the meaning provided in the Recitals.

Partner means any General Partner or Limited Partner.

Partner Nonrecourse Debt MinimumGain has the meaning set forth in Regulations Section 1.704-2(i). A Partner’s share of Partner Nonrecourse Debt Minimum Gain shall be determined in accordance with Regulations Section 1.704-2(i)(5).

Partnership means Resource Real Estate Opportunity OP, LP, a Delaware limited partnership.

Partnership Interest means an ownership interest in the Partnership held by either a Limited Partner or the General Partner and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement.

Partnership Loan has the meaning provided in Section 5.2(b) hereof.

Partnership Merger has the meaning provided in the Recitals.

Partnership Minimum Gain has the meaning set forth in Regulations Section 1.704-2(d). In accordance with Regulations Section 1.704-2(d), the amount of Partnership Minimum Gain is determined by first computing, for each Partnership nonrecourse liability, any gain the Partnership would realize if it disposed of the property subject to that liability for no consideration other than full satisfaction of the liability, and then aggregating the separately computed gains. A Partner’s share of Partnership Minimum Gain shall be determined in accordance with Regulations Section 1.704-2(g)(1).

Partnership Record Date means the record date established by the General Partner for the distribution of cash pursuant to Section 5.2 hereof, which record date shall be the same as the record date established by the General Partner for a Distribution to the Stockholders of some or all of its portion of such distribution.

Partnership Representative has the meaning set forth in Section 11.5(a) hereof.

Partnership Unit means a fractional, undivided share of the Partnership Interests of all Partners issued hereunder. Without limitation on the authority of the General Partner as set forth in Section 4.2 hereof, the General Partner may designate any Partnership Units, when issued, as Common Units or Preferred Units, may establish any other class of Partnership Units, and may designate one or more series of any class of Partnership Units. The allocation of Partnership Units among the Partners shall be as set forth on Exhibit A, as such Exhibit may be amended from time to time.

EAST\180070029.1

Partnership Year means the fiscal year of the Partnership, which shall be the calendar year.

Percentage Interest means, with respect to a Partner, (i) when referring to a specific class or series of Partnership Units, such Partner’s interest in such class or series of Partnership Units as determined by dividing the number of Partnership Units in such class or series held by such Partner by the total number of Partnership Units in such class or series then outstanding, (ii) when not referring to a specific class of series of Partnership Units, (A) the aggregate number of Common Units, Series A Preferred Units and any other Partnership Units of any class or series having participation rights equivalent to the rights of a Common Unit held by such Partner divided by (B) the total aggregate number of Common Units, Series A Preferred Units and such other Partnership Units of any class or series having participation rights equivalent to the rights of a Common Unit held by such Partner then outstanding.  For purposes of determining Percentage Interest, each Series A Preferred Unit outstanding shall count as 1.22423 Partnership Units.

Person means any individual, partnership, limited liability company, corporation, joint venture, trust or other entity.

PM Contributor has the meaning provided in the Recitals.

PM Holdings has the meaning provided in the Recitals.

Preferred Unit means any Partnership Unit issued from time to time pursuant to Section 4.2 hereof that is specifically designated by the General Partner at the time of its issuance as a Preferred Unit. Each class or series of Preferred Units shall have such designations, preferences, and relative, participating, optional, or other special rights, powers, and duties, including rights, powers and duties senior to the Common Units, all as determined by the General Partner, subject to compliance with the requirements of Section 4.2 hereof.

Profit has the meaning provided in Section 5.1(f) hereof.

Property or Properties means the real properties or real estate investments which are acquired by the Partnership either directly or through Joint Ventures, partnerships or other entities.

Push-out Election has the meaning set forth in Section 11.5(c) hereof.

Regulations means the federal income tax regulations promulgated under the Code, as amended and as hereafter amended from time to time. Reference to any particular provision of the Regulations shall mean that provision of the Regulations as of the date hereof and any successor provision of the Regulations.

REIT means a real estate investment trust under Sections 856 through 860 of the Code.

REIT Expenses means (i) costs and expenses relating to the formation and continuity of existence and operation of the General Partner and any Subsidiaries thereof (which Subsidiaries shall, for purposes hereof, be included within the definition of General Partner), including taxes, fees and assessments associated therewith, any and all costs, expenses or fees payable to any director, officer, or employee of the General Partner, (ii) costs and expenses relating to any Offering and registration of securities or exemption from registration by the General Partner and all statements, reports, fees and expenses incidental thereto, including, without limitation, underwriting discounts and sales commissions applicable to any such Offering of securities, and any costs and expenses associated with any claims made by any holders of such securities or any underwriters or placement agents thereof, (iii) costs and expenses associated with any repurchase of any securities by the General Partner, (iv) costs and expenses associated with the preparation

EAST\180070029.1

and filing of any periodic or other reports and communications by the General Partner under federal, state or local laws or regulations, including filings with the SEC, (v) costs and expenses associated with compliance by the General Partner with laws, rules and regulations promulgated by any regulatory body, including the SEC and any National Securities Exchange, (vi) costs and expenses associated with any 401(k) plan, incentive plan, bonus plan or other plan providing for compensation for the employees of the General Partner, (vii) costs and expenses incurred by the General Partner relating to any issuance or redemption of Partnership Interests or securities of the General Partner, and (viii) all other operating or administrative costs of the General Partner incurred in the ordinary course of its business on behalf of or in connection with the Partnership.

REIT I has the meaning provided in the Recitals.

REIT I Operating Partnership has the meaning provided in the Recitals.

REIT Merger has the meaning provided in the Recitals.

REIT Share means a share of common stock, par value $0.01 per share, in the General Partner (or successor entity, as the case may be), the terms and conditions of which are set forth in the Articles of Incorporation.

REIT Shares Amount means a number of REIT Shares equal to the product of the number of Partnership Units offered for exchange or redemption, multiplied by the Conversion Factor as may be adjusted to and including the Specified Exchange Date or other applicable redemption or exchange date; provided that in the event the General Partner issues to all holders of REIT Shares rights, options, warrants or convertible or exchangeable securities entitling the stockholders to subscribe for or purchase REIT Shares, or any other securities or property (collectively, the “rights”), and the rights have not expired at the Specified Exchange Date or other applicable redemption or exchange date, then the REIT Shares Amount shall also include the rights issuable to a holder of the REIT Shares Amount of REIT Shares on the record date fixed for purposes of determining the holders of REIT Shares entitled to rights.

SEC means the Securities and Exchange Commission.

Series A Preferred Units has the meaning set forth in Exhibit C hereto.

Service means the Internal Revenue Service.

Specified Exchange Date means the first business day of the month that is at least 60 business days after the receipt by the General Partner of the Notice of Exchange.

Stock means shares of stock of the General Partner of any class or series, including REIT Shares, preferred stock or shares-in-trust.

Stockholders means the registered holders of the General Partner’s Stock.

Subsidiary means, with respect to any Person, any corporation or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person.

Subsidiary Partnership means any partnership of which the partnership interests therein are owned by the General Partner or a direct or indirect Subsidiary of the General Partner.

EAST\180070029.1

Substitute Limited Partner means any Person admitted to the Partnership as a Limited Partner pursuant to Section 9.3 hereof.

Successor Entity has the meaning set forth in Section 4.2(a)(ii) hereof.

Surviving General Partner has the meaning set forth in Section 7.1(c) hereof.

Transaction has the meaning set forth in Section 7.1(b) hereof.

Transfer has the meaning set forth in Section 9.2(a) hereof.

Value means, with respect to REIT Shares, the average of the daily market price of such REIT Share for the ten (10) consecutive trading days immediately preceding the date of such valuation. The market price for each such trading day shall be: (i) if the REIT Shares are Listed, the sale price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices, regular way, on such day; (ii) if the REIT Shares are not Listed, the Net Asset Value Per REIT Share on such day; providedthat if there are no bid and asked prices reported during the ten (10) days prior to the date in question, the value of the REIT Shares shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. In the event the REIT Shares Amount includes rights that a holder of REIT Shares would be entitled to receive, then the value of such rights shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.

ARTICLE 2

PARTNERSHIP FORMATION AND IDENTIFICATION

2.1Formation. The Partnership was formed as a limited partnership pursuant to the Act for the purposes and upon the terms and conditions set forth in this Agreement.

2.2Name, Office and Registered Agent. The name of the Partnership is RRE Opportunity OP II, LP. The specified office and place of business of the Partnership shall be 1845 Walnut Street, 17th Floor, Philadelphia, Pennsylvania 19103 (telephone number (215) 231-7050). The General Partner may at any time change the location of such office, provided the General Partner gives notice to the Partners of any such change. The name and address of the Partnership’s registered agent is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The sole duty of the registered agent as such is to forward to the Partnership any notice that is served on him as registered agent.

2.3Partners.

(a)The General Partner of the Partnership is Resource REIT, Inc., a Maryland corporation. Its principal place of business is the same as that of the Partnership.

(b)The Limited Partners are those Persons identified as Limited Partners on Exhibit A hereto, as amended from time to time.  The parties agree that Exhibit A will be confidential and maintained in the offices of the General Partner.

EAST\180070029.1

2.4Term and Dissolution.

(a)The Partnership shall have perpetual duration, except that the Partnership shall be dissolved upon the first to occur of any of the following events:

(i)The occurrence of an Event of Bankruptcy as to a General Partner or the dissolution, death, removal or withdrawal of a General Partner unless the business of the Partnership is continued pursuant to Section 7.3(b) hereof; provided that if a General Partner is on the date of such occurrence a partnership, the dissolution of such General Partner as a result of the dissolution, death, withdrawal, removal or Event of Bankruptcy of a partner in such partnership shall not be an event of dissolution of the Partnershipif the business of such General Partner is continued by the remaining partner or partners, either alone or with additional partners, and such General Partner and such partners comply with any other applicable requirements of this Agreement;

(ii)The passage of 90 days after the sale or other disposition of all or substantially all of the assets of the Partnership (provided that if the Partnership receives an installment obligation as consideration for such sale or other disposition, the Partnership shall continue, unless sooner dissolved under the provisions of this Agreement, until such time as such note or notes are paid in full);

(iii)The exchange of all Limited Partnership Interests (other than any of such interests held by the General Partner or Affiliates of the General Partner) for REIT Shares or the securities of any other entity; or

(iv)The election by the General Partner that the Partnership should be dissolved.

(b)Upon dissolution of the Partnership (unless the business of the Partnership is continued pursuant to Section 7.3(b) hereof), the General Partner (or its trustee, receiver, successor or legal representative) shall amend or cancel the Certificate and liquidate the Partnership’s assets and apply and distribute the proceeds thereof in accordance with Section 5.6 hereof. Notwithstanding the foregoing, the General Partner (or such trustee, receiver, successor or legal representative) may either (i) defer liquidation of, or withhold from distribution for a reasonable time, any assets of the Partnership (including those necessary to satisfy the Partnership’s debts and obligations), or (ii) distribute the assets of the Partnership to the Partners in kind.

2.5Filing of Certificate and Perfection of Limited Partnership. The General Partner shall execute, acknowledge, record and file at the expense of the Partnership, the Certificate any and all amendments thereto and all requisite fictitious name statements and notices in such places and jurisdictions as may be necessary to cause the Partnership to be treated as a limited partnership under, and otherwise to comply with, the laws of each state or other jurisdiction in which the Partnership conducts business.

2.6Certificates Describing Partnership Units. At the request of a Limited Partner, the General Partner, at its option, may issue a certificate summarizing the terms of such Limited Partner’s interest in the Partnership, including the number and class or series of Partnership Units owned and the Percentage Interest represented by such Partnership Units as of the date of such certificate. Any such certificate (i) shall be in form and substance as approved by the General Partner, (ii) shall not be negotiable and (iii) shall bear a legend to the following effect:

EAST\180070029.1

THIS CERTIFICATE IS NOT NEGOTIABLE. THE PARTNERSHIP UNITS REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY AND TRANSFERABLE ONLY IN ACCORDANCE WITH THE PROVISIONS OF THE AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF RESOURCE REAL ESTATE OPPORTUNITY OP, LP, AS AMENDED FROM TIME TO TIME.

ARTICLE 3

BUSINESS OF THE PARTNERSHIP

3.1Purpose.  The purpose and nature of the business to be conducted by the Partnership is (i) to conduct any business that may be lawfully conducted by a limited partnership organized pursuant to the Act, provided, however, that such business shall be limited to and conducted in such a manner as to permit the General Partner at all times to qualify as a REIT and in a manner such that the General Partner will not be subject to any taxes under Sections 856, 857 or 4981 of the Code to the greatest extent commercially reasonably possible, unless the General Partner otherwise ceases to qualify as a REIT, (ii) to enter into any partnership, joint venture or other similar arrangement to engage in any of the foregoing or to own interests in any entity engaged in any of the foregoing, and (iii) to do anything necessary or incidental to the foregoing. In connection with the foregoing, and without limiting the General Partner’s right in its sole and absolute discretion to cease qualifying as a REIT, the Partners acknowledge that the General Partner’s current status as a REIT and the avoidance of income and excise taxes on the General Partner inures to the benefit of all the Partners and not solely to the General Partner. Notwithstanding the foregoing, the Limited Partners agree that the General Partner may terminate its status as a REIT under the Code at any time to the full extent permitted under the Articles of Incorporation. The General Partner shall also be empowered to do any and all acts and things necessary or prudent to ensure that the Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Code.

3.2Powers.  The Partnership is empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Partnership, including, without limitation, full power and authority, directly or through its ownership interest in other entities, to enter into, perform and carry out contracts of any kind, borrow money and issue evidences of indebtedness, whether or not secured by mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and develop real property, and lease, sell, transfer and dispose of Real Estate Related Assets or other ownership interests; provided, however that nothing in this Section 3.2 is intended to eliminate or limit the rights of the Limited Partners included elsewhere in this Agreement.

3.3Relationship with Partners.  It is expressly acknowledged and agreed by the Partners that the General Partner may, in its sole and absolute discretion, waive or otherwise modify the application with respect to any Partner or assignee of any provision herein restricting, prohibiting or otherwise relating to (i) the transfer of a Limited Partner Interest or the Partnership Units evidencing the same, (ii) the admission of any Limited Partners and (iii) the redemption rights of such Partners, and that such waivers or modifications may be made by the General Partner at any time or from time to time, including, without limitation, concurrently with the issuance of any Partnership Units pursuant to the terms of this Agreement; provided, however that nothing in this Section 3.3 is intended to eliminate or limit the rights of the Limited Partners included elsewhere in this Agreement.

EAST\180070029.1

ARTICLE 4

CAPITAL CONTRIBUTIONS AND ACCOUNTS

4.1Capital Contributions. The General Partner and each Limited Partner has made a Capital Contribution to the Partnership in exchange for the Partnership Units set forth opposite such Partner’s name on Exhibit A, as amended from time to time by the General Partner to the extent necessary to accurately reflect sales, exchanges or other Transfers, redemptions, Capital Contributions, the issuance of additional Partnership Units or similar events having an effect on a Partner’s ownership of Partnership Units.  The Capital Accounts of the Partners are being booked-up on the date of this Agreement as set forth on Exhibit A.

4.2Additional Capital Contributions and Issuances of Additional Partnership Units. Except as provided in this Section 4.2 or in Section 4.3, the Partners shall have no right or obligation to make any additional Capital Contributions or loans to the Partnership. The General Partner may contribute additional capital to the Partnership, from time to time, and receive additional Partnership Interests, in the form of Partnership Units, in respect thereof, in the manner contemplated in this Section 4.2.

(a)Issuances of Additional Partnership Units.

(i)General. The General Partner is hereby authorized to cause the Partnership to issue such additional Partnership Interests, in the form of Partnership Units, for any Partnership purpose at any time or from time to time, to the Partners (including the General Partner) or to other Persons for such consideration and on such terms and conditions as shall be established by the General Partner in its sole and absolute discretion, all without the approval of any Limited Partner, including but not limited to, Partnership Units issued in connection with the issuance of REIT Shares or of other interests in the General Partner, Any additional Partnership Interests issued thereby may be issued in one or more classes, or one or more series of any of such classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to any Common Units, all as shall be determined by the General Partner in its sole and absolute discretion and without the approval of any Limited Partner (subject to any consent rights expressly provided to holders of Preferred Units), subject to Delaware law, including, without limitation: (i) the allocations of items of Partnership income, gain, loss, deduction and credit to each such class or series of Partnership Units; (ii) the right of each such class or series of Partnership Units to share in Partnership distributions; (iii)the rights of each such class or series of Partnership Units upon dissolution and liquidation of the Partnership; (iv) the voting rights, if any, of each such class or series of Partnership Units and (v) the conversion, redemption or exchange rights applicable to each such class or series of Partnership Units; provided, however, that no additional Partnership Units shall be issued to the General Partner unless:

(1) (A) the additional Partnership Units are issued in connection with an issuance of REIT Shares of, or other interests in, the General Partner, which shares or interests have designations, preferences and other rights, all such that the economic interests are substantially similar to the designations, preferences and other rights of the additional Partnership Units issued to the General Partner by the Partnership in accordance with this Section 4.2 and (B) the General Partner shall make a Capital Contribution to the Partnership in an amount equal to the net proceeds raised in connection with the issuance of such shares of stock of or other interests in the General Partner;

EAST\180070029.1

(2) the additional Partnership Units are issued in exchange for property owned by the General Partner with a fair market value, as determined by the General Partner, in good faith, equal to the value of the Partnership Units; or

(3) with respect to the class or series of Partnership Units so issued, additional Partnership Units are issued to all Partners holding Partnership Units in proportion to their respective Percentage Interests.

In addition, the General Partner may acquire Partnership Units from other Partners pursuant to this Agreement. In the event that the Partnership issues Partnership Units pursuant to this Section 4.2(a), the General Partner shall make such revisions to this Agreement, including amending Exhibit A, as are necessary to reflect the issuance of such additional Partnership Units and any special rights, powers, and duties associated therewith.

Without limiting the foregoing, the General Partner is expressly authorized to cause the Partnership to issue Partnership Units (i) upon the conversion, redemption or exchange of any debt or other securities issued by the Partnership, (ii) for less than fair market value, so long as the General Partner concludes in good faith that such issuance is in the best interests of the General Partner and the Partnership and (iii) in connection with any merger of any other entity into the Partnership or any Subsidiary of the Partnership if the applicable merger agreement provides that entity or its owners are to receive Partnership Units in exchange for their interests in the entity merging into the Partnership or any Subsidiary of the Partnership.

(ii)Adjustment Events. In the event the General Partner (i) declares or pays a dividend on outstanding REIT Shares in REIT Shares or makes a distribution to all holders of its outstanding REIT Shares in REIT Shares, (ii) subdivides its outstanding REIT Shares, or (iii) combines its outstanding REIT Shares into a smaller number of REIT Shares, then a corresponding adjustment to the number of outstanding Common Units (or other Partnership Interests for other securities in the General Partner) necessary to maintain the proportionate relationship between the number of outstanding Common Units to the number of outstanding REIT Shares (or other Partnership Interests for other securities in the General Partner) shall automatically be made. Additionally, in the event that any other entity shall become General Partner pursuant to any merger, consolidation, or combination of the General Partner with or into another entity (the “Successor Entity”), the number of outstanding Common Units (or other Partnership Interests for other securities in the General Partner) shall be adjusted by multiplying such number by the number of shares of the Successor Entity into which one REIT Share is converted pursuant to such merger, consolidation, or combination, determined as of the date of such merger, consolidation, or combination. Any adjustment to the number of outstanding Common Units (or other Partnership Interests for other securities in the General Partner) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event; provided, however, that if the General Partner receives a Notice of Exchange after the record date, but prior to the effective date of such dividend, distribution, subdivision, or combination, or such merger, consolidation, or combination, the number of outstanding Common Units shall be determined as if the General Partner had received the Notice of Exchange immediately prior to the record date for such dividend, distribution, subdivision, or combinationor such merger, consolidation, or combination. If the General Partner takes any other action affecting the REIT Shares other than actions specifically described above and, in the opinion of the General Partner such action would require an

EAST\180070029.1

adjustment to the number of Common Units (or other Partnership Interests for other securities of the General Partner) to maintain the proportionate relationship between the number of outstanding Partnership Units and the number of outstanding REIT Shares, the General Partner shall have the right to make such adjustment to the number of Common Units, to the extent permitted by law, in such manner and at such time as the General Partner, in its sole discretion, may determine to be appropriate under the circumstances.  For the avoidance of doubt, to the extent any such adjustment is made pursuant to this Section 4.2(a)(ii), the “Conversion Factor” shall not be adjusted with respect to such Common Units in any manner that would result in a duplicative adjustment with respect to the relevant event.

(iii)Upon Issuance of Additional Securities. The General Partner shall not issue any Additional Securities other than to all holders of REIT Shares, unless (A) the General Partner shall cause the Partnership to issue to the General Partner, as the General Partner may designate, Partnership Units or rights, options, warrants or convertible or exchangeable securities of the Partnership having designations, preferences and other rights, all such that the economic interests are substantially similar to those of the Additional Securities, and (B) the General Partner contributes the net proceeds from the issuance of such Additional Securities and from any exercise of rights contained in such Additional Securities, directly and through the General Partner, to the Partnership; provided, however, that the General Partner is allowed to issue Additional Securities in connection with an acquisition of Property to be held directly by the General Partner, but if and only if, such direct acquisition and issuance of Additional Securities have been approved and determined to be in the best interests of the General Partner and the Partnership by a majority of the board of directors of the General Partner. Without limiting the foregoing, the General Partner is expressly authorized to issue Additional Securities for less than fair market value, and to cause the Partnership to issue to the General Partner corresponding Partnership Units, so long as (x) the General Partner concludes in good faith that such issuance is in the best interests of the General Partner and the Partnership, including without limitation, the issuance of REIT Shares, stock options, incentive awards and corresponding Partnership Units pursuant to an employee share purchase plan providing for employee purchases of REIT Shares at a discount from fair market value or employee stock options that have an exercise price that is less than the fair market value of the REIT Shares, either at the time of issuance or at the time of exercise, and (y) the General Partner contributes all proceeds from such issuance to the Partnership. For example, and without limiting the foregoing, in the event the General Partner issues REIT Shares for a cash purchase price and contributes all of the net proceeds of such issuance to the Partnership as required hereunder, the General Partner shall be issued a number of additional Partnership Units equal to the product of (A) the number of such REIT Shares issued by the General Partner, the proceeds of which were so contributed, multiplied by (B) a fraction, the numerator of which is 100%, and the denominator of which is the Conversion Factor in effect on the date of such contribution.

(b)Certain Deemed Contributions of Proceeds of Issuance of Interests in the General Partner. In connection with any and all issuances of REIT Shares, or other interests in the General Partner, the General Partner shall make Capital Contributions to the Partnership of the proceeds therefrom, provided that if the proceeds actually received and contributed by the General Partner are less than the gross proceeds of such issuance as a result of any underwriter’s discount or other expenses paid or incurred in connection with such issuance, then the General Partner shall be deemed to have made Capital Contributions to the Partnership in the aggregate amount of the gross proceeds of such issuance and the Partnership shall be deemed simultaneously to have paid such

EAST\180070029.1

offering expenses in accordance with Section 6.5 hereof and in connection with the required issuance of additional Partnership Units to the General Partner for such Capital Contributions pursuant to Section 4.2(a) hereof. In connection with any and all issuances of REIT Shares pursuant to the General Partner’s distributionreinvestment plan, the General Partner shall be deemed to have made Capital Contributions to the Partnership in the aggregate amount of the distributions that have been reinvested in respect of the REIT Shares issued by the General Partner in return for an equal number of Common Units as the issued REIT Shares.

4.3Additional Funding. If the General Partner determines that it is in the best interests of the Partnership to provide for additional Partnership funds (“Additional Funds”) for any Partnership purpose, the General Partner may (i) cause the Partnership to obtain such funds from outside borrowings, or (ii) elect to have the General Partner or any of its Affiliates provide such Additional Funds to the Partnership through loans or otherwise.

4.4Capital Accounts. A separate capital account (a “Capital Account”) shall be established and maintained for each Partner in accordance with Regulations Section 1.704-1(b)(2)(iv). If (i) a new or existing Partner acquires an additional Partnership Interest in exchange for more than a de minimis Capital Contribution, (ii) the Partnership distributes to a Partner more than a de minimis amount of Partnership property as consideration for a Partnership Interest, (iii) the Partnership is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) or (iv) a Partnership Interest (other than a de minimis interest) is granted as consideration for the provision of services to or for the benefit of the Partnership by an existing Partner acting in a partner capacity, or by a new Partner acting in a partner capacity in anticipation of being a Partner, the General Partner shall revalue the property of the Partnership to its fair market value (as determined by the General Partner, in its sole and absolute discretion, and taking into account Section 7701(g) of the Code) in accordance with Regulations Section 1.704-1(b)(2)(iv)(f). When the Partnership’s property is revalued by the General Partner, the Capital Accounts of the Partners shall be adjusted in accordance with Regulations Sections 1.704-1(b)(2)(iv)(f) and (g), which generally require such Capital Accounts to be adjusted to reflect the manner in which the unrealized gain or loss inherent in such property (that has not been reflected in the Capital Accounts previously) would be allocated among the Partners pursuant to Section 5.1 if there were a taxable disposition of such property for its fair market value (as determined by the General Partner, in its sole and absolute discretion, and taking into account Section 7701(g) of the Code) on the date of the revaluation.

4.5Percentage Interests. If the number of outstanding Partnership Units increases or decreases during a taxable year, each Partner’s Percentage Interest shall be adjusted by the General Partner effective as of the effective date of each such increase or decrease to give effect to such increase or decrease. If the Partners’ Percentage Interests are adjusted pursuant to this Section 4.5, the Profits and Losses for the taxable year in which the adjustment occurs shall be allocated between the part of the year ending on the day when the Partnership’s property is revalued by the General Partner and the part of the year beginning on the following day either (i) as if the taxable year had ended on the date of the adjustment or (ii) based on the number of days in each part. The General Partner, in its sole and absolute discretion, shall determine which method shall be used to allocate Profits and Losses for the taxable year in which the adjustment occurs. The allocation of Profits and Losses for the earlier part of the year shall be based on the Percentage Interests before adjustment, and the allocation of Profits and Losses for the later part of the year shall be based on the adjusted Percentage Interests.

4.6No Interest on Contributions. No Partner shall be entitled to interest on its Capital Contributions.

4.7Return of Capital Contributions. No Partner shall be entitled to withdraw any part of its Capital Contribution or its Capital Account or to receive any distribution from the Partnership, except as

EAST\180070029.1

specifically provided in this Agreement. Except as otherwise provided herein, there shall be no obligation to return to any Partner or withdrawn Partner any part of such Partner’s Capital Contribution for so long as the Partnership continues in existence.

4.8No Third Party Beneficiary. No creditor or other third party having dealings with the Partnership shall have the right to enforce the right or obligation of any Partner to make Capital Contributions or loans or to pursue any other right or remedy hereunder or at law or in equity, it being understood and agreed that the provisions of this Agreement shall be solely for the benefit of, and may be enforced solely by, the parties hereto and their respective successors and assigns. None of the rights or obligations of the Partners herein set forth to make Capital Contributions or loans to the Partnership shall be deemed an asset of the Partnership for any purpose by any creditor or other third party, nor may such rights or obligations be sold, transferred or assigned by the Partnership or pledged or encumbered by the Partnership to secure any debt or other obligation of the Partnership or of any of the Partners. In addition, it is the intent of the parties hereto that no distribution to any Limited Partner shall be deemed a return of money or other property in violation of the Act. However, if any court of competent jurisdiction holds that, notwithstanding the provisions of this Agreement, any Limited Partner is obligated to return such money or property, such obligation shall be the obligation of such Limited Partner and not of the General Partner. Without limiting the generality of the foregoing, unless otherwise provided in a written agreement between the Partner and the Partnership, a deficit Capital Account of a Partner shall not be deemed to be a liability of such Partner nor an asset or property of the Partnership and upon a liquidation within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), if any Partner has a deficit Capital Account (after giving effect to all contributions, distributions, allocations and other Capital Account adjustments for all taxable years, including the year during which such liquidation occurs), such Partner shall have no obligation to make any Capital Contribution to reduce or eliminate the negative balance of such Partner’s Capital Account.

4.10Treatment of Merger.  The parties to the Partnership Merger intend that, for United States federal income tax purposes and, where applicable, state or local income tax purposes, the Partnership Merger shall be treated as a transfer by REIT I Operating Partnership of all of its assets and liabilities to the Partnership in exchange for Partnership Units followed by the distribution of such units to the REIT I Operating Partnerships’ partners in a complete liquidation of REIT I Operating Partnership, the exchange and distribution being respectively described in Section 721 of the Code and Section 731 of the Code.  Unless otherwise required by a final determination within the meaning of Section 1313(a) of the Code (or a similar determination under applicable state of local Law), all parties to the Partnership Merger shall file all United States federal, state and local tax returns in a manner consistent with the intended tax treatment of the Partnership Merger described in this Section 4.10, and no party to the Partnership Merger shall take a position inconsistent with such treatment.

ARTICLE 5

PROFITS AND LOSSES; DISTRIBUTIONS

5.1Allocation of Profit and Loss.

(a)General Allocations.

(i)Profits. After making the special allocations set forth in Sections 5.1(b) and 5.1(c) and the priority allocation with respect to the Preferred Units in Section 5.1(d) below and subject to the application of Section 5.1(a)(ii), after adjusting for all Capital Contributions and distributions made during any Partnership Year (or portion thereof), the Partnership’s Profits and Losses for such Partnership Year (or portion thereof) shall be allocated among the Partners in a manner such that, after such allocations have been made, the balance of each Partner’s Capital Account shall, to the extent possible, be equal to an

EAST\180070029.1

amount that would be distributed to such Partner if (A) the Partnership were to sell its assets for their Book Values, (B) all Partnership liabilities were satisfied (limited with respect to each nonrecourse liability to the Book Value of the assets encumbering such liability), and (C) the Partnership were to distribute the proceeds of sale in accordance with Section 5.6 and dissolve in accordance with Section 2.4, minus the sum of such Partner’s shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain.

(ii)Losses. Losses shall not be allocated to a Limited Partner to the extent that such allocation would cause a deficit in such Partner’s Capital Account (after reduction to reflect the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such Partner’s shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain. Any Losses in excess of that limitation shall be allocated to the General Partner. After the occurrence of an allocation of Loss to the General Partner in accordance with this Section 5.1(a)(ii), to the extent permitted by Regulations Section 1.704-1(b), Profits shall first be allocated to the General Partner in an amount necessary to offset the Losses previously allocated to the General Partner under this Section 5.01(a)(ii).

(b)Minimum Gain Chargeback. Notwithstanding any provision to the contrary, (i) any expense of the Partnership that is a “nonrecourse deduction” within the meaning of Regulations Section 1.704-2(b)(1) shall be allocated in accordance with the Partners’ respective Percentage Interests, (ii) any expense of the Partnership that is a “partner nonrecourse deduction” within the meaning of Regulations Section 1.704-2(i)(2) shall be allocated to the Partner that bears the “economic risk of loss” with respect to the “partner nonrecourse debt” within the meaning of Regulations Section 1.704-2(b)(4) to which such partner nonrecourse deduction is attributable in accordance with Regulations Section 1.704-2(i)(1), (iii) if there is a net decrease in Partnership Minimum Gain within the meaning of Regulations Section 1.704-2(f)(1) for any Partnership Year (or other period), then, subject to the exceptions set forth in Regulations Section 1.704-2(f)(2),(3), (4) and (5), items of gain and income shall be allocated among the Partners in accordance with Regulations Section 1.704-2(f) and the ordering rules contained in Regulations Section 1.704-2(j), and (iv) if there is a net decrease in Partner Nonrecourse Debt Minimum Gain within the meaning of Regulations Section 1.704-2(i)(4) for any Partnership Year (or other period), then, subject to the exceptions set forth in Regulations Section 1.704-(2)(g), items of gain and income shall be allocated among the Partners in accordance with Regulations Section 1.704-2(i)(4) and the ordering rules contained in Regulations Section 1.704-2(j). A Partner’s “interest in partnership profits” for purposes of determining its share of the nonrecourse liabilities of the Partnership within the meaning of Regulations Section 1.752-3(a)(3) shall be such Partner’s Percentage Interest.

(c)Qualified Income Offset. If a Partner unexpectedly receives in any Partnership Year (or other period) an adjustment, allocation, or distribution described in subparagraphs (4), (5), or (6) of Regulations Section 1.704-1(b)(2)(ii)(d) that causes or increases a deficit balance in such Partner’s Capital Account that exceeds the sum of such Partner’s shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, as determined in accordance with Regulations Sections 1.704-2(g) and 1.704-2(i), such Partner shallbe allocated specially for such Partnership Year or other period (and, if necessary, later Partnership Years or other periods) items of income and gain in an amount and manner sufficient to eliminate such deficit Capital Account balance as quickly as possible as provided in Regulations Section 1.704-1(b)(2)(ii)(d); provided, that an allocation pursuant to this Section 5.1(c) shall be made only if and to the extent that such Partner would have a deficit Capital Account balance after all other allocations provided for in Article 5 have been tentatively made as if this Section 5.1(c) were not in this Agreement. This Section 5.1(c)

EAST\180070029.1

is intended to constitute a “qualified income offset” under Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith.

(d)Priority Allocation With Respect to Preferred Units. Profits, and if necessary, items of Partnership gross income or gain for any Partnership Year, shall be specially allocated to Partners that own Series A Preferred Units in an amount equal to the excess, if any, of (i) the cumulative distributions received by such Partner for or with respect to the current Partnership Year and all prior Partnership Years with respect to the Series A Preferred Priority Return on such Series A Preferred Units (with a distribution made in a Partnership Year that relates to a Partnership Record Date occurring at the end of the preceding Partnership Year being treated as made with respect to such preceding Partnership Year) over (ii) the cumulative allocations of Partnership Profits, gross income and gain to such Partner under this Section 5.1(d) for all prior Partnership Years.

(e)Allocations Between Transferor and Transferee. If a Partner transfers any part or all of its Partnership Interest, the distributive shares of the various items of Profit and Loss allocable among the Partners during such Partnership Year shall be allocated between the transferor and the transferee Partner either (i) as if the Partnership’s taxable year had ended on the date of the transfer, or (ii) based on the number of days of such taxable year that each was a Partner without regard to the results of Partnership activities in the respective portions of such taxable year in which the transferor and the transferee were Partners. The General Partner, in its sole and absolute discretion, shall determine which method shall be used to allocate the distributive shares of the various items of Profit and Loss between the transferor and the transferee Partner.

(f)Definition of Profit and Loss. “Profit” and “Loss” and any items of income, gain, expense, or loss referred to in this Agreement shall be determined in accordance with federal income tax accounting principles, as modified by Regulations Section 1.704-1(b)(2)(iv), except that Profit and Loss shall not include items of income, gain and expense that are specially allocated pursuant to Sections 5.1(b), 5.1(c), or 5.1(d). All allocations of income, Profit, gain, Loss and expense (and all items contained therein) for federal income tax purposes shall be identical to all allocations of such items set forth in this Section 5.1, except as otherwise required by Section 704(c) of the Code and Regulations Section 1.704-1(b)(4). The General Partner shall have the sole and absolute authority to elect the method to be used by the Partnership for allocating items of income, gain, and expense as required by Section 704(c) of the Code including a method that may result in a Partner receiving a disproportionately larger share of the Partnership tax depreciation deductions, and such election shall be binding on all Partners; provided, however, the Partnership shall allocate items of income, gain, loss and deduction with respect to the assets contributed to REIT I Operating Partnership pursuant to the Contribution and Exchange Agreement using the “traditional method” under Regulations Section 1.704-3(b).

(g)Curative Allocations. The allocations set forth in Sections 5.1(b) and 5.1(c) of this Agreement (the “Regulatory Allocations”) are intended to comply with certain requirements of the Regulations. The General Partner is authorized to offset all Regulatory Allocations either with other Regulatory Allocations or with special allocations of other items of Partnership income, gain, loss or deduction pursuant to this Section 5.1(g). Therefore, notwithstanding any other provision of this Section 5.1 (other than the Regulatory Allocations), the General Partner shall make such offsetting special allocations of Partnership income, gain, loss or deduction in whatever manner it deems appropriate so that, after such offsetting allocations are made, each Partner’s Capital Account is, to the extent possible, equal to the Capital Account balance such Partner would have had if the Regulatory Allocations were not part of this Agreement and all Partnership items were allocated pursuant to Sections 5.1(a), 5.1(d) and 5.1(e).

EAST\180070029.1

5.2Distributions.

(a)Cash Available for Distribution. The Partnership shall distribute cash on a quarterly (or, at the election of the General Partner, more or less frequently) basis, in an amount determined by the General Partner in its sole and absolute discretion, to the Partners who are Partners on the Partnership Record Date with respect to such quarter (or other distribution period) in the following order of priority:

(i)first, to the holders of Preferred Units, in such amounts as is required for the Partnership to pay all distributions and any other amounts with respect to such Preferred Units accumulated, due or payable in accordance with the instruments designating such Preferred Units through the last day of such quarter or other distribution period (such distributions shall be made to such Partners in such order of priority and with such preferences as have been established with respect to such Preferred Units as of the last day of such quarter or other distribution period); and

(ii)thereafter, to the holders of the Common Units, including the General Partner, in amounts proportionate to their respective Percentage Interests in the Common Units on the applicable Partnership Record Date;

provided, however, that if a new or existing Partner acquires additional Partnership Units in exchange for a Capital Contribution on any date other than the next day after a Partnership Record Date, the cash distribution attributable to such additional Partnership Units (other than Partnership Units acquired by the General Partner in connection with the issuance of additional REIT Shares, or other interests in the General Partner) relating to the Partnership Record Date next following the issuance of such additional Partnership Units (or relating to the Partnership Record Date if such Partnership Units are acquired on a Partnership Record Date) shall be reduced in the proportion to (i) the number of days that such additional Partnership Units are held by such Partner bears to (ii) the number of days between such Partnership Record Date (inclusive of such Partnership Record Date) and the immediately preceding Partnership Record Date (exclusive of such immediately preceding Partnership Record Date).

(b)Withholding; Partnership Loans. Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that it determines to be necessary or appropriate to cause the Partnership to comply with any withholding requirements established under the Code or any other federal, state or local law including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership is required to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to any Partner or assignee (including by reason of Section 1446 of the Code), either (i) if the actual amount to be distributed to thePartner equals or exceeds the amount required to be withheld by the Partnership, the amount withheld shall be treated as a distribution of cash in the amount of such withholding to such Partner, or (ii) if the actual amount to be distributed to the Partner is less than the amount required to be withheld by the Partnership, the excess of the amount required to be withheld over the actual amount to be distributed shall be treated as a loan (a “Partnership Loan”) from the Partnership to the Partner on the day the Partnership pays over such amount to a taxing authority. A Partnership Loan shall be repaid through withholding by the Partnership with respect to subsequent distributions to the applicable Partner or assignee. In the event that a Limited Partner (a “Defaulting Limited Partner”) fails to pay any amount owed to the Partnership with respect to the Partnership Loan within 15 days after demand for payment thereof is made by the Partnership on the Limited Partner, the General Partner, in its sole and absolute discretion, may elect to make the payment to the Partnership on behalf of such Defaulting Limited

EAST\180070029.1

Partner. In such event, on the date of payment, the General Partner shall be deemed to have extended a loan (a “General Partner Loan”) to the Defaulting Limited Partner in the amount of the payment made by the General Partner and shall succeed to all rights and remedies of the Partnership against the Defaulting Limited Partner as to that amount. Without limitation, the General Partner shall have the right to receive any distributions that otherwise would be made by the Partnership to the Defaulting Limited Partner until such time as the General Partner Loan has been paid in full, and any such distributions so received by the General Partner shall be treated as having been received by the Defaulting Limited Partner and immediately paid to the General Partner.

Any amounts treated as a Partnership Loan or a General Partner Loan pursuant to this Section 5.2(b) shall bear interest at the lesser of (i) the base rate on corporate loans at large United States money center commercial banks, as published from time to time in The Wall Street Journal, or (ii) the maximum lawful rate of interest on such obligation, such interest to accrue from the date the Partnership or the General Partner, as applicable, is deemed to extend the loan until such loan is repaid in full.

(c)Limitation on Distributions. In no event may a Partner receive a distribution of cash with respect to a Partnership Unit if such Partner is entitled to receive a cash distribution as the holder of record of a REIT Share for which all or part of such Partnership Unit has been or will be exchanged.

5.3REIT Distribution Requirements. The General Partner shall use its commercially reasonable efforts to cause the Partnership to distribute amounts sufficient to enable the General Partner to pay stockholder dividends that will allow the General Partner to (i) meet its distribution requirement for qualification as a REIT as set forth in Section 857 of the Code and (ii) avoid any federal income or excise tax liability imposed by the Code.

5.4No Right to Distributions In Kind. No Partner shall be entitled to demand property other than cash in connection with any distributions by the Partnership.

5.5Limitations of Return of Capital Contributions. Notwithstanding any of the provisions of this Article 5, no Partner shall have the right to receive and the General Partner shall not have the right to make, a distribution that includes a return of all or part of a Partner’s Capital Contributions, unless after giving effect to the return of a Capital Contribution, the sum of all Partnership liabilities, other than the liabilities to a Partner for the return of his Capital Contribution, does not exceed the fair market value of the Partnership’s assets.

5.6Distributions Upon Liquidation. Upon liquidation of the Partnership, after payment of, or adequate provision for, debts and obligations of the Partnership, including any Partner loans, any remaining assets of the Partnership shall be distributed to the Partners as follows:

(a)first, to the holders of Preferred Units, in such amounts as is required for them to receive the Liquidation Preference with respect to the Preferred Units held by them in accordance with the instruments designating such Preferred Units (such distributions shall be made to such Partners in such order of priority and with such preferences as have been established with respect to such Preferred Units);

(b)thereafter, to the holders of the Common Units, including the General Partner, in amounts proportionate to their respective Percentage Interests in the Common Units.

EAST\180070029.1

To the extent deemed advisable by the General Partner, appropriate arrangements (including the use of a liquidating trust) may be made to assure that adequate funds are available to pay any contingent debts or obligations.

5.7Substantial Economic Effect. It is the intent of the Partners that the allocations of Profit and Loss under this Agreement have substantial economic effect, or be consistent with the Partners’ interests in the Partnership, within the meaning of Section 704(b) of the Code as interpreted by the Regulations promulgated pursuant thereto. Article 5 and other relevant provisions of this Agreement shall be interpreted in a manner consistent with such intent.

ARTICLE 6

RIGHTS, OBLIGATIONS AND

POWERS OF THE GENERAL PARTNER

6.1Management of the Partnership.

(a)Except as otherwise expressly provided in this Agreement, the General Partner shall have full, complete and exclusive discretion to manage and control the business of the Partnership for the purposes herein stated, and shall make all decisions affecting the business and assets of the Partnership. Subject to the restrictions specifically contained in this Agreement, the powers of the General Partner shall include, without limitation, the authority to take the following actions, as deemed necessary or desirable in the sole and absolute discretion of the General Partner, on behalf of the Partnership (or any Subsidiary or Subsidiary Partnership):

(i)to acquire, purchase, own, operate, lease and dispose of (other than in a “prohibited transaction” within the meaning of Section 857(b)(6)(B)(iii) of the Code) any real property and any other property or assets including, but not limited to, notes and mortgages, that the General Partner determines are necessary or appropriate or in the best interests of the business of the Partnership;

(ii)to construct buildings and make other improvements on the Properties owned or leased by the Partnership;

(iii)to authorize, issue, sell, redeem or otherwise purchase any Partnership Interests or any securities (including secured and unsecured debt obligations of the Partnership, debt obligations of the Partnership convertible into any class or series of Partnership Interests, or options, rights, warrants or appreciation rights relating to any Partnership Interests) of the Partnership;  

(iv)to borrow or lend money for the Partnership, issue or receive evidences of indebtedness in connection therewith, refinance, increase the amount of, modify, amend or change the terms of, or extend the time for the payment of, any such indebtedness, and secure such indebtedness by mortgage, deed of trust, pledge or other lien on the Partnership’s assets;

(v)to pay, either directly or by reimbursement, for all Administrative Expenses to third parties or to the General Partner or its Affiliates as set forth in this Agreement;

(vi)to guarantee or become a co-maker of indebtedness of the General Partner or any Subsidiary thereof, refinance, increase the amount of, modify, amend or change the

EAST\180070029.1

terms of, or extend the time for the payment of, any such guarantee or indebtedness, and secure such guarantee or indebtedness by mortgage, deed of trust, pledge or other lien on the Partnership’s assets;

(vii)to use assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with this Agreement, including, without limitation, payment, either directly or by reimbursement, of all Administrative Expenses of the General Partner, the Partnership or any Subsidiary of either, to third parties or to the General Partner as set forth in this Agreement;

(viii)to lease all or any portion of any of the Partnership’s assets, whether or not the terms of such leases extend beyond the termination date of the Partnership and whether or not any portion of the Partnership’s assets so leased are to be occupied by the lessee, or, in turn, subleased in whole or in part to others, for such consideration and on such terms as the General Partner may determine;

(ix)to prosecute, defend, arbitrate, or compromise any and all claims or liabilities in favor of or against the Partnership, on such terms and in such manner as the General Partner may reasonably determine, and similarly to prosecute, settle or defend litigation with respect to the Partners, the Partnership, or the Partnership’s assets;

(x)to file applications, communicate, and otherwise deal with any and all governmental agencies having jurisdiction over, or in any way affecting, the Partnership’s assets or any other aspect of the Partnership business;

(xi)to make or revoke any election permitted or required of the Partnership by any taxing authority;

(xii)to maintain such insurance coverage for public liability, fire and casualty, and any and all other insurance for the protection of the Partnership, for the conservation of Partnership assets, or for any other purpose convenient or beneficial to the Partnership, in such amounts and such types, as it shall determine from time to time;

(xiii)to determine whether or not to apply any insurance proceeds for any Property to the restoration of such Property or to distribute the same;

(xiv)to establish one or more divisions of the Partnership, to hire and dismiss employees of the Partnership or any division of the Partnership, and to retain legal counsel, accountants, consultants, real estate brokers, and such other persons, as the General Partner may deem necessary or appropriate in connection with the Partnership business and to pay therefor such reasonable remuneration as the General Partner may deem reasonable and proper;

(xv)to retain other services of any kind or nature in connection with the Partnership business, and to pay therefor such remuneration as the General Partner may deem reasonable and proper;

(xvi)to negotiate and conclude agreements on behalf of the Partnership with respect to any of the rights, powers and authority conferred upon the General Partner;

EAST\180070029.1

(xvii)to maintain accurate accounting records and to file promptly all federal, state and local income tax returns on behalf of the Partnership;

(xviii)to distribute Partnership cash or other Partnership assets in accordance with this Agreement;

(xix)to form or acquire an interest in, and contribute property to, any further limited or general partnerships, limited liability companies, joint ventures or other relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the contributions of property to, Subsidiaries of the Partnership and any other Person in which it has an equity interest from time to time);

(xx)to establish Partnership reserves for working capital, capital expenditures, contingent liabilities, or any other valid Partnership purpose;

(xxi)to merge, consolidate or combine the Partnership with or into another Person, subject to any limitations set forth in this Agreement, including those set forth in Articles 7 and 12;

(xxii)to do any and all acts and things necessary or prudent to ensure that the Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Code;

(xxiii)to take any and all actions necessary to adopt or modify any distribution reinvestment plan of the Partnership or the General Partner;

(xxiv)to take any and all actions necessary to maintain the General Partner’s status as a REIT as set forth in Section 3.1; and

(xxv)to take such other action, execute, acknowledge, swear to or deliver such other documents and instruments, and perform any and all other acts that the General Partner deems necessary or appropriate for the formation, continuation and conduct of the business and affairs of the Partnership (including, without limitation, all actions consistent with allowing the General Partner at all times to qualify as a REIT unless the General Partner voluntarily terminates its REIT status) and to possess and enjoy all of the rights and powers of a general partner as provided by the Act.

(b)Except as otherwise provided herein, to the extent the duties of the General Partner require expenditures of funds to be paid to third parties, the General Partner shall not have any obligations hereunder except to the extent that Partnership funds are reasonably available to it for the performance of such duties, and nothing herein contained shall be deemed to authorize or require the General Partner, in its capacity as such, to expend its individual funds for payment to third parties or to undertake any individual liability or obligation on behalf of the Partnership.

6.2Delegation of Authority. The General Partner may delegate any or all of its powers, rights and obligations hereunder, and may appoint, employ, contract or otherwise deal with any Person for the transaction of the business of the Partnership, which Person may, under supervision of the General Partner, perform any acts or services for the Partnership as the General Partner may approve.

EAST\180070029.1

6.3Indemnification and Exculpation of Indemnitees.

(a)The Partnership shall indemnify to the fullest extent allowed under applicable law, an Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including reasonable legal fees and expenses), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits orproceedings, civil, criminal, administrative or investigative, that relate to the operations of the Partnership as set forth in this Agreement in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise.

Any indemnification pursuant to this Section 6.3 shall be made only out of the assets of the Partnership.

(b)The indemnification provided by this Section 6.3 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity.

(c)The Partnership may purchase and maintain insurance, on behalf of the Indemnitees and such other Persons as the General Partner shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Partnership’s activities, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement.

(d)For purposes of this Section 6.3, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute fines within the meaning of this Section 6.3; and actions taken or omitted by the Indemnitee with respect to an employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the Partnership.

(e)In no event may an Indemnitee subject the Limited Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.

(f)An Indemnitee shall not be denied indemnification in whole or in part under this Section 6.3 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

(g)The provisions of this Section 6.3 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons.

(h)Neither the amendment nor repeal of this Section 6.3, nor the adoption or amendment of any other provision of the Agreement inconsistent with this Section 6.3, shall apply to or affect in any respect the applicability with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.

EAST\180070029.1

6.4Liability of the General Partner.

(a)Notwithstanding anything to the contrary set forth in this Agreement, the General Partner shall not be liable for monetary damages to the Partnership or any Partners for losses sustained or liabilities incurred as a result of errors in judgment or of any act or omission if the General Partner acted ingood faith. The General Partner shall not be in breach of any duty that the General Partner may owe to the Limited Partners or the Partnership or any other Persons under this Agreement or of any duty stated or implied by law or equity provided the General Partner, acting in good faith, abides by the terms of this Agreement.

(b)The Limited Partners expressly acknowledge that the General Partner is acting on behalf of the Partnership, itself and its stockholders collectively, that the General Partner is under no obligation to consider the separate interests of the Limited Partners (including, without limitation, the tax consequences to Limited Partners or the tax consequences of some, but not all, of the Limited Partners) in deciding whether to cause the Partnership to take (or decline to take) any actions. In the event of a conflict between the interests of its stockholders on one hand and the Limited Partners on the other, the General Partner shall endeavor in good faith to resolve the conflict in a manner not adverse to either its stockholders or the Limited Partners; provided, however, that for so long as the General Partner directly owns a controlling interest in the Partnership, any such conflict that the General Partner, in its sole and absolute discretion, determines cannot be resolved in a manner not adverse to either its stockholders or the Limited Partner shall be resolved in favor of the stockholders. The General Partner shall not be liable for monetary damages for losses sustained, liabilities incurred, or benefits not derived by Limited Partners in connection with such decisions, provided that the General Partner has acted in good faith.

(c)Subject to its obligations and duties as General Partner set forth in Section 6.1 hereof, the General Partner may exercise any of the powers granted to it under this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents. The General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by it in good faith.

(d)Notwithstanding any other provisions of this Agreement or the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such action or omission is necessary or advisable in order (i) to protect the ability of the General Partner to continue to qualify as a REIT or (ii) to prevent the General Partner from incurring any taxes under Section 857, Section 4981, or any other provision of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners.

(e)Any amendment, modification or repeal of this Section 6.4 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the General Partner’s liability to the Partnership and the Limited Partners under this Section 6.4 as in effect immediately prior to such amendment, modification or repeal with respect to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when claims relating to such matters may arise or be asserted.

6.5Reimbursement of General Partner.

(a)Except as provided in this Section 6.5 and elsewhere in this Agreement (including the provisions of Articles 5 and 6 regarding distributions, payments, and allocations to which it

EAST\180070029.1

may be entitled), the General Partner shall not be compensated for its services as general partner of the Partnership.

(b)REIT Expenses and Administrative Expenses shall be obligations of the Partnership and the General Partner shall be entitled to reimbursement for all REIT Expenses and Administrative Expenses incurred by the General Partner on behalf of the Partnership.  Reimbursement of REIT Expenses and Administrative Expenses shall be treated as an expense of the Partnership and not as allocations of Partnership income or gain.

(c)The General Partner shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its sole and absolute discretion, for all Administrative Expenses.

6.6Outside Activities. Subject to the Articles of Incorporation and any agreements entered into by the General Partner or its Affiliates with the Partnership or a Subsidiary, any officer, director, employee, agent, trustee, Affiliate or stockholder of the General Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities substantially similar or identical to those of the Partnership. Neither the Partnership nor any of the Limited Partners shall have any rights by virtue of this Agreement in any such business ventures, interest or activities. None of the Limited Partners nor any other Person shall have any rights by virtue of this Agreement or the partnership relationship established hereby in any such business ventures, interests or activities, and the General Partner shall have no obligation pursuant to this Agreement to offer any interest in any such business ventures, interests and activities to the Partnership or any Limited Partner, even if such opportunity is of a character which, if presented to the Partnership or any Limited Partner, could be taken by such Person.

6.7Employment or Retention of Affiliates.

(a)Any Affiliate of the General Partner may be employed or retained by the Partnership and may otherwise deal with the Partnership (whether as a buyer, lessor, lessee, manager, furnisher of goods or services, broker, agent, lender or otherwise) and may receive from the Partnership any compensation, price, or other payment therefor which the General Partner determines to be fair and reasonable.

(b)The Partnership may lend or contribute to its Subsidiaries or other Persons in which it has an equity investment, and such Persons may borrow funds from the Partnership, on terms and conditions established in the sole and absolute discretion of the General Partner. The foregoing authority shall not create any right or benefit in favor of any Subsidiary or any other Person.

(c)The Partnership may transfer assets to joint ventures, other partnerships, corporations or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions as the General Partner deems are consistent with this Agreement and applicable law.

(d)Except as expressly permitted by this Agreement, neither the General Partner nor any of its Affiliates shall sell, transfer or convey any property to, or purchase any property from, the Partnership, directly or indirectly, except pursuant to transactions that are on terms that are fair and reasonable to the Partnership.

6.8General Partner Participation. The General Partner agrees that all business activities of the General Partner, including activities pertaining to the acquisition, development or ownership of Properties,

EAST\180070029.1

shall be conducted through the Partnership or one or more Subsidiaries of thePartnership (including a taxable REIT subsidiary within the meaning of Section 856(l) of the Code); provided, however, that the General Partner is allowed to make a direct acquisition, but if and only if, such acquisition is made in connection with the issuance of Additional Securities, which direct acquisition and issuance have been approved and determined to be in the best interests of the General Partner and the Partnership by a majority of the board of directors of the General Partner.

6.9Title to Partnership Assets. Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the GeneralPartner or one or more nominees, as the General Partner may determine, including Affiliates of the General Partner. The General Partner hereby declares and warrants that any Partnership assets for which legal title is held in the name of the General Partner or any nominee or Affiliate of the General Partner shall be held by the General Partner for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use its best efforts to cause beneficial and record title to such assets to be vested in the Partnership as soon as reasonably practicable. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which legal title to such Partnership assets is held.

6.10Miscellaneous. In the event the General Partner redeems any REIT Shares (other than REIT Shares redeemed in accordance with the share redemption program of the General Partner through proceeds received from the General Partner’s distribution reinvestment plan, which proceeds so used shall not become a Capital Contribution of the General Partner), then the General Partner shall cause the Partnership to purchase from the General Partner an equivalent number of Common Units as determined based on the application of the Conversion Factor on the same terms that the General Partner redeemed such REIT Shares. Moreover, if the General Partner makes a cash tender offer or other offer to acquire REIT Shares, then the General Partner shall cause the Partnership to make a corresponding offer to the General Partner to acquire an equivalent number of Common Units held by the General Partner as determined based on the application of the Conversion Factor. In the event any REIT Shares are exchanged by the General Partner pursuant to such offer, the Partnership shall redeem an equivalent number of the General Partner’s Common Units as determined based on the application of the Conversion Factor for an equivalent purchase price.

6.11Reliance by Third Parties.  Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority, without consent or approval of any other Partner or Person, to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any contracts on behalf of the Partnership, and take any and all actions on behalf of the Partnership and such Person shall be entitled to deal with the General Partner as if the General Partner were the Partnership’s sole party in interest, both legally and beneficially.  Each Limited Partner hereby waives any and all defenses or other remedies which may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing. In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or its representatives.  Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (i) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (ii) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership and (iii) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership.

EAST\180070029.1

ARTICLE 7

CHANGES IN GENERAL PARTNER

7.1Transfer of the General Partner’s Partnership Interest.

(a)The General Partner shall not transfer all or any portion of its General Partnership Interest or withdraw as General Partner except as provided in or in connection with a transaction contemplated by Section 7.1(b), (c) or (d).

(b)Except as otherwise provided in Section 7.1(c) or (d) hereof, the General Partner shall not engage in any merger, consolidation or other combination with or into another Person or sale of all or substantially all of its assets, (other than in connection with a change in the General Partner’s state of incorporation or organizational form) in each case which results in a change of control of the General Partner (a “Transaction”), unless:

(i)the approval of the holders of a majority of the Common Units is obtained;

(ii)as a result of such Transaction all Limited Partners will receive for each Common Unit an amount of cash, securities, or other property equal to the product of the Conversion Factor and the greatest amount of cash, securities or other property paid in the Transaction to a holder of one REIT Share in consideration of one REIT Share, provided that if, in connection with the Transaction, a purchase, tender or exchange offer (“Offer”) shall have been made to and accepted by the holders of more than 50% of the outstanding REIT Shares, each holder of Common Units shall be given the option to exchange its Common Units for the greatest amount of cash, securities, or other property which a Limited Partner would have received had it (A) exercised its Exchange Right and (B) sold, tenderedor exchanged pursuant to the Offer the REIT Shares received upon exercise of the Exchange Right immediately prior to the expiration of the Offer; or

(iii)the General Partner is the surviving entity in the Transaction and either (A) the holders of REIT Shares do not receive cash, securities, or other property in the Transaction or (B) all Limited Partners (other than the General Partner or any Subsidiary of the General Partner) receive an amount of cash, securities, or other property (expressed as an amount per REIT Share) that is no less than the product of the Conversion Factor and the greatest amount of cash, securities, or other property (expressed as an amount per REIT Share) received in the Transaction by any holder of REIT Shares.

(c)Notwithstanding Section 7.1(b), the General Partner may merge with or into or consolidate with another entity if immediately after such merger or consolidation (i) substantially all of the assets of the successor or surviving entity (the “Surviving General Partner”), other than Partnership Units held by the General Partner, are contributed, directly or indirectly, to the Partnership as a Capital Contribution in exchange for Partnership Units with a fair market value equal to the value of the assets so contributed as determined by the Surviving General Partner in good faith and (ii) the Surviving General Partner expressly agrees to assume all obligations of the General Partner, as appropriate, hereunder. Upon such contribution and assumption, the Surviving General Partner shall have the right and duty to amend this Agreement as set forth in this Section 7.1(c). The Surviving General Partner shall in good faith arrive at a new method for the calculation of the Cash Amount, the REIT Shares Amount and Conversion Factor for a Partnership Unit after any such merger or consolidation so as to approximate the existing method for such calculation as closely as reasonably possible. Such calculation shall take into account, among other things, the

EAST\180070029.1

kind and amount of securities, cash and other property that was receivable upon such merger or consolidation by a holder of REIT Shares or options, warrants or other rights relating thereto, and which a holder of Partnership Units could have acquired had such Partnership Units been exchanged immediately prior to such merger or consolidation.  Such amendment to this Agreement shall provide for adjustment to such method of calculation, which shall be as nearly equivalent as may be practicable to the adjustments provided for with respect to the Conversion Factor. The Surviving General Partner also shall in good faith modify the definition of REIT Shares and make such amendments to Section 8.5 hereof so as to approximate the existing rights and obligations set forth in Section 8.5 as closely as reasonably possible. The above provisions of this Section 7.1(c) shall similarly apply to successive mergers or consolidations permitted hereunder.

In respect of any transaction described in the preceding paragraph, the General Partner is required to use its commercially reasonable efforts to structure such transaction to avoid causing the Limited Partners to recognize a gain for federal income tax purposes by virtue of the occurrence of or their participation in such transaction, provided such efforts are consistent with the exercise of the fiduciary duties of the board of directors of the General Partner to the Stockholders under applicable law.

(d)Notwithstanding Section 7.1(b),

(i)a General Partner may transfer all or any portion of its General Partnership Interest to (A) a wholly-owned Subsidiary of such General Partner or (B) the owner of all of the ownership interests of such General Partner, and following a transfer of all of its General Partnership Interest, may withdraw as General Partner; and

(ii)the General Partner may engage in Transactions not required by law or by the rules of any National Securities Exchange on which the REIT Shares are listed to be submitted to the vote of the holders of the REIT Shares.

7.2Admission of a Substitute or Additional General Partner. A Person shall be admitted as a substitute or additional General Partner of the Partnership only if the following terms and conditions are satisfied:

(a)the Person to be admitted as a substitute or additional General Partner shall have accepted and agreed to be bound by all the terms and provisions of this Agreement by executing a counterpart thereof and such other documents or instruments as may be required or appropriate in order to effect the admission of such Person as a General Partner, and a certificate evidencing the admission of such Person as a General Partner shall have been filed for recordation and all other actions required by Section 2.5 hereof in connection with such admission shall have been performed;

(b)if the Person to be admitted as a substitute or additional General Partner is a corporation or a partnership it shall have provided the Partnership with evidence satisfactory to counsel for the Partnership of such Person’s authority to become a General Partner and to be bound by the terms and provisions of this Agreement; and

(c)counsel for the Partnership shall have rendered an opinion (relying on such opinions from other counsel and the state or any other jurisdiction as may be necessary) that the admission of the person to be admitted as a substitute or additional General Partner is in conformity with the Act, that none of the actions taken in connection with the admission of such Person as a substitute or additional General Partner will cause (i) the Partnership to be classified other than as

EAST\180070029.1

a partnership for federal income tax purposes, or (ii) the loss of any Limited Partner’s limited liability.

7.3Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General Partner.

(a)Upon the occurrence of an Event of Bankruptcy as to a General Partner (and its removal pursuant to Section 7.4(a) hereof) or the death, withdrawal, removal or dissolution of a General Partner (except that, if a General Partner is on the date of such occurrence a partnership, the withdrawal, death, dissolution, Event of Bankruptcy as to, or removal of a partner in, such partnership shall be deemed not to be a dissolution of such General Partner if the business of such General Partner is continued by the remaining partner or partners), the Partnership shall be dissolved and terminated unless the Partnership is continued pursuant to Section 7.3(b) hereof. The merger of the General Partner with or into any entity that is admitted as a substitute or successor General Partner pursuant to Section 7.2 hereof shall not be deemed to be the withdrawal, dissolution or removal of the General Partner.

(b)Following the occurrence of an Event of Bankruptcy as to a General Partner (and its removal pursuant to Section 7.4(a) hereof) or the death, withdrawal, removal or dissolution of a General Partner (except that, if a General Partner is on the date of such occurrence a partnership, the withdrawal, death, dissolution, Event of Bankruptcy as to, or removal of a partner in, such partnership shall be deemed not to be a dissolution of such General Partner if the business of such General Partner is continued by the remaining partner or partners), the holders of Common Units, within 90 days after such occurrence, may elect to continue the business of the Partnership for the balance of the term specified in Section 2.4 hereof by selecting, subject to Section 7.2 hereof and any other provisions of this Agreement, a substitute General Partner by consent of a majority in interest of the Common Units. If the holders of Common Units elect to continue the business of the Partnership and admit a substitute General Partner, the relationship with the Partners and of any Person who has acquired an interest of a Partner in the Partnership shall be governed by this Agreement.

7.4Removal of a General Partner.

(a)Upon the occurrence of an Event of Bankruptcy as to, or the dissolution of, a General Partner, such General Partner shall be deemed to be removed automatically; provided, however, that if a General Partner is on the date of such occurrence a partnership, the withdrawal, death, dissolution, Event of Bankruptcy as to or removal of a partner in such partnership shall be deemed not to be a dissolution of the General Partner if the business of such General Partner is continued by the remaining partner or partners. The Limited Partners may not remove the General Partner, with or without cause.

(b)If a General Partner has been removed pursuant to this Section 7.4 and the Partnership is continued pursuant to Section 7.3 hereof, such General Partner shall promptly transfer and assign its General Partnership Interest in the Partnership to the substitute General Partner approved by a majority in interest of the Limited Partners in accordance with Section 7.3(b) hereof and otherwise admitted to the Partnership in accordance with Section 7.2 hereof. At the time of assignment, the removed General Partner shall be entitled to receive from the substitute General Partner the fair market value of the General Partnership Interest of such removed General Partner as reduced by any damages caused to the Partnership by such General Partner. Such fair market value shall be determined by an appraiser mutually agreed upon by the General Partner and a majority in interest of the Limited Partners within 10 days following the removal of the General Partner. In the event that the parties are unable to agree upon an appraiser, the removed General

EAST\180070029.1

Partner and a majority in interest of the Limited Partners each shall select an appraiser. Each such appraiser shall complete an appraisal of the fair market value of the removed General Partner’s General Partnership Interest within 30 days of the General Partner’s removal, and the fair market value of the removed General Partner’s General Partnership Interest shall be the average of the two appraisals; provided, however, that if the higher appraisal exceeds the lower appraisal by more than 20% of the amount of the lower appraisal, the two appraisers, no later than 40 days after the removal of the General Partner, shall select a third appraiser who shall complete an appraisal of the fair market value of the removed General Partner’s General Partnership Interest no later than 60 days after the removal of the General Partner. In such case, the fair market value of the removed General Partner’s General Partnership Interest shall be the average of the two appraisals closest in value.

(c)The General Partnership Interest of a removed General Partner, during the time after default until transfer under Section 7.4(b), shall be converted to that of a special Limited Partner; provided, however, such removed General Partner shall not have any rights to participate in the management and affairs of the Partnership, and shall not be entitled to any portion of the income, expense, profit, gain or loss allocations or cash distributions allocable or payable, as the case may be, to the Limited Partners. Instead, such removed General Partner shall receive and be entitled only to retain distributions or allocations of such items that it would have been entitled to receive in its capacity as General Partner, until the transfer is effective pursuant to Section 7.4(b).

(d)All Partners shall have given and hereby do give such consents, shall take such actions and shall execute such documents as shall be legally necessary and sufficient to effect all the foregoing provisions of this Section.

ARTICLE 8

RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS

8.1Management of the Partnership. The Limited Partners shall not participate in the management or control of Partnership business nor shall they transact any business for or on behalf of the Partnership, nor shall they have the power to sign for or bind the Partnership, such powers being vested solely and exclusively in the General Partner.

8.2Power of Attorney. Each Limited Partner hereby irrevocably appoints the General Partner its true and lawful attorney-in-fact, who may act for each Limited Partner and in its name, place and stead, and for its use and benefit, to sign, acknowledge, swear to, deliver, file or record, at the appropriate public offices, any and all documents, certificates, and instruments as may be deemed necessary or desirable by the General Partner to carry out fully the provisions of this Agreement and the Act in accordance with their terms, which power of attorney is coupled with an interest and shall survive the death, dissolution or legal incapacity of the Limited Partner, or the transfer by the Limited Partner of any part or all of its Partnership Interest.

8.3Limitation on Liability of Limited Partners. No Limited Partner shall be liable for any debts, liabilities, contracts or obligations of the Partnership. A Limited Partner shall be liable to the Partnership only to make payments of its Capital Contribution, if any, as and when due hereunder. After its Capital Contribution is fully paid, no Limited Partner shall, except as otherwise required by the Act, be required to make any further Capital Contributions or other payments or lend any funds to the Partnership.

8.4Ownership by Limited Partner of Corporate General Partner or Affiliate. No Limited Partner shall at any time, either directly or indirectly, own any stock or other interest in the General Partner or in any Affiliate thereof, if such ownership by itself or in conjunction with other stock or other interests owned by other Limited Partners would, in the opinion of counsel for the Partnership, jeopardize the

EAST\180070029.1

classification of the Partnership as a partnership for federal tax purposes. The General Partner shall be entitled to make such reasonable inquiry of the Limited Partners as is required to establish compliance by the Limited Partners with the provisions of this Section.

8.5Exchange Right.

(a)Subject to Sections 8.5(b), 8.5(c), 8.5(d), 8.5(e), and 8.5(g) and the provisions of any agreements between the Partnership and one or more holders of Common Units with respect to Common Units held by them, each holder of Common Units shall have the right (the “Exchange Right”) to require the Partnership to redeem on a Specified Exchange Date all or a portion of the Common Units held by such Limited Partner at an exchange price equal to and in the form of the Cash Amount to be paid by the Partnership, provided that such Common Units shall have been outstanding for at least one year.  The Exchange Right shall be exercised pursuant to a Notice of Exchange delivered to the Partnership (with a copy to the General Partner) by the Limited Partner who is exercising the Exchange Right (the “Exchanging Partner”); provided, however, that the Partnership shall not be obligated to satisfy such Exchange Right if the General Partner elects to purchase the Common Units subject to the Notice of Exchange pursuant to Section 8.5(b); and provided, further, that no holder of Common Units may deliver more than two Notices of Exchange during each calendar year. A Limited Partner may not exercise the Exchange Right for less than 1,000 Common Units or, if such Limited Partner holds less than 1,000 Common Units, all of the Common Units held by such Partner. The Exchanging Partner shall have no right, with respect to any Common Units so exchanged,to receive any distribution paid with respect to Common Units if the record date for such distribution is on or after the Specified Exchange Date.

(b)Notwithstanding the provisions of Section 8.5(a), a Limited Partner that exercises the Exchange Right shall be deemed to have offered to sell the Common Units described in the Notice of Exchange to the General Partner, and the General Partner may, in its sole and absolute discretion, elect to purchase directly and acquire such Common Units by paying to the Exchanging Partner either the Cash Amount or the REIT Shares Amount, as elected by the General Partner (in its sole and absolute discretion), on the Specified Exchange Date, whereupon the General Partner shall acquire the Common Units offered for exchange by the Exchanging Partner and shall be treated for all purposes of this Agreement as the owner of such Common Units. If the General Partner shall elect to exercise its right to purchase Common Units under this Section 8.5(b) with respect to a Notice of Exchange, it shall so notify the Exchanging Partner within five business days after the receipt by the General Partner of such Notice of Exchange. Unless the General Partner (in its sole and absolute discretion) shall exercise its right to purchase Common Units from the Exchanging Partner pursuant to this Section 8.5(b), the General Partner shall have no obligation to the Exchanging Partner or the Partnership with respect to the Exchanging Partner’s exercise of the Exchange Right. In the event the General Partner shall exercise its right to purchase Common Units with respect to the exercise of an Exchange Right in the manner described in the first sentence of this Section 8.5(b), the Partnership shall have no obligation to pay any amount to the Exchanging Partner with respect to such Exchanging Partner’s exercise of such Exchange Right, and each of the Exchanging Partner, the Partnership, and the General Partner, as the case may be, shall treat the transaction between the General Partner, as the case may be, and the Exchanging Partner for federal income tax purposes as a sale of the Exchanging Partner’s Common Units to the General Partner, as the case may be. Each Exchanging Partner agrees to execute such documents as the General Partner may reasonably require in connection with the issuance of REIT Shares upon exercise of the Exchange Right, including an assignment of the Common Units, and if the General Partner is relying upon the exemption from registration under the Securities Act of 1933, as amended, provided by Regulation D promulgated under the Securities Act of 1933, as amended, or any successor rule, a document pursuant to which the Exchanging Partner makes a representation that

EAST\180070029.1

it is an accredited investor; provided, however, that if the Exchanging Partner cannot make such representation, then the Exchanging Partner shall have no right to exercise its Exchange Right.

(c)Notwithstanding the provisions of Section 8.5(a) and 8.5(b), a Limited Partner shall not be entitled to exercise the Exchange Right if the delivery of REIT Shares to such Partner on the Specified Exchange Date by the General Partner pursuant to Section 8.5(b) (regardless of whether or not the General Partner would in fact exercise its rights under Section 8.5(b)) would, in the determination of the General Partner (i) result in such Partner or any other person owning, directly or indirectly, shares of stock of the General Partner in excess of the Aggregate Stock Ownership Limit (as defined in the Articles of Incorporation and calculated in accordance therewith) or the Common Stock Ownership Limit (as defined in the Articles of Incorporation and calculated in accordance therewith), except as provided in the Articles of Incorporation, (ii) result in REIT Shares being owned by fewer than 100 persons (determined without reference to any rules of attribution), except as provided in the Articles of Incorporation, (iii) result in the General Partner being “closely held” within the meaning of Section 856(h) of the Code, (iv) cause the General Partner to own, directly or constructively, 9.9% or more of the ownership interests in a tenant within the meaning of Section 856(d)(2)(B) of the Code, (v) cause a violation of the Securities Act of 1933, as amended, either for the exchange or other securities offerings, (vi) require such REIT Shares to be registered under the Securities Act of 1933, as amended, (vii) cause the General Partner to no longer qualify as a REIT, or (viii) cause the Partnership to be treated as a “publicly traded partnership” under Section 7704 of the Code. The General Partner, in its sole and absolute discretion, may waive the restriction on exchange set forth in this Section 8.5(c).

(d)Any Cash Amount to be paid to an Exchanging Partner pursuant to this Section 8.5 shall be paid on the Specified Exchange Date; provided, however, that the General Partner may elect to cause the Specified Exchange Date to be delayed for up to an additional 180 days to the extent required for the General Partner to cause additional REIT Shares to be issued to provide financing to be used to make such payment of the Cash Amount. Notwithstanding the foregoing, the General Partner agrees to use its commercially reasonable efforts to cause the closing of the acquisition of exchanged Common Units hereunder to occur as quickly as reasonably possible.

(e)Notwithstanding any other provision of this Agreement, the General Partner shall place appropriate restrictions on the ability of the Limited Partners to exercise their Exchange Rights as and if deemed necessary to ensure that the Partnership does not constitute a “publicly traded partnership” under Section 7704 of the Code. If and when the General Partner determines that imposing such restrictions is necessary, the General Partner shall give prompt written notice thereof to each of the Limited Partners, which notice shall state the restrictions the General Partner has instituted in order to avoid the Partnership being treated as a “publicly traded partnership” under Section 7704 of the Code.

(f)Each Limited Partner covenants and agrees with the General Partner that all Common Units delivered for exchange shall be delivered to the Partnership or the General Partner, as the case may be, free and clear of all liens; and, notwithstanding anything contained herein to the contrary, neither the General Partner nor the Partnership shall be under any obligation to acquire Common Units which are or may be subject to any liens. Each Limited Partner further agrees that, if any state or local property transfer tax is payable as a result of the transfer of its Common Units to the Partnership or the General Partner, such Limited Partner shall assume and pay such transfer tax.

EAST\180070029.1

(g)With respect to the Contribution Common Units, the Exchange Right provided for in this Article 8 shall not be exercisable or exercised by any holder of Contribution Common Units until such Contribution Common Units have been outstanding for at least two years.

(h)The exercise of an Exchange Right by a Limited Partner will be subject to compliance with securities laws applicable to the exchange and therefore the Exchange Right may not be exercisable in the absence of an effective registration statement or an available exemption from registration.

8.6Outside Activities of Limited Partners. Subject to (i) any other agreements entered into by a Limited Partner or any of its Affiliates with the General Partner, including the Restrictive Covenants Agreements between PM Contributor, Advisor Contributor, PM Holdings, Advisor Holdings and the General Partner dated as of the date hereof, and (ii) any fiduciary duty owed by a Limited Partner or any officer, director, employee, agent, representative, trustee, Affiliate, manager, member or stockholder of any such Limited Partner or assignee, to the General Partner by virtue of such Person’s position as a director of the General Partner, any Limited Partner, any assignee of such Limited Partner admitted pursuant to Section 9.3, or any officer, director, employee, agent, representative, trustee, Affiliate, manager, member or stockholder of any such Limited Partner or assignee, as applicable, shall be entitled to and may have business interests and engage in business activities in addition to those relating to the General Partner, including business interests and activities that are in direct or indirect competition with the General Partner or that are enhanced by the activities of the General Partner. Neither the General Partner nor any Limited Partner shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner or assignee admitted pursuant to Section 9.3. Subject to such agreements, none of the General Partner, Limited Partners nor any other Person shall have any rights by virtue of this Agreement in any business ventures of any other Person (other than to the extent expressly provided herein), and such Person shall have no obligation pursuant to this Agreement, subject to any other agreements entered into by a Limited Partner or its Affiliates with the General Partner or its Affiliates to offer any interest in any such business ventures to the General Partner, any other Limited Partner, or any such other Person, even if such opportunity is of a character that, if presented to the General Partner, any other Limited Partner or such other Person, could be taken by such Person.

8.7Rights of Limited Partners Relating to the General Partner.

(a) In addition to other rights provided by this Agreement or by the Act, and subject to Section 8.7(c), the General Partner shall deliver to each Limited Partner that is a holder of a Contribution Common Unit a copy of any information mailed to all of the common stockholders of the General Partner as soon as practicable after such mailing.

(b) The General Partner shall notify any Limited Partner, on request, of the then current Conversion Factor or any change made to the Conversion Factor.

(c) Notwithstanding any other provision of this Section 8.7, the General Partner may keep confidential from the Limited Partners (or any of them, individually), for such period of time as the General Partner determines to be reasonable, any information that (i) the General Partner believes to be in the nature of trade secrets or other information the disclosure of which the General Partner in good faith believes is not in its best interests or (ii) the General Partner is required by law or by agreement to keep confidential.

EAST\180070029.1

ARTICLE 9

TRANSFERS OF LIMITED PARTNERSHIP INTERESTS

9.1Purchase for Investment.

(a)Each Limited Partner hereby represents and warrants to the General Partner and to the Partnership that the acquisition of its Partnership Interests is made as a principal for its account for investment purposes only and not with a view to the resale or distribution of such Partnership Interest.

(b)Each Limited Partner agrees that it will not sell, assign or otherwise transfer its Partnership Interest or any fraction thereof, whether voluntarily or by operation of law or at judicial sale or otherwise, to any Person who does not make the representations and warranties to the General Partner set forth in Section 9.1(a) above and similarly agree not to sell, assign or transfer such Partnership Interest or fraction thereof to any Person who does not similarly represent, warrant and agree.

9.2Restrictions on Transfer of Limited Partnership Interests.

(a)Subject to the provisions of Sections 9.2(b), (c) and (d), no Limited Partner may offer, sell, assign, hypothecate, pledge or otherwise transfer all or any portion of its Limited Partnership Interest, or any of such Limited Partner’s economic rights as a Limited Partner, whether voluntarily or by operation of law or at judicial sale or otherwise (collectively, a “Transfer”) without the consent of the General Partner, which consent shall not unreasonably be withheld. Any such purported transfer undertaken without such consent shall be considered to be null and void ab initio and shall not be given effect. The General Partner may require, as a condition of any Transfer to which it consents, that the transferor assume all costs incurred by the Partnership in connection therewith.

(b)No Limited Partner may withdraw from the Partnership other than as a result of a permitted Transfer (i.e., a Transfer consented to as contemplated by clause (a) above or clause (c) below or a Transfer pursuant to Section 9.5 below) of all of its Partnership Units pursuant to this Article 9 or pursuantto an exchange of all of its Partnership Units pursuant to Section 8.5 or any instrument designating a Preferred Unit. Upon the permitted Transfer or redemption of all of a Limited Partner’s Partnership Interest, such Limited Partner shall cease to be a Limited Partner.

(c)Subject to Sections 9.2(e), (f) and (g) below, a Limited Partner may Transfer, with the consent of the General Partner, which consent shall not be unreasonably withheld, all or a portion of its Partnership Units to (i) its Affiliate; (ii) a parent or parent’s spouse, natural or adopted descendant or descendants, spouse of such descendant, or brother or sister, or a trust created by such Limited Partner for the benefit of such Limited Partner and/or any such Person(s), of which trust such Limited Partner or any such Person(s) is a trustee, (iii) a corporation controlled by a Person or Persons named in (i) above, or (iv) if the Limited Partner is an entity, its beneficial owners.

(d)Subject to Sections 9.2(e), (f) and (g) below, a Limited Partner may Transfer, with the consent of the General Partner, which consent may be granted or withheld in its sole and absolute discretion, all or a portion of its Partnership Units to (i) any lender or lenders, or agents acting on their behalf, to whom any Partnership Unit Interest is transferred pursuant to (y) the formation of any secured pledge or (z) the exercise of remedies under a pledge; or (ii) any special

EAST\180070029.1

purpose entities owned and used by the lenders or agents described in Section 9.2(d)(i) for the purpose of holding any such Partnership Unit.

(d)No Limited Partner may effect a Transfer of its Limited Partnership Interest, in whole or in part, if, in the opinion of legal counsel for the Partnership, such proposed Transfer would otherwise violate any applicable federal or state securities or blue sky law (including investment suitability standards).

(e)No Transfer by a Limited Partner of its Partnership Units, in whole or in part, may be made to any Person if (i) in the opinion of the General Partner based on the advice of legal counsel for the Partnership, the transfer would result in the Partnership’s being treated as an association taxable as a corporation (other than a qualified REIT subsidiary within the meaning of Section 856(i) of the Code), (ii) in the opinion of the General Partner based on the advice of legal counsel for the Partnership, it would adversely affect the ability of the General Partner to continue to qualify as a REIT or subject the General Partner to any additional taxes under Section 857 or Section 4981 of the Code, (iii) in the opinion of the General Partner, such transfer would cause any of the Partnership Units to be deemed to be “traded” on an “established securities market” or “readily tradable on a secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code and the Regulations promulgated thereunder, (iv) would cause the Partnership to become, with respect to any employee benefit plan subject to Title I of ERISA or to Section 4975 of the Code, a “party-in-interest” (as defined in Section 3(14) of ERISA) or a “disqualified person” (as defined in Section 4975(e)(2) of the Code) or (v) would, in the belief of the General Partner, cause any portion of the assets of the Partnership to constitute assets of any employee benefit plan pursuant to 29 CFR Section 2510.3-101.

(f)No transfer of any Partnership Units may be made to a lender to the Partnership or any Person who is related (within the meaning of Regulations Section 1.752-4(b)) to any lender to the Partnership whose loan constitutes a nonrecourse liability (within the meaning of Regulations Section 1.752-1(a)(2)), without the consent of the General Partner, which may be withheld in its sole and absolute discretion, provided that as a condition to such consent the lender will be required to enter into an arrangement with the Partnership and the General Partner to exchange or redeem for the Cash Amount any Partnership Units in which a security interest is held simultaneously with the time at which such lender would be deemed to be a partner in the Partnership for purposes of allocating liabilities to such lender under Section 752 of the Code.

(g)Any Transfer in contravention of any of the provisions of this Article 9 shall be void and ineffectual and shall not be binding upon, or recognized by, the Partnership.

(h)Prior to the consummation of any Transfer under this Article 9, the transferor and/or the transferee shall deliver to the General Partner such opinions, certificates and other documents as the General Partner shall request in connection with such Transfer.

9.3Admission of Substitute Limited Partner.

(a)Subject to the other provisions of this Article 9, an assignee of the Limited Partnership Interest of a Limited Partner (which shall be understood to include any purchaser, transferee, donee, or other recipient of any disposition of such Limited Partnership Interest) shall be deemed admitted as a Limited Partner of the Partnership only with the consent of the General Partner and upon the satisfactory completion of the following:

EAST\180070029.1

(i)The assignee shall have accepted and agreed to be bound by the terms and provisions of this Agreement by executing a counterpart or an amendment thereof, including a revised Exhibit A, and such other documents or instruments as the General Partner may require in order to effect the admission of such Person as a Limited Partner.

(ii)To the extent required, an amended Certificate evidencing the admission of such Person as a Limited Partner shall have been signed, acknowledged and filed for record in accordance with the Act.

(iii)The assignee shall have delivered a letter containing the representation set forth in Section 9.1(a) hereof and the agreement set forth in Section 9.1(b) hereof.

(iv)If the assignee is a corporation, partnership or trust, the assignee shall have provided the General Partner with evidence satisfactory to counsel for the Partnership of the assignee’s authority to become a Limited Partner under the terms and provisions of this Agreement.

(v)The assignee shall have executed a power of attorney containing the terms and provisions set forth in Section 8.2 hereof.

(vi)The assignee shall have paid all legal fees and other expenses of the Partnership and the General Partner and filing and publication costs in connection with its substitution as a Limited Partner.

(vii)The assignee shall have obtained the prior written consent of the General Partner to its admission as a Substitute Limited Partner, which consent may be given or denied in the exercise of the General Partner’s sole and absolute discretion.

(b)For the purpose of allocating Profits and Losses and distributing cash received by the Partnership, a Substitute Limited Partner shall be treated as having become, and appearing in the records of the Partnership as, a Partner upon the filing of the Certificate described in Section 9.3(a)(ii) hereof or, if no such filing is required, the later of the date specified in the transfer documents or the date on which the General Partner has received all necessary instruments of transfer and substitution.

(c)The General Partner shall cooperate with the Person seeking to become a Substitute Limited Partner by preparing the documentation required by this Section and making all official filings and publications. The Partnership shall take all such action as promptly as practicable after the satisfaction of the conditions in this Article 9 to the admission of such Person as a Limited Partner of the Partnership.

9.4Rights of Assignees of Partnership Interests.

(a)Subject to the provisions of Sections 9.1 and 9.2 hereof, except as required by operation of law, the Partnership shall not be obligated for any purposes whatsoever to recognize the assignment by any Limited Partner of its Partnership Interest until the Partnership has received notice thereof.

(b)Any Person who is the assignee of all or any portion of a Limited Partner’s Limited Partnership Interest, but does not become a Substitute Limited Partner and desires to make a further assignment of such Limited Partnership Interest, shall be subject to all the provisions of this Article

EAST\180070029.1

9 to thesame extent and in the same manner as any Limited Partner desiring to make an assignment of its Limited Partnership Interest.

9.5Effect of Bankruptcy, Death, Incompetence or Termination of a Limited Partner. The occurrence of an Event of Bankruptcy as to a Limited Partner, the death of a Limited Partner or a final adjudication that a Limited Partner is incompetent (which term shall include, but not be limited to, insanity) shall not cause the termination or dissolution of the Partnership, and the business of the Partnership shall continue if an order for relief in a bankruptcy proceeding is entered against a Limited Partner, the trustee or receiver of his estate or, if he dies, his executor, administrator or trustee, or, if he is finally adjudicated incompetent, his committee, guardian or conservator, shall have the rights of such Limited Partner for the purpose of settling or managing his estate property and such power as the bankrupt, deceased or incompetent Limited Partner possessed to assign all or any part of his Partnership Interest and to join with the assignee in satisfying conditions precedent to the admission of the assignee as a Substitute Limited Partner.

9.6Joint Ownership of Interests. A Partnership Interest may be acquired by two individuals as joint tenants with right of survivorship, provided that such individuals either are married or are related and share the same personal residence. The written consent or vote of both owners of any such jointly held Partnership Interest shall be required to constitute the action of the owners of such Partnership Interest; provided, however, that the written consent of only one joint owner will be required if the Partnership has been provided with evidence satisfactory to the counsel for the Partnership that the actions of a single joint owner can bind both owners under the applicable laws of the state of residence of such joint owners. Upon the death of one owner of a Partnership Interest held in a joint tenancy with a right of survivorship, the Partnership Interest shall become owned solely by the survivor as a Limited Partner and not as an assignee. The Partnership need not recognize the death of one of the owners of a jointly-held Partnership Interest until it shall have received notice of such death. Upon notice to the General Partner from either owner, the General Partner shall cause the Partnership Interest to be divided into two equal Partnership Interests, which shall thereafter be owned separately by each of the former owners.

ARTICLE 10

ADMISSION OF ADDITIONAL LIMITED PARTNERS

10.1Admission of Additional Limited Partners. No Person shall be admitted as an Additional Limited Partner without the consent of the General Partner, which consent shall be given or withheld in the General Partner’s sole and absolute discretion. A Person who makes a Capital Contribution to the Partnership in accordance with this Agreement or who exercises an option to receive Partnership Units shall be admitted to the Partnership as an Additional Limited Partner only with the consent of the General Partner and only upon furnishing to the General Partner (i) evidence of acceptance in form satisfactory to the General Partner of all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 8.2 and (ii) such other documents or instruments as may be required in the discretion of the General Partner to effect such Person’s admission as an Additional Limited Partner. The admission of any Person as an Additional Limited Partner shall become effective on the date upon which the name of such Person is recorded on the books and records of the Partnership, following the consent of the General Partner to such admission.

10.2Allocations to Additional Limited Partners. If any Additional Limited Partner is admitted to the Partnership on any day other than the first day of a Partnership Year, then Profits, Losses, eachitem thereof and all other items allocable among Partners and assignees for such Partnership Year shall be allocated among such Additional Limited Partner and all other Partners and assignees by taking into account their varying interests during the Partnership Year in accordance with Section 706(d) of the Code, using the interim closing of the books method (unless the General Partner, in its sole and absolute discretion,

EAST\180070029.1

elects to adopt a daily, weekly or monthly proration method, in which event Profits, Losses, and each item thereof would be prorated based upon the applicable period selected by the General Partner). Solely for purposes of making such allocations, each of such item for the calendar month in which an admission of any Additional Limited Partner occurs shall be allocated among all the Partners and assignees including such Additional Limited Partner. All distributions by the Partnership with respect to which the Partnership Record Date is before the date of such admission shall be made solely to Partners and assignees other than the Additional Limited Partner, and all distributions by the Partnership thereafter shall be made to all the Partners and assignees including such Additional Limited Partner.

10.3Amendment of Agreement and Certificate of Limited Partnership. For the admission to the Partnership of any Partner, the General Partner shall take all steps necessary and appropriate under the Act to amend the records of the Partnership and, if necessary, to prepare as soon as practical an amendment of this Agreement (including an amendment to Exhibit A) and, if required by law, shall prepare and file an amendment to the Certificate and may for this purpose exercise the power of attorney granted pursuant to Section 8.2 hereof.

ARTICLE 11

BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS; REPORTS

11.1Books and Records. At all times during the continuance of the Partnership, the General Partner shall keep or cause to be kept at the Partnership’s specified office true and complete books of account in accordance with generally accepted accounting principles, including: (a) a current list of the full name and last known business address of each Partner, (b) a copy of the Certificate and all certificates of amendment thereto, (c) copies of the Partnership’s federal, state and local income tax returns and reports, (d) copies of this Agreement and amendments thereto and any financial statements of the Partnership for the three most recent Partnership Years and (e) all documents and information required under the Act. Any Partner or its duly authorized representative, upon paying the costs of collection, duplication and mailing, shall be entitled to inspect or copy such records during ordinary business hours.

11.2Custody of Partnership Funds; Bank Accounts.

(a)All funds of the Partnership not otherwise invested shall be deposited in one or more accounts maintained in such banking or brokerage institutions as the General Partner shall determine, and withdrawals shall be made only on such signature or signatures as the General Partner may, from time to time, determine.

(b)All deposits and other funds not needed in the operation of the business of the Partnership may be invested by the General Partner in investment grade instruments (or investment companies whose portfolio consists primarily thereof), government obligations, certificates of deposit, bankers’ acceptances and municipal notes and bonds, or other investments approved by the board of directors of the General Partner. The funds of the Partnership shall not be commingled with the funds of any other Person except for such commingling as may necessarily result from an investment in those investment companies permitted by this Section 11.2(b).

11.3Fiscal and Taxable Year. The fiscal and taxable year of the Partnership shall be the calendar year.

11.4Annual Tax Information and Report. Within 90 days after the end of each Partnership Year, the General Partner shall use commercially reasonable efforts to furnish to each person who was a Limited Partner at any time during such Partnership Year the tax information necessary to file such Limited Partner’s individual tax returns as shall be reasonably required by law.

EAST\180070029.1

11.5Partnership Representative; Tax Elections; Special Basis Adjustments.

(a)The General Partner is hereby designated as the “partnership representative” of the Partnership within the meaning of Section 6223(a) of the Code. If any state or local tax law provides for a partnership representative or person having similar rights, powers, authority or obligations, the person designated above shall also serve in such capacity (in any such federal, state or local capacity, the “Partnership Representative”). The General Partner may name a replacement Partnership Representative at any time; provided, however, that the designated Partnership Representative shall serve as the Partnership Representative until resignation, death, incapacity, or removal. In such capacity, the Partnership Representative shall have all of the rights, authority and power, and shall be subject to all of the obligations, of a partnership representative to the extent provided in the Code and the Regulations, and the Partners hereby agree to be bound by any actions taken by the Partnership Representative in such capacity. The Partnership Representative shall represent the Partnership in all tax matters to the extent allowed by law. Without limiting the foregoing, the Partnership Representative is authorized and required to represent the Partnership (at the Partnership’s expense) in connection with all examinations of the Partnership’s affairs by tax authorities, including administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith. Any decisions made by the Partnership Representative, including, without limitation, whether or not to settle or contest any tax matter, and the choice of forum for any such contest, and whether or not to extend the period of limitations for the assessment or collection of any tax, shall be made in the Partnership Representative’s sole discretion. The Partnership Representative (i) shall have the sole authority to make any elections on behalf of the Partnership permitted to be made pursuant to the Code or the Regulations promulgated thereunder and (ii) may, in its sole discretion, make an election on behalf of the Partnership under Sections 6221(b) or 6226 of the Code, (iii) may request a modification to any assessment of an imputed underpayment, including a modification for any Partner who is a REIT or regulated investment company as defined in Section 851, based on such Partner making a deficiency dividend pursuant to Section 860, and a modification based on the tax-exempt status of a reviewed year Partner, and (iv) may take all actions the Partnership Representative deems necessary or appropriate in connection with the foregoing. The Partnership Representative shall be reimbursed and indemnified by the Partnership for all claims, liabilities, losses, costs, damages and expenses, and for reasonable legal and accounting fees, incurred in connection with the performance of its duties as Partnership Representative in accordance with the terms hereof, unless the actions of the Partnership Representative constitute gross negligence or intentional misconduct.

(b)Each Partner hereby covenants to cooperate with the Partnership Representative and to do or refrain from doing any or all things reasonably requested by the Partnership Representative withrespect to examinations of the Partnership’s affairs by tax authorities (including, without limitation, promptly filing amended tax returns and promptly paying any related taxes, including penalties and interest) and shall provide promptly and update as necessary at any times requested by the Partnership Representative, all information, documents, self-certifications, tax identification numbers, tax forms, and verifications thereof, that the Partnership Representative deems necessary in connection with (1) any information required for the Partnership to determine the application of Sections 6221 through 6235 of the Code to the Partnership; (2) an election by the Partnership under Section 6221(b) or 6226 of the Code, and (3) an audit of the Partnership or a final adjustment of a Partnership item by a tax authority. The Partnership and the Partners hereby agree and acknowledge that (i) the actions of the Partnership Representative in connection with examinations of the Partnership’s affairs by tax authorities shall be binding on the Partnership and the Partners; and (ii) neither the Partnership nor the Partners have any right to contact the Service

EAST\180070029.1

with respect to an examination of the Partnership or participate in an audit of the Partnership or proceedings under Sections 6221 through 6235 of the Code.

(c)The Partners acknowledge that the Partnership may elect the application of Section 6221(b) of the Code (the “Opt-Out Election”) for any Partnership Year in which it is eligible to make such election. The Partners further acknowledge that the Partnership may elect the application of Section 6226 of the Code (the “Push-out Election”) for any Partnership Year in which it is not eligible to make the Opt-Out Election. This acknowledgement applies to each Partner whether or not the Partner owns a Partnership Interest in both the reviewed year and the year of the tax adjustment. If the Partnership makes a Push-Out Election, the Partners shall take into account and report to the Service (or any other applicable tax authority) any adjustment to their tax items for the reviewed year of which they are notified by the Partnership in a written statement, in the manner provided in Section 6226(b) of the Code, whether or not any applicable Partner owns a Partnership Interest at such time. Any Partner that fails to report its share of such adjustments on its tax return, shall indemnify and hold harmless the Partnership, the General Partner, the Partnership Representative, and each of their Affiliates from and against any and all liabilities related to taxes (including penalties and interest) imposed on the Partnership as a result of the Partner’s failure.  Each Partner acknowledges and agrees that no Partner shall have any claim against the Partnership, the General Partner, the Partnership Representative, or any of their Affiliates for any tax, penalties or interest resulting from the Partnership making a Push-Out Election.

(d)If the Partnership does not make a Push-Out Election, the amount of any imputed underpayment assessed upon the Partnership, pursuant to Code Section 6232, attributable to a Partner (or former Partner), as reasonably determined by the Partnership Representative, shall be treated as a withholding tax with respect to such Partner. To the extent any portion of such imputed underpayment cannot be withheld from a current distribution, any such Partner (or former Partner) shall be liable to the Partnership for the amount that cannot be withheld and agrees to pay such amount to the Partnership. Any such amount withheld or any such payment shall not be treated as a Capital Contribution for purposes of any provision herein that affects distributions to the Partners and any amount not paid byany such Partner (or former Partner) at the time reasonably requested by the Partnership Representative shall accrue interest at the rate set by the Service for the underpayment of federal taxes, compounded quarterly, until paid.

(e)The provisions of this Section 11 shall survive the termination of the Partnership, the termination of this Agreement and, with respect to any Partner, the transfer or assignment of any portion of such Partner’s Partnership Interest.

(f)The Partnership Representative shall keep the Partners reasonably informed as to the status of any tax investigations, audits, lawsuits or other judicial or administrative tax proceedings and shall promptly copy all other Partners on any correspondence to or from the Service or applicable state, local or foreign tax authority relating to such proceedings. The Partnership Representative shall inform the Service, as promptly as possible upon the commencement of any examination or proceeding, of the tax-exempt status of any Partners and shall take any actions or refrain from taking any action to the extent necessary to preserve the tax-exempt status of such Partners and shall afford such Partners tax-free treatment, to the extent permissible under the Code. The Partnership Representative has an obligation to perform its duties as the Partnership Representative in good faith and in such manner as will serve the best interests of the Partnership and all of the Partners.

(g)The Partnership shall elect to deduct expenses, if any, incurred by it in organizing the Partnership as provided in Section 709 of the Code.

EAST\180070029.1

(h)Notwithstanding anything to the contrary in this Agreement, (i) each Partner hereby agrees to release and hold harmless the Partnership Representative for all decisions and actions made or untaken, as applicable, by the Partnership Representative in its capacity as such, provided that no such Partner shall be required to release and hold harmless the Partnership Representative for any such decisions and actions made or untaken, as applicable, to the extent such decisions or actions give rise to any right of recovery by such Partner under any other agreements entered into by such Partner or any of its Affiliates with the General Partner or any of its Affiliates (including the terms of the Contribution and Exchange Agreement), and (ii) to the fullest extent permitted by law, the Partnership shall indemnify and hold harmless the Partnership Representative for all costs, expenses, claims, liabilities, losses, damages and legal and accounting fees that are incurred by the Partnership Representative in connection with this Section 11.5(h).

11.6Reports Made Available to Limited Partners.

(a)As soon as practicable, but in no event later than ninety (90) days after the close of each fiscal quarter (other than the last quarter of the Partnership Year), upon written request by a Limited Partner to the General Partner, the General Partner will make available, without cost, to each Limited Partner a quarterly report containing financial statements of the Partnership, or of the General Partner if such statements are prepared solely on a consolidated basis with the General Partner, for such fiscal quarter, presented in accordance with generally accepted accounting principles. As soon as practicable, but in no event later than ninety (90) days after the close of each Partnership Year, upon written request by a Limited Partner to the General Partner, the General Partner will make available, without cost, to each Limited Partner an annual report containing financial statements of the Partnership, or of the General Partner if such statements are prepared solely on a consolidated basis with the General Partner, for such fiscal year, presented in accordance with generally accepted accounting principles.

(b)Any Partner shall further have the right to a private audit of the books and records of the Partnership at the expense of such Partner, provided such audit is made for Partnership purposes and is made during normal business hours.

(c)Notwithstanding the foregoing, the General Partner, in its sole discretion, may restrict receipt of the information identified in Section 11.1, if the General Partner reasonably believes that disclosure of such information is not in the best interest of the Partnership or could damage the Partnership or the General Partner or its business or the requesting Limited Partner’s reason for obtaining the applicable information is, in the General Partner’s sole discretion, related to the Limited Partner’s individual purposes and not for a Partnership purpose.

ARTICLE 12

AMENDMENT OF AGREEMENT; MERGER

12.1General.  The General Partner’s consent shall be required for any amendment to this Agreement. Subject to any consent rights expressly provided to holders of Preferred Units in this Agreement, or any amendment hereto, the General Partner, without the consent of the Limited Partners, may amend this Agreement in any respect or merge or consolidate the Partnership with or into any other partnership or business entity (as defined in Section 17-211 of the Act) in a transaction pursuant to Section 7.1(b), (c) or (d) hereof; provided, however, that the following amendments and any other merger or consolidation of the Partnership shall require the consent of a majority in interest of the Common Units:

EAST\180070029.1

(a)any amendment affecting the operation of the Exchange Right (except as provided in Section 8.5(d) or 7.1(c) hereof) in a manner adverse to the Limited Partners;

(b)any amendment that would adversely affect the rights of the Limited Partners to receive the distributions payable to them hereunder, other than with respect to the issuance of additional Partnership Interests pursuant to Section 4.2 hereof;

(c)any amendment that would alter the Partnership’s allocations of Profit and Loss to the Limited Partners, other than with respect to the issuance of additional Partnership Interests pursuant to Section 4.2 hereof; or

(d)any amendment that would impose on the Limited Partners any obligation to make additional Capital Contributions to the Partnership.

12.2Amendment Without the Consent of the Limited Partners.  The ability of the General Partner to amend this Agreement without the consent of the Limited Partners, pursuant to Section 12.1, includes, but is not limited to, any amendment to:

(a)add or modify a distribution reinvestment plan for the General Partner or the Partnership;

(b)modify the allocation provisions of the Agreement to comply with Code Section 704(b) or 704(c);

(c)add to the representations, duties, services or obligations of the General Partner or any Affiliates for the benefit of the Limited Partners;

(d)cure any ambiguity or mistake, correct or supplement any provision in the Agreement that may be inconsistent with any other provision, or make any other provision with respect to matters or questions arising under the Agreement that will not be inconsistent with the provisions of the Agreement;

(e)amend the Agreement to reflect the addition or substitution of Limited Partners or the reduction of the Capital Accounts upon the return of capital to the Limited Partners;

(f)minimize the adverse impact of, or comply with, any “plan assets” for ERISA purposes;

(g)execute, acknowledge and deliver any and all instruments to effectuate the foregoing, including the execution, acknowledgment and delivery of any such instrument by the attorney-in-fact for the General Partner under a special or limited power of attorney and to take all such actions in connection therewith as the General Partner deems necessary or appropriate with the signature of the General Partner acting alone;

(h)change the name and/or principal place of business of the Partnership;

(i)decrease the rights and powers of the General Partner (so long as such decrease does not impair the ability of the General Partner to manage the Partnership and conduct its business affairs);

(j)sell preferred units and other securities and admit preferred limited partners and other limited partners to the Partnership, subject to any consent rights expressly provided to holders of Preferred Units in this Agreement, or any amendment thereto;

EAST\180070029.1

(k)make any changes necessary or advisable to enable the General Partner to qualify or maintain its status as a REIT;

(l)establish or amend exchange rights for the exchange of Units for an equivalent number of REIT Shares;

(m)establish or amend a Unit repurchase program; or

(n)make any changes necessary or advisable to satisfy concerns of the Commission, any state securities regulator or any stock exchange in connection with a securities offering by the General Partner or otherwise.

No amendment will be adopted pursuant to Sections 12.2(j) or 12.2(n) without the consent of the Limited Partners unless the adoption thereof (i) is for the benefit of and not adverse to the interests of the Limited Partners and (ii) does not affect the limited liability of the Limited Partners or the status of the Partnership as a partnership for federal income tax purposes.

ARTICLE 13

GENERAL PROVISIONS

13.1Notices. All communications required or permitted under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or upon deposit in the United States mail, registered, postage prepaid return receipt requested, to the Partners at the addresses set forth in Exhibit A attached hereto; provided, however, that any Partner may specify a different address by notifying the General Partner in writing of such different address. Notices to the Partnership shall be delivered at or mailed to its specified office.

13.2Survival of Rights. Subject to the provisions hereof limiting transfers, this Agreement shall be binding upon and inure to the benefit of the Partners and the Partnership and their respective legal representatives, successors, transferees and assigns.

13.3Additional Documents. Each Partner agrees to perform all further acts and execute, swear to, acknowledge and deliver all further documents which may be reasonable, necessary, appropriate or desirable to carry out the provisions of this Agreement or the Act.

13.4Severability. If any provision of this Agreement shall be declared illegal, invalid, or unenforceable in any jurisdiction, then such provision shall be deemed to be severable from this Agreement (to the extent permitted by law) and in any event such illegality, invalidity or unenforceability shall not affect the remainder hereof.

13.5Entire Agreement. This Agreement and exhibits attached hereto constitute the entire Agreement of the Partners and supersede all prior written agreements and prior and contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof.

13.6Pronouns and Plurals. When the context in which words are used in the Agreement indicates that such is the intent, words in the singular number shall include the plural and the masculine gender shall include the neuter or female gender as the context may require.

13.7Headings. The Article headings or sections in this Agreement are for convenience only and shall not be used in construing the scope of this Agreement or any particular Article.

EAST\180070029.1

13.8Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original copy and all of which together shall constitute one and the same instrument binding on all parties hereto, notwithstanding that all parties shall not have signed the same counterpart.

13.9Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware; provided, however, that causes of action for violations of federal or state securities laws shall not be governed by this Section 13.9.

13.10Waiver of Jury Trial.  EACH PARTNER HEREBY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT.

13.11Electronic Signatures.  Any electronic signature of a party to this Agreement and of a party to take any action related to this Agreement or any agreement entered into by the Partnership shall be valid as an original signature and shall be effective and binding.  Any such electronic signature (including the signature(s) to this Agreement) shall be deemed (i) to be “written” or “in writing,” (ii) to have been signed and (iii) to constitute a record established and maintained in the ordinary course of business and an original written record when printed from electronic files.

13.12Side Letter Agreements.  Notwithstanding the foregoing or any provision of this Agreement to the contrary, the Partners acknowledge and agree that the authority granted to the General Partner hereunder provides the General Partner with the authority to enter into agreements with any Limited Partner (a "Side Letter") without the consent of any other Person (including, without limitation, any other Limited Partner), in connection with the relationship of such Limited Partner to the Partnership which may affect the terms of this Agreement; provided, however, that the economic terms set forth in any such Side Letter shall not affect the economic rights or obligations of any other Limited Partner under any provision of this Agreement and the terms of such Side Letter shall be determined as to the relationship solely as between such Limited Partner and the General Partner.

EAST\180070029.1

IN WITNESS WHEREOF, the parties hereto have hereunder affixed their signatures to this Amended and Restated Limited Partnership Agreement, all as of the 28th day of January, 2021.

GENERAL PARTNER:

Resource REIT, Inc.

By: /s/ Alan Feldman

Alan Feldman, Chief Executive Officer and President

LIMITED PARTNERS:

RRE Opportunity Holdings II, LLC

By:   Resource REIT, Inc., its sole member

By: /s/ Alan Feldman

Alan Feldman, Chief Executive Officer and President

RRE Opportunity Holdings, LLC

BY:  REVOLUTION I MERGER SUB, LLC, its sole member

By:  Resource REIT, Inc., its sole member

By: /s/ Alan Feldman

Alan Feldman, Chief Executive Officer and President

REVOLUTION I MERGER SUB, LLC

By:  Resource REIT, Inc., its sole member

By: /s/ Alan Feldman

Alan Feldman, Chief Executive Officer and President

C-III Capital partners llc

By: /s/ Marc W. Levy

Marc W. Levy, Executive Managing Director

RRE LEGACY CO. LLC

By: /s/ Marc W. Levy

Marc W. Levy, Executive Vice President

EAST\180070029.1

RRE OPPORTUNITY OP II, LP

AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT

EXHIBIT A

On file with the Partnership

A-1

EAST\180070029.1

EXHIBIT B

NOTICE OF EXERCISE OF EXCHANGE RIGHT

In accordance with Section 8.5 of the Amended and Restated Limited Partnership Agreement (the “Agreement”) of RRE Opportunity OP II, LP, the undersigned hereby irrevocably (i) presents for exchange _______ Common Units in RRE Opportunity OP II, LP in accordance with the terms of the Agreement and the Exchange Right referred to in Section 8.5 thereof, (ii) surrenders such Common Units and all right, title and interest therein, and (iii) directs that the Cash Amount or REIT Shares Amount (as defined in the Agreement) as determined by the General Partner deliverable upon exercise of the Exchange Right be delivered to the address specified below, and if REIT Shares (as defined in the Agreement) are to be delivered, such REIT Shares be registered or placed in the name(s) and at the address(es) specified below.

Dated: ________________, ___________

(Name of Limited Partner)

(Signature of Limited Partner)

(Mailing Address)

(City) (State) (Zip Code)

Signature Guaranteed by:

If REIT Shares are to be issued, issue to:

Name:

Social Security or Tax I.D. Number:

B-1

EAST\180070029.1

EXHIBIT C

DESIGNATION OF THE RIGHTS, POWERS, PRIVILEGES, RESTRICTIONS, QUALIFICATIONS AND LIMITATIONS OF THE

SERIES A CUMULATIVE PARTICIPATING REDEEMABLE PREFERRED UNITS

The following are the terms of the Series A Cumulative Participating Redeemable Preferred Units (the “Series A Preferred Units”) established pursuant to this Designation of Rights, Powers, Privileges, Restrictions, Qualifications and Limitations of the Series A Cumulative Participating Redeemable Preferred Units (the “Designation of Rights”).  This Designation of Rights includes terms defined in the Agreement in addition to terms defined in this Designation of Rights.  The following terms used in this Designation of Rights shall have the meanings specified below:

Original Issuance Date means, with respect to each Series A Preferred Unit, the date on which such Series A Preferred Unit was originally issued by the Partnership.

Redemption Date means, the date on which the Series A Preferred Units shall be redeemed, as set forth in Section 6 hereof.

Redemption Price means, as of any specified date with respect to a Series A Preferred Unit, an amount of cash equal to the sum of (i) the Series A Preferred Stated Value, (ii) the Series A Preferred Distribution Shortfall, and (iii) the product of the Value of 1.22423 REIT Share and the REIT Shares Amount as of such date.

Reset Date means, with respect to each Series A Preferred Unit, the fifth anniversary of the Original Issuance Date of such Series A Preferred Unit.

Series A Preferred Capital means, with respect to each Series A Preferred Unit as of any particular date, an amount equal to the sum of (i) the Series A Preferred Stated Value, and (ii) the Series A Preferred Distribution Shortfall.

Series A Preferred Distribution Date means the 15th day of each January, April, July and October of each year (or, if not a business day, the next succeeding business day).

Series A Preferred Distribution Period means, with respect to each Series A Preferred Unit, the period commencing on and including January 1, April 1, July 1 and October 1 of each year and ending on and including the day preceding the first day of the next succeeding Distribution Period (other than the initial Distribution Period which shall commence on and include the Original Issuance Date of such Series A Preferred Unit and the Distribution Period during which such Series A Preferred Unit is redeemed or otherwise acquired by the Partnership which shall end on and include the date of such redemption or acquisition).

Series A Preferred Distribution Shortfall means, with respect to each Series A Preferred Unit as of any particular date, the excess of (i) the sum of the Series A Preferred Priority Return and the Series A Preferred Return for such Series A Preferred Unit as of such date over (ii) the cumulative amount distributed in respect of such Series A Preferred Unit pursuant to Section 5.2(a)(i) of the Agreement.

Series A Preferred Priority Return means, with respect to each Series A Preferred Unit as of any particular date, an amount equal to (i) 7.00% per annum on the Series A Preferred Stated Value for the

C-1

EAST\180070029.1

period commencing on the Original Issuance Dateand ending on the day prior to the Reset Date and (ii) 10.00% per annum on the Series A Preferred Stated Value for the period commencing on the Reset Date.  For any partial period of less than a year, the amountof the Series A Preferred Priority Return shall be prorated and computed on the basis of a 360-day yearconsisting of twelve 30-day months.

Series A Preferred Return means, with respect to each Series A Preferred Unit as of any particular date, the amount of distributions to which a holder of such Series A Preferred Unit would be entitled to receive as of such date if the Series A Preferred Units were treated as part of a single class of units with the Common Units and the Series A Preferred Units shared in distributions with the Common Units pursuant to Section 5.2(a)(ii) and Section 5.6(b) proportionately based on the total number of outstanding Series A Preferred Units and Common Units; provided, however for this purpose each Series A Preferred Units shall be treated as 1.22423 Units.

Series A Preferred Stated Value means, with respect to each Series A Preferred Unit, an amount equal to $200 as adjusted pursuant to Section 11 of this Designation of Rights.

(1)Designation and Number. A series of Preferred Units, designated as the Series A Cumulative Participating Redeemable Preferred Units, is hereby established.  The number of authorized Series A Preferred Units is 319,965.

(2)Maturity.  The Series A Preferred Units have no stated maturity and will not be subject to any sinking fund or mandatory redemption.

(3)Rank. The Series A Preferred Units will, with respect to distribution rights and rights upon liquidation, dissolution or winding up of the Partnership, rank: (a) senior to all classes and series of Common Units of the Partnership, and any other class or series of Preferred Units expressly designated as ranking junior to the Series A Preferred Units as to distribution rights and rights upon liquidation, dissolution or winding up of the Partnership (the “Junior Units”); (b) on a parity with any other class or series of Preferred Units issued by the Partnership expressly designated as ranking on parity with the Series A Preferred Units as to distribution rights and rights upon liquidation, dissolution or winding up of the Partnership (the “Parity Preferred Units”); and (c) junior to any class or series of Preferred Units issued by the Partnership expressly designated as ranking senior to the Series A Preferred Units with respect to distribution rights and rights upon liquidation, dissolution or winding up of the Partnership (“Senior Preferred Units”).  The term “Preferred Units” does not include convertible or exchangeable debt securities of the Partnership, which will rank senior to the Series A Preferred Units prior to conversion or exchange.  The Series A Preferred Units will also rank junior in right or payment to the Partnership’s existing and future indebtedness.

(4)Distributions.

(a)Pursuant to Section 5.2(a)(i) of the Agreement, and subject to the preferential rights of holders of any class or series of Senior Preferred Units, each holder of Series A Preferred Units shall be entitled to receive, when, as and if authorized by the General Partner and declared by the Partnership, out of funds of the Partnership legally available for payment of distributions, with respect to each Series A Preferred Unit, an amount equal to such Series A Preferred Unit’s Series A Preferred Distribution Shortfall as of the applicable Partnership Record Date for the respective Series A Preferred Distribution Period.

C-2

EAST\180070029.1

(b)No distributions on the Series A Preferred Units shall be authorized by the General Partner or declared, paid or set apart for payment by the Partnership at such time as the terms and provisions of any agreement of the General Partner or the Partnership, including any agreement relating to the indebtedness of either of them, prohibits such authorization, declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such declaration or payment shall be restricted or prohibited by law.

(c)Notwithstanding anything to the contrary contained herein, the Series A Preferred Priority Return will accrue and, to the extent not paid in cash, compound quarterly on each Series A Preferred Distribution Date, whether or not the restrictions referred to in Section 4(b) exist, whether or not the Partnership has earnings, whether or not there are funds legally available for the payment of distributions, and whether or not such distributions are authorized or declared.  No interest, or sum of money in lieu of interest, will be payable in respect of any distribution on the Series A Preferred Units which may be in arrears. When distributions are not paid in full upon the Series A Preferred Units and any Parity Preferred Units (or a sum sufficient for such full payment is not so set apart), all distributions declared upon the Series A Preferred Units and any Parity Preferred Units shall be declared pro rata so that the amount of distributions declared per Series A Preferred Unit and such Parity Preferred Units shall in all cases bear to each other the same ratio that accumulated distributions per Series A Preferred Unit and such Parity Preferred Units (which shall not include any accrual in respect of unpaid distributions for prior distributions periods if such Parity Preferred Units do not have a cumulative distribution) bear to each other.

(d)Except as provided in the immediately preceding paragraph, unless the Series A Preferred Distribution Shortfall for each Series A Preferred Unit has been or contemporaneously is (i) declared and paid in cash or (ii) declared and a sum sufficient for the payment thereof in cash is set apart for such payment for all past Distribution Periods that have ended, no distributions (other than a distribution in Junior Units or in options, warrants or rights to subscribe for or purchase any such Junior Units) shall be declared and paid or declared and set apart for payment nor shall any other distribution be declared and made upon the Junior Units or any Parity Preferred Units, nor shall any Junior Units or Parity Preferred Units be redeemed, purchased or otherwise acquired for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such Units) by the Partnership (except (i) by conversion into or exchange for Junior Units, (ii) the purchase of Junior Units or Parity Preferred Units in connection with a redemption of stock pursuant to the Articles of Incorporation to the extent necessary to preserve the General Partner’s qualification as a REIT or (iii) the purchase of Parity Preferred Units pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Series A Preferred Units). Holders of the Series A Preferred Units shall not be entitled to any distribution, whether payable in cash, property or units, in excess of the Series A Preferred Distribution Shortfall for the Series A Preferred Units as provided above.

(5)Liquidation Preference.  Pursuant to Section 5.6(b) of the Agreement, upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Partnership, the holders of Series A Preferred Units are entitled to be paid out of the assets of the Partnership legally available for distribution to its Partners, after payment of or provision for the Partnership’s debts and other liabilities, an amount per Series A Preferred Unit that is equal to such Series A Preferred Unit’s Series A Preferred Capital (the “Liquidation Preference”) before any distribution of assets is made to holders of Junior Units. If the assets of the Partnership legally available for distribution to Partners are insufficient to pay in full the Liquidation Preference on the Series A Preferred Units and the liquidation preference on any Parity Preferred Units, all

C-3

EAST\180070029.1

assets distributed to the holders of the Series A Preferred Units and any Parity Preferred Units shall be distributed pro rata so that the amount of assets distributed per Series A Preferred Unit and per such Parity Preferred Unit shall in all cases bear to each other the same ratio that the Liquidation Preference per Series A Preferred Unit and the liquidation preference per such Parity Preferred Unit bear to each other. Written notice of any distribution in connection with any such liquidation, dissolution or winding up of the affairs of the Partnership, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given by first class mail, postage pre-paid, not less than 30 nor more than 60 days prior to the payment date stated therein, to each record holder of the Series A Preferred Units at the respective addresses of such holders as the same shall appear on the records of the Partnership. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series A Preferred Units will have no right or claim to any of the remaining assets of the Partnership. The consolidation or merger of the Partnership with or into another entity, a merger of another entity with or into the Partnership, a statutory exchange by the Partnership or a sale, lease, transfer or conveyance of all or substantially all of the Partnership’s property or business shall not be deemed to constitute a liquidation, dissolution or winding up of the affairs of the Partnership. Notwithstanding the above, for purposes of determining the amount each holder of Series A Preferred Units is entitled to receive with respect to a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Partnership, no effect shall be given to amounts that would be needed, if the Partnership were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of holders of the Series A Preferred Units.

(6)Redemption.

(a)Except as provided for in this Section 6(a) or in Section 6(b) below, the Series A Preferred Units shall not be redeemable by the Partnership prior to the first anniversary of the Original Issuance Date.  Following the first anniversary of the Original Issuance Date, the Partnership shall redeem, at the option of a holder of the Series A Preferred Units, a number of Series A Preferred Units as follows:  (i) between the first and second anniversary of the Original Issuance Date, up to 25% of the number of Series A Preferred Units issued to the holder thereof on the Original Issuance Date; (ii) between the second and third anniversary of the Original Issuance Date, up to 50% of the number of Series A Preferred Units issued to the holder thereof on the Original Issuance Date (less the number of Series A Preferred Units previously redeemed); (iii) between the third and fourth anniversary of the Original Issuance Date, up to 75% of the number of Series A Preferred Units issued to the holder thereof on the Original Issuance Date (less the number of Series A Preferred Units previously redeemed); and (iv) following the fourth anniversary of the Original Issuance Date, up to 100% of the number of Series A Preferred Units issued to the holder thereof on the Original Issuance Date (less the number of Series A Preferred Units previously redeemed) (the “Redemption Right”). The Series A Preferred Units redeemed in accordance with this Section 6 shall be redeemed for cash at a per unit redemption amount equal to such Series A Preferred Unit’s Redemption Price as of the Redemption Date; provided, however, that the Redemption Right provided under this Section 6 shall be suspended at such time that the General Partner (or any Successor Entity) applies to list REIT Shares (or the common stock of any Successor Entity) on a National Securities Exchange, and shall be terminated at such time as the National Securities Exchange approves such REIT Shares (or the common stock of any Successor Entity) for listing; provided further, that any payment pursuant to the Redemption Right shall be prohibited if the board of directors of the General Partner (or any Successor Entity) determines, in its reasonable discretion, that such redemption payment shall have a material adverse effect on the General Partner, including without limitation, effects on the General Partner’s cash available for

C-4

EAST\180070029.1

operations or any restrictions set forth under any credit facility or loan agreements of the General Partner or the Partnership.

(b)Upon the occurrence of a Listing or a Change of Control (as defined below), the Partnership may at its option redeem for cash the outstanding Series A Preferred Units, in whole or from time to time, in part, at the Redemption Price on the Redemption Date.  Any notice sent by the Partnership with respect to a redemption upon a Listing or a Change of Control shall include (i) instructions as to the tender of the Series A Preferred Units, (ii) the Redemption Date; (iii) the place or places where any certificates representing such Series A Preferred Units, if any, are to be surrendered for payment of the Redemption Price; (iv) the amount of the Redemption Price; and (v) in the case of a Change of Control, a description of the transaction or transactions that constitute the Change of Control. For purposes of this Section 6(b), “Change of Control” shall mean (x)  a merger or consolidation of the General Partner with or into any other business entity (except one in which the holders of capital stock or other equity interests of the General Partner immediately prior to such merger or consolidation continue to hold at least a majority of the outstanding voting securities of the surviving entity), or (y) the acquisition by any person or any group of persons (other than the General Partner or any of its direct or indirect subsidiaries) acting together in any transaction or related series of transactions, of such number of shares of the General Partner’s capital stock or other equity interests as causes such person, or group of persons, to own beneficially, directly or indirectly, as of the time immediately after such transaction or series of transactions, 50% or more of the combined voting securities of the General Partner.

(c)Following the second anniversary of the Original Issuance Date, the Partnership may, at its option, redeem the outstanding Series A Preferred Units, in whole or from time to time, in part, at the Redemption Price on the Redemption Date.  The Redemption Date shall be selected by the Partnership and shall be no less than 30 days and no more than 60 days after the date on which the Partnership sends the notice of redemption to the holder or holders of the Series A Preferred Units to be redeemed.

(d)A holder of Series A Preferred Units desiring to exercise its Redemption Right under Section 6(a) hereof must deliver a written redemption notice (the “Redemption Exercise Notice”) in the form approved by the Partnership, duly completed, to the Partnership by certified or express delivery mail postage prepaid to the Partnership’s principal office c/o the General Partner. The Redemption Exercise Notice must state: (i) the number of Series A Preferred Units to be redeemed by the Partnership; and (ii) that the Series A Preferred Units are to be redeemed pursuant to Section 6(a) hereof. The Redemption Date for the Series A Preferred Units properly tendered to the Partnership pursuant a Redemption Exercise Notice shall be the 90^th day after receipt of the Redemption Exercise Notice (or, if not a business day, the next succeeding business day).  Upon receipt of a Redemption Exercise Notice, the Partnership shall provide the holder of the Series A Preferred Units subject to the Redemption Exercise Notice with the following information: (i) instructions as to the tender of the Series A Preferred Units; (ii) the Redemption Date; (iii) the place or places where any certificates representing such Series A Preferred Units, if any, are to be surrendered for payment of the Redemption Price; and (iv) the amount of the Redemption Price.  The Partnership may elect to cause the Redemption Date to be delayed for up to an additional 90 days to the extent required for the General Partner to cause additional REIT Shares to be issued to provide financing to be used to make such payment of the Redemption Price. Notwithstanding the foregoing, the Partnership agrees to use its best efforts to redeem the Series A Preferred Units properly tendered to the Partnership as quickly as reasonably possible.

C-5

EAST\180070029.1

(e)On or after a Redemption Date, each holder of Series A Preferred Units to be redeemed must present and surrender the certificates (or an affidavit of loss and indemnity satisfactory to the Partnership), if such units are certificated, representing the Series A Preferred Units to the Partnership to be redeemed at the place designated in the notice from the Partnership referenced in Sections 6(b) or 6(c) above, or the instructions from the Partnership referenced in Section 6(d) above, as the case may be, and thereupon the Redemption Price for such Series A Preferred Units, determined as of the Redemption Date, will be paid to or on the order of such holder by wire transfer pursuant to wire instructions provided by such holder and each surrendered certificate, if any, will be canceled. If the Series A Preferred Units to be redeemed are certificated, then in the event that fewer than all the Series A Preferred Units are to be redeemed, a new certificate will be issued representing the unredeemed Series A Preferred Units.

(e)From and after a Redemption Date, all distributions on the Series A Preferred Units subject to such redemption will cease to accumulate and all rights of the holders thereof, except the right to receive the Redemption Price thereof (and all accumulated and unpaid distributions to but excluding the Redemption Date), will cease and terminate and such Series A Preferred Units shall not be deemed to be outstanding for any purpose whatsoever, other than as provided in clause (f) below.

(f)In the event that the Partnership defaults in the payment of the Redemption Price for any Series A Preferred Units surrendered for redemption pursuant to Section 6(a), such Series A Preferred Units shall continue to be deemed to be outstanding for all purposes and to be owned by the respective holders, and the Partnership shall promptly return any surrendered certificates representing such Series A Preferred Units to such holders (although the failure of the Partnership to return any such certificates to such holders shall in no way affect the ownership of such Series A Preferred Units by such holders or their rights thereunder).  Following such default, the Partnership shall remain obligated to deliver payment of the Redemption Price pursuant to clause (d) above as soon as reasonably practicable as determined by the board of directors of the General Partner.  

(g)At its election, the Partnership, prior to a Redemption Date, may irrevocably deposit the Redemption Price of the Series A Preferred Units to be redeemed pursuant to this Section 6 in trust for the holders of the Series A Preferred Units with a bank or trust company, in which case the Partnership shall send a notice to the holders of Series A Preferred Units to be redeemed which shall (i) state the date of such deposit, (ii) specify the office of such bank or trust company as the place of payment of the Redemption Price and (iii) require the holder of Series A Preferred Units to be redeemed to surrender the certificates, if any, representing such Series A Preferred Units (or an affidavit of loss and indemnity satisfactory to the Partnership) at such place on or about the date fixed in the redemption notice (which may not be later than the Redemption Date) against payment of the Redemption Price. Any monies so deposited which remain unclaimed at the end of two years after the Redemption Date shall be returned by such bank or trust company to the Partnership.

(h)In the event any Series A Preferred Units have been redeemed by the Partnership pursuant to this Section 6, the Series A Preferred Units so redeemed shall become authorized but unissued Preferred Units without further designation as to class or series, available for future classification or reclassification by the General Partner and issuance by the Partnership.

C-6

EAST\180070029.1

(7)Listing Exchange Right.

(a)In the event that the Redemption Right is terminated in accordance with Section 6(a), beginning 180 days after the date that the REIT Shares (or the common stock of any Successor Entity) are listed on a National Exchange (the “Listed Shares”), each holder of the Series A Preferred Units shall have the right to require the General Partner to purchase all or a portion of such holder’s Series A Preferred Units (the “Listing Exchange Units”) in exchange for a number of Listed Shares determined by dividing (i) the number of Listing Exchange Units tendered for purchase multiplied by the Redemption Price as of the Listing Exchange Date (as defined below) by (ii) the volume-weighted average price of the Listed Shares over the 30 day period prior to the Exchange Date (the “Listing Exchange Right”). In connection with the issuance of Listed Shares pursuant to this Listing Exchange Right, the General Partner shall issue a corresponding number of additional Partnership Units, to be held by the General Partner, as set forth in Section 4.2(a)(i). A holder of Series A Preferred Units desiring to exercise its Listing Exchange Right must deliver a written notice (the “Listing Exchange Notice”) in the form approved by the Partnership, duly completed, to the Partnership by certified or express delivery mail postage prepaid to the Partnership’s principal office c/o the General Partner. The Listing Exchange Notice must state: (i) the number of Listing Exchange Units tendered for purchase by the General Partner; and (ii) that the Listing Exchange Units are to be purchased pursuant to this Section 7(a).  The General Partner shall purchase the Listing Exchange Units properly tendered to the General Partner within 30 days after receipt of the Listing Exchange Notice (or, if not a business day, the next succeeding business day) (the “Listing Exchange Date”).  Upon receipt of a Listing Exchange Notice, the General Partner shall provide the holder of the Listing Exchange Units subject to the Listing Exchange Notice with (i) instructions as to the tender of the Listing Exchange Units, (ii) the Listing Exchange Date; (iii) the place or places where any certificates representing such Listing Exchange Units are to be surrendered against payment of the Listed Shares; and (iv) the Redemption Price on the Listing Exchange Date. The Series A Preferred Units are not convertible or exchangeable for any other property or securities of the Partnership except as provided in this Section 7(a).

(b)The Partnership, the General Partner and each holder of Series A Preferred Units that exercises its Listing Exchange Right, as the case may be, shall treat the transaction between the General Partner and such holder of Series A Preferred Units for federal income tax purposes as a sale of such holder’s Series A Preferred Units to the General Partner. Each holder of Series A Preferred Units that exercises its Listing Exchange Right agrees to execute such documents as the General Partner may reasonably require in connection with the issuance of REIT Shares upon exercise of the Listing Exchange Right.

(c)Notwithstanding the provisions of Section 7(a), a holder of Series A Preferred Units shall not be entitled to exercise the Listing Exchange Right if the delivery of REIT Shares to such Partner on the Listing Exchange Date by the General Partner pursuant to Section 7(a) would (i) result in such Partner or any other person owning, directly or indirectly, REIT Shares in excess of the Aggregate Stock Ownership Limit (as defined in the Articles of Incorporation and calculated in accordance therewith) or the Common Stock Ownership Limit (as defined in the Articles of Incorporation and calculated in accordance therewith), except as provided in the Articles of Incorporation, (ii) result in REIT Shares being owned by fewer than 100 persons (determined without reference to any rules of attribution), except as provided in the Articles of Incorporation, (iii) result in the General Partner being “closely held” within the meaning of Section 856(h) of the Code, or (iv) cause the General Partner to own, directly or constructively, 9.9% or more of the ownership interests in a tenant within the meaning of Section 856(d)(2)(B) of the Code. The

C-7

EAST\180070029.1

General Partner, in its sole and absolute discretion, may waive the restriction on exchange set forth in this Section 7(c).

(d)Notwithstanding any other provision of this Designation of Rights, the General Partner shall place appropriate restrictions on the ability of the holders of Series A Preferred Units to exercise their Listing Exchange Rights as and if deemed necessary to ensure that the Partnership does not constitute a “publicly traded partnership” under Section 7704 of the Code. If and when the General Partner determines that imposing such restrictions is necessary, the General Partner shall give prompt written notice thereof to each holder of Series A Preferred Units, which notice shall be accompanied by a copy of an opinion of counsel to the Partnership which states that, in the opinion of such counsel, restrictions are necessary in order to avoid the Partnership being treated as a “publicly traded partnership” under Section 7704 of the Code.

(e)Each holder of Series A Preferred Units covenants and agrees with the Partnership and the General Partner that all Series A Preferred Units delivered for redemption or exchange pursuant to Sections 6 and 7 hereof shall be delivered to the Partnership or the General Partner, as the case may be, free and clear of all liens; and, notwithstanding anything contained herein to the contrary, neither the General Partner nor the Partnership shall be under any obligation to acquire Series A Preferred Units which are or may be subject to any liens. Each holder of Series A Preferred Units further agrees that, if any state or local property transfer tax is payable as a result of the transfer of its Series A Preferred Units to the Partnership or the General Partner, such Limited Partner shall assume and pay such transfer tax.

(8)Voting Rights.  Except as set forth in Article 12 of the Agreement and as provided in Section 9 of this Designation of Rights, holders of the Series A Preferred Units will not have any voting rights.  

(9)Restrictions on New Issuances.  Unless (i) fewer than 39,995.625Series A Preferred Units (as may be adjusted pursuant to Section 12 below) remain issued and outstanding, (ii) the holders of a majority of the then outstanding Series A Preferred Units consent, or (iii) an additional class or series of Preferred Units is being issued in connection with a full redemption of the Series A Preferred Units in accordance with Section 6, the Partnership shall not issue any Senior Preferred Units.  The holders of the Series A Preferred Units may deliver a consent in writing or by electronic transmission to the Partnership, and if the holders of the Series A Preferred Units entitled to cast not less than the minimum number of votes that would be necessary to authorize the issuance of the Senior Preferred Units deliver such consent to the Partnership, the Partnership shall not be required to seek the consent of the remaining holders of Series A Preferred Units, if any.  The Partnership must give notice of any consent granted pursuant to this Section 8 to each holder of Series A Preferred Units not later than 10 days after the effective time of such action.

(10)Record Holders. The Partnership and the transfer agent for the Series A Preferred Units may deem and treat the record holder of any Series A Preferred Units as the true and lawful owner thereof for all purposes, and neither the Partnership nor the transfer agent shall be affected by any notice to the contrary.

(11)No Preemptive Rights. No holder of the Series A Preferred Units will, as a holder of Series A Preferred Units, have any preemptive rights to purchase or subscribe for Common Units or any other security of the Partnership (whether now or hereafter authorized).

(12)Adjustment. If the number of Common Units is adjusted pursuant to Section 4.2(a)(ii) of the Agreement, then a corresponding adjustment to the number of Series A Preferred Units shall

C-8

EAST\180070029.1

automatically be made.  The number of issued and outstanding Series A Preferred Units immediately after such adjustment shall be equal to the number of issued and outstanding Series A Preferred Units immediately prior thereto multiplied by a fraction (the “Adjustment Factor”) the numerator of which is equal to the number of issued and outstanding Common Units as adjusted pursuant to Section 4.2(a)(ii) of the Agreement immediately afterthe corresponding Adjustment Event and the denominator of which is the number of issued and outstanding Common Units prior to adjustment pursuant to Section 4.2(a)(ii) in connection with such Adjustment Event.  In connection with such adjustment to the number of Series A Preferred Units, the Series A Preferred Stated Value per Series A Preferred Unit shall also be adjusted by multiplying the applicable Series A Preferred Stated Value immediately prior to such adjustment by the Adjustment Factor.

C-9

EAST\180070029.1

EXHIBIT D

DESIGNATION OF THE RIGHTS, POWERS, PRIVILEGES, RESTRICTIONS, QUALIFICATIONS AND LIMITATIONS OF THE

CONVERTIBLE UNITS

The following are the terms of the Convertible Units established pursuant to this Designation of Rights, Powers, Privileges, Restrictions, Qualifications and Limitations of the Convertible Units (the “Designation of Rights”).  This Designation of Rights includes terms defined in the Agreement in addition to terms defined in this Designation of Rights.  The following terms used in this Designation of Rights shall have the meanings specified below:

(1)Convertible Share shall mean the convertible stock issued by the General Partner pursuant to the Articles of Incorporation of the General Partner.

(2)Convertible Units.

(a)Distribution Rights. The holders of the outstanding Convertible Units shall not be entitled to receive distributions on the Convertible Units.

(b)Voting Rights.

(i)Except for the voting rights expressly conferred by this Section 1(b), the holders of the outstanding Convertible Units shall not be entitled (1) to vote on any matter, or (2) to receive notice of, or to participate in, any meeting of the Partnership's Partners at which they are not entitled to vote.

(ii)Except to the extent the holders of the Convertible Stock have consented pursuant to their consent rights, the affirmative vote of the holders of at least two-thirds of the outstanding Convertible Units, voting together as a single class for such purposes with each Convertible Unit entitled to one vote, shall be required to (1) adopt any amendment, alteration or repeal of any provision of the Agreement that materially and adversely changes the preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications or terms and conditions of redemption of the Convertible Units  and (2) effect or validate a consolidation with or merger of the Partnership into another entity, or a consolidation with or merger of another entity into the Partnership, unless in each such case each Convertible Unit (A) shall remain outstanding without a material and adverse change to its terms and rights or (B) shall be converted into or exchanged for Partnership interests or other ownership interest of the surviving entity having preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms or conditions of redemption thereof identical to that of a Convertible Unit (except for changes that do not materially and adversely affect the holders of the Convertible Units); provided, however, that this vote shall be in addition to any other vote or consent of the Partners required by law or by the Agreement.

D-1

EAST\180070029.1

(c)Conversion.

(i)In the event that the Convertible Shares convert into REIT Shares pursuant to the terms of the Convertible Shares as set forth in the Article of Incorporation, the Convertible Units shall convert into Common Units automatically and without any further action required. The conversion shall occur on the same date and time the Convertible Shares convert into REIT Shares.  The number of Common Units shall equal the number of REIT Shares the Convertible Shares are converted into.

(ii)The issuance of Common Units on the conversion of the Convertible Shares shall be made by the Partnership without charge for expenses or for any tax in respect of the issuance of the Common Units.

(iii)In the event of any adjustment event described in Section 4.2(a)(ii) or in case of any consolidation or merger to which the Partnership is a party, except a merger in which the Partnership is the surviving Partnership and which does not result in any reclassification or recapitalization, the Partnership or the successor or purchasing business entity shall provide that the holder of each Convertible Unit then outstanding shall thereafter continue to have the right, with as nearly the same economic rights and effects as possible to the Convertible Units to reflect the securities issued to the holders of the Convertible Shares. The provisions of this paragraph (iii) of this Section (2)(c) shall similarly apply to successive reclassifications, recapitalizations, consolidations or mergers.

(iv)Common Units issued on conversion of Convertible Units shall be issued as fully paid Common Units and shall be nonassessable by the Partnership. The Partnership shall, at all times, reserve and keep available, for the purpose of effecting the conversion of the outstanding Convertible Units, the number of its duly authorized Common Units as shall be sufficient to effect the conversion of all of the outstanding Convertible Units.

D-2

EAST\180070029.1

EX-21.1

EXHIBIT 21.1

Subsidiaries of the Registrant

Subsidiaries

RRE Opportunity Holdings, LLC

Resource Real Estate Opportunity OP, LP

RRE Iroquois, LP

RRE Iroquois Holdings, LLC

RRE Cannery Holdings, LLC

RRE Williamsburg Holdings, LLC

RRE Autumn Wood Holdings, LLC

RRE Village Square Holdings, LLC

RRE Brentdale Holdings, LLC

RRE Jefferson Point Holdings, LLC

RRE Centennial Holdings, LLC

RRE Pinnacle Holdings, LLC

RRE River Oaks Holdings, LLC

RRE Nicollet Ridge Holdings, LLC

RRE Charlemagne Holdings, LLC

RRE Addison Place, LLC

PRIP Coursey, LLC

PRIP 500, LLC

PRIP Pines, LLC

RRE Berkeley Run Holdings, LLC

RRE Berkeley Trace Holdings LLC

RRE Merrywood LLC

RRE Sunset Ridge Holdings, LLC

RRE Parkridge Place Holdings, LLC

RRE Woodmoor Holdings, LLC

RRE Gilbert Holdings, LLC

RRE Bonita Glen Holdings, LLC

RRE Yorba Linda Holdings, LLC

RRE Providence Holdings, LLC

RRE Green Trails Holdings, LLC

RRE Terraces at Lake Mary Holdings, LLC

RRE Courtney Meadows Holdings, LLC

RRE Sandy Springs Holdings, LLC

RRE Grapevine Holdings, LLC

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

Resource Apartment OP III, LP

Resource Apartment Holdings III, LLC

RRE Payne Place Holdings, LLC

RRE Bay Club Holdings, LLC

RRE Tramore Village Holdings, LLC

RRE Matthews Reserve Holdings, LLC

RRE Kensington Holdings, LLC

RRE Wimbledon Oaks Holdings, LLC

RRE Summit Holdings, LLC

Revolution I Merger Sub, LLC

Revolution III Merger Sub, LLC

The subsidiaries listed above are all incorporated in the State of Delaware.  

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated March 25, 2021, with respect to the consolidated financial statements included in the Annual Report of Resource REIT, Inc. on Form 10-K for the year ended December 31, 2020. We consent to the incorporation by reference of said report in the Registration Statement of Resource REIT, Inc. on Form S-3 (File No. 333-236040) and Form S-8 (File No. 333-252958).

/s/ GRANT THORNTON LLP

Philadelphia, Pennsylvania

March 25, 2021

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Alan F. Feldman, certify that:

1) I have reviewed this annual report on Form 10-K for the year ended December 31, 2020 of Resource REIT, Inc. (f/k/a 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 REIT, INC.
March 25, 2021	By:	/s/ Alan F. Feldman
		Alan F. Feldman
		Chief Executive Officer, President and Director (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas C. Elliott, certify that:

1) I have reviewed this annual report on Form 10-K for the year ended December 31, 2020 of Resource REIT, Inc. (f/k/a 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 REIT, INC.
March 25, 2021	By:	/s/ Thomas C. Elliott
		Thomas C. Elliott
		Chief Financial Officer, Executive Vice President and Treasurer (Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Resource REIT, Inc. (f/k/a Resource Real Estate Opportunity REIT II, Inc.) (“the Company”) on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Alan F. Feldman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

	RESOURCE REIT, INC.
March 25, 2021	By:	/s/ Alan F. Feldman
		Alan F. Feldman
		Chief Executive Officer, President and Director (Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Resource REIT, Inc. (f/k/a Resource Real Estate Opportunity REIT II, Inc.) (“the Company”) on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas C. Elliott, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

	RESOURCE REIT, INC.
March 25, 2021	By:	/s/ Thomas C. Elliott
		Thomas C. Elliott
		Chief Financial Officer, Executive Vice President and Treasurer (Principal Financial Officer)

EX-99.1

EXHIBIT 99.1

CONSENT OF INDEPENDENT VALUATION EXPERT

We hereby consent to the reference to our name and description of our role in the valuation process of Resource REIT, Inc. (f/k/a Resource Real Estate Opportunity REIT II, Inc.) ("the Company") being included or incorporated by reference to the Company's Registration Statements on Form S-3 (File No. 333-236040) and Form S-8 (File No. 333-252958) by being filed on an Annual Report on Form 10K, to be filed on the date hereof. In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the Securities Act of 1933, as amended.

/s/ Duff & Phelps, LLC

Duff & Phelps, LLC

March 25, 2021

XML

Document and Entity Information - USD ($)

12 Months Ended

Dec. 31, 2020

Mar. 23, 2021

Jun. 30, 2020

Cover [Abstract]

Entity Registrant Name

Resource REIT, 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 Interactive Data Current

Yes

Entity Filer Category

Non-accelerated Filer

Document Type

10-K

Document Period End Date

Dec. 31, 2020

Document Fiscal Year Focus

2020

Document Fiscal Period Focus

FY

Amendment Flag

false

Entity Emerging Growth Company

false

Entity Small Business

false

Title of 12(g) Security

Common Stock, par value $0.01 per share

Entity Shell Company

false

Document Annual Report

true

Document Transition Report

false

Entity File Number

000-55430

Entity Tax Identification Number

80-0854717

Entity Incorporation, State or Country Code

MD

Entity Address, Address Line One

1845 Walnut Street

Entity Address, Address Line Two

17th Floor

Entity Address, City or Town

Philadelphia

Entity Address, State or Province

PA

Entity Address, Postal Zip Code

19103

City Area Code

215

Local Phone Number

231-7050

Entity Common Stock, Shares Outstanding

157,560,096

Entity Public Float

$ 0

ICFR Auditor Attestation Flag

false

Documents Incorporated by Reference

Registrant incorporates by reference portions of the Resource REIT, Inc. Definitive Proxy Statement for the 2021 Annual Meeting of Stockholders (Items 10, 11, 12, 13, and 14 of Part III).

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Investments:
Rental properties, net	$ 700,905	$ 735,530
Cash	63,487	39,647
Restricted cash	9,475	6,534
Subtotal - cash and restricted cash	72,962	46,181
Tenant receivables	301	107
Due from related parties	0	297
Prepaid expenses and other assets	2,255	2,109
Operating lease right-of-use assets	12	38
Total assets	776,435	784,262
Liabilities:
Mortgage notes payable, net	580,114	547,875
Accounts payable and accrued expenses	4,402	6,435
Accrued real estate taxes	5,508	5,029
Due to related parties	1,915	432
Tenant prepayments	618	634
Security deposits	1,651	1,513
Distribution payable	0	5,993
Operating lease liabilities	12	38
Total liabilities	594,220	567,949
Stockholders’ equity:
Preferred stock (par value $.01, 10,000,000 shares authorized, none issued and outstanding)	0	0
Common stock, outstanding	599	600
Additional paid-in capital	527,644	528,464
Accumulated other comprehensive loss	(231)	(189)
Accumulated deficit	(345,798)	(312,563)
Total stockholders’ equity	182,215	216,313
Total liabilities and stockholders’ equity	776,435	784,262
Convertible Stock
Stockholders’ equity:
Common stock, outstanding	1	1
Total stockholders’ equity	$ 1	$ 1

XML

Consolidated Balance Sheets (Parentheticals) - $ / shares	Dec. 31, 2020	Dec. 31, 2019
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)	60,026,513	60,094,623
Common stock, shares outstanding (in shares)	60,026,513	60,094,623
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

XML

Consolidated Statements of Operations and Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Revenues:
Rental income	$ 85,810	$ 85,681	$ 87,256
Expenses:
Rental operating - expenses	15,518	13,205	14,411
Rental operating - payroll	7,334	7,682	7,943
Rental operating - real estate taxes	11,728	11,316	11,992
Subtotal - Rental operating expenses	34,580	32,203	34,346
Acquisition costs	0	0	30
Transaction expenses	3,732
Management fees	12,894	13,208	13,728
General and administrative	8,339	7,586	8,155
Loss on disposal of assets	215	219	522
Depreciation and amortization expense	40,195	39,599	41,424
Total expenses	99,955	92,815	98,205
Loss before net gain on disposition	(14,145)	(7,134)	(10,949)
Net gain on disposition of property	0	20,619	0
(Loss) income before other income (expense)	(14,145)	13,485	(10,949)
Other income (expense):
Interest income	14	223	157
Insurance proceeds in excess of cost basis		225	115
Interest expense	(19,093)	(25,877)	(24,764)
Net loss	(33,224)	(11,944)	(35,441)
Other comprehensive income (loss):
Designated derivatives, fair value adjustment	(42)	190	65
Comprehensive loss	$ (33,266)	$ (11,754)	$ (35,376)
Weighted average common shares outstanding, basic and diluted	60,227	60,728	61,110
Basic and diluted net loss per common share	$ (0.55)	$ (0.20)	$ (0.58)

XML

Consolidated Statement of Changes in Stockholders' Equity - USD ($) $ in Thousands	Total	Convertible Stock	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit
Balance, beginning of period at Dec. 31, 2017	$ 330,660	$ 1	$ 606	$ 534,683	$ (444)	$ (204,186)
Balance, beginning of period (in shares) at Dec. 31, 2017		50,000	60,782,000
Common stock issued through distribution reinvestment plan	20,693		$ 24	20,669
Common stock issued through distribution reinvestment plan (in shares)			2,397,000
Distributions declared	(36,634)					(36,634)
Common stock redemptions	(15,877)		$ (18)	(15,859)
Common stock redemptions (in shares)			(1,800,000)
Designated derivatives, fair value adjustment	65				65
Net loss	(35,441)					(35,441)
Balance, end of period at Dec. 31, 2018	263,466	$ 1	$ 612	539,493	(379)	(276,261)
Balance, end of period (in shares) at Dec. 31, 2018		50,000	61,379,000
Common stock issued through distribution reinvestment plan	14,724		$ 18	14,706
Common stock issued through distribution reinvestment plan (in shares)			1,754,000
Distributions declared	(24,358)					(24,358)
Common stock redemptions	(25,765)		$ (30)	(25,735)
Common stock redemptions (in shares)			(3,038,000)
Designated derivatives, fair value adjustment	190				190
Net loss	(11,944)					(11,944)
Balance, end of period at Dec. 31, 2019	$ 216,313	$ 1	$ 600	528,464	(189)	(312,563)
Balance, end of period (in shares) at Dec. 31, 2019	60,094,623	50,000	60,095,000
Common stock issued through distribution reinvestment plan	$ 3,131		$ 4	3,127
Common stock issued through distribution reinvestment plan (in shares)			371,000
True-up of prior year cash distributions declared	(11)					(11)
Common stock redemptions	(3,952)		$ (5)	(3,947)
Common stock redemptions (in shares)			(439,000)
Designated derivatives, fair value adjustment	(42)				(42)
Net loss	(33,224)					(33,224)
Balance, end of period at Dec. 31, 2020	$ 182,215	$ 1	$ 599	$ 527,644	$ (231)	$ (345,798)
Balance, end of period (in shares) at Dec. 31, 2020	60,026,513	50,000	60,027,000

XML

Consolidated Statements of Cash Flows $ in Thousands	12 Months Ended
	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Cash flows from operating activities:
Net loss	$ (33,224)	$ (11,944)	$ (35,441)
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss on disposal of assets	215	219	522
Net gain on disposition of property	0	(20,619)	0
Casualty gain	4	552
Depreciation and amortization	40,195	39,599	41,424
Amortization of deferred financing costs	1,398	1,104	1,318
Amortization of mortgage premiums	(111)	(113)	(116)
Change in fair value of interest rate caps	95		55
Changes in operating assets and liabilities:
Tenant receivables	(194)	(33)	14
Due from related parties	297	(240)
Prepaid expenses and other assets	(130)	(1)	(2)
Due to related parties	1,483	(151)	46
Accounts payable and accrued expenses	751	2,008	(1,414)
Accrued real estate taxes	479	(1,473)	(599)
Tenant prepayments	(16)	16	67
Security deposits	138	98	158
Net cash provided by operating activities	11,380	9,022	6,032
Cash flows from investing activities
Proceeds from disposal of property, net of closing costs		32,882
Capital expenditures	(7,297)	(8,156)	(15,097)
Net cash (used in) provided by investing activities	(7,297)	24,726	(15,097)
Cash flows from financing activities:
Redemptions of common stock	(3,952)	(25,765)	(15,877)
Payment of deferred financing costs		(445)	(503)
Increase in borrowings	37,797	8,946	17,439
Repayments on borrowings	(8,121)	(5,760)	(4,660)
Purchase of interest rate caps	(153)	(11)	(66)
Distributions paid on common stock	(2,873)	(12,520)	(16,175)
Net cash provided by (used in) financing activities	22,698	(35,555)	(19,842)
Net increase (decrease) in cash and restricted cash	26,781	(1,807)	(28,907)
Cash and restricted cash at beginning of year	46,181	47,988	76,895
Cash and restricted cash at end of year	72,962	46,181	47,988
Reconciliation of cash and restricted cash
Cash	63,487	39,647	40,175
Restricted cash	9,475	6,534	7,813
Cash and restricted cash at end of year	$ 72,962	$ 46,181	$ 47,988

XML

Nature of Business and Operations

12 Months Ended

Dec. 31, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Nature of Business and Operations

NOTE 1 - NATURE OF BUSINESS AND OPERATIONS

Resource REIT, Inc. (f/k/a Resource Real Estate Opportunity REIT II, Inc.) (the “Company”) was organized in Maryland on September 28, 2012. The Company launched an initial public offering in February 2014, the primary portion of which terminated in February 2016.  The Company continues to offer shares pursuant to its distribution reinvestment plan at a purchase price equal to 95% of the estimated net asset value per share.  The Company has adopted a fiscal year ending December 31.  

Prior to the execution of the REIT I Merger Agreement (as defined below), on September 8, 2020, Resource Real Estate Opportunity REIT, Inc. ("REIT I"), a non-traded real estate investment trust ("REIT") sponsored by Resource America, Inc. (“RAI”), the Company’s initial sponsor, entered into a series of transactions to become self-managed (the “Self-Management Transaction”) and succeeded to the advisory, asset management and property management arrangements in place for the Company. Accordingly, the sponsor of the Company changed from RAI to Resource Real Estate Opportunity OP, LP, the operating partnership of REIT I, while the REIT I Merger (defined below) was pending.

Following the Self-Management Transaction, Resource Real Estate Opportunity Advisor II, LLC (the “Advisor”) is indirectly owned by REIT I.  Prior to September 8, 2020, the Advisor was an indirect wholly-owned subsidiary of RAI.  Pursuant to the advisory agreement initially entered into in February 2014 and renewed annually thereafter but prior to the occurrence of the REIT I Merger, the Advisor has acted 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. The advisory agreement was amended and restated on September 8, 2020.

RAI is a wholly-owned subsidiary of C-III Capital Partners, LLC ("C-III”). Prior to September 8, 2020, C-III controlled the Advisor, Resource Securities LLC ("Resource Securities"), the Company's dealer manager, and Resource Real Estate Opportunity Manager II, LLC (the "Manager"), the Company's property manager. C-III also controlled all of the shares of the Company's common stock held by RAI and the Advisor.

As of December 31, 2020, a total of 60,026,513 shares, including shares purchased by the Advisor and shares issued through the distribution reinvestment plan, remain outstanding. As of December 31, 2020, the Company had issued 10,197,726 shares valued at $88.5 million pursuant to its distribution reinvestment plan.

The Company’s objective is to take advantage of the multifamily investing and lending platforms available to it to invest in apartment communities in order to provide the investor with growing cash flow and increasing asset values. The Company has acquired and may continue to acquire underperforming apartments which it will renovate and stabilize in order to increase rents. To a lesser extent, the Company may acquire or originate commercial real estate debt secured by apartments. The Company elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes under the provisions of the Internal Revenue Code of 1986, as amended, commencing with its taxable year ending December 31, 2014. As such, to maintain its REIT qualification for U.S. federal income tax purposes, the Company is generally required to distribute at least 90% of its net income (excluding net capital gains) to its stockholders as well as comply with certain other requirements. Accordingly, the Company generally will not be subject to U.S. federal income taxes to the extent that it annually distributes all of its REIT taxable income to its stockholders. The Company also operates its business in a manner that will permit it to maintain its exemption from registration under the Investment Company Act of 1940, as amended.

Mergers with Resource Real Estate Opportunity REIT, Inc. and Resource Apartment REIT III, Inc.

On September 8, 2020, the Company entered into merger agreements (as described herein) to acquire each of REIT I and Resource Apartment REIT III, Inc. (“REIT III”) in stock-for-stock transactions whereby each of REIT I and REIT III were to be merged into the Company’s wholly owned subsidiary. The REIT I Merger (as defined below) and the REIT III Merger (as defined below) are referred to collectively herein as the Mergers. Each of the Mergers was intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended.  The Mergers were effective as of January 28, 2021.

Effective as of the close of the REIT I Merger, the Company acquired the Advisor and is a self-managed REIT.  Much of the historical information regarding the Company’s structure and agreements presented in this Note 1 and throughout the rest of these Notes to Consolidated Financial Statements has materially changed as a result of the Mergers, but did apply as of December 31, 2020.

Based on an evaluation of the relevant factors and the guidance in Accounting Standards Codification (‘‘ASC’’) 805, Business Combinations, all of which required significant management judgment, the entity in the Mergers considered the acquirer for accounting purposes (REIT I) is not the legal acquirer (The Company). In order to make this determination, various factors have been analyzed, including which entity issued its equity interests, relative voting rights, existence of minority interests (if any), control of the board of directors, management composition, relative size, transaction initiation, and other factors such as operational structure, and relative composition of employees, and other factors. The strongest factors identified were the relative size of the companies and management composition. Based on financial measures, REIT I is a larger entity than the Company and REIT III. REIT I has more common stock outstanding at a higher net asset value than the Company and REIT III and upon the consummation of the Mergers will be issued more shares of the Company than are currently held by the Company’s stockholders or than will be issued to REIT III stockholders in the REIT III Merger. Based on these factors, REIT I was concluded to be the accounting acquirer.

REIT I Merger

On September 8, 2020, the Company, RRE Opportunity OP II, LP (“OP II”), Revolution I Merger Sub, LLC, a wholly-owned subsidiary of the Company (“Merger Sub I”), REIT I, and Resource Real Estate Opportunity OP, LP (“OP I”), entered into an Agreement and Plan of Merger (the “REIT I Merger Agreement”).

Effective January 28, 2021, REIT I merged with and into Merger Sub I, with Merger Sub I surviving as direct, wholly-owned subsidiary of the Company (the “REIT I Company Merger”) and OP I merged with and into OP II (the “REIT I Partnership Merger” and, together with the REIT I Company Merger, the “REIT I Merger”), with OP II surviving the REIT I Partnership Merger. At such time, the separate existence of REIT I and OP I ceased. At the effective time of the REIT I Company Merger, each issued and outstanding share of REIT I’s common stock (or fraction thereof) converted into the right to receive 1.22423 shares of the Company’s common stock, and each issued and outstanding share of REIT I’s convertible stock converted into the right to receive $0.02 in cash (without interest).

At the effective time of the REIT I Partnership Merger, each common unit of partnership interests in OP I outstanding immediately prior to the effective time of the REIT I Partnership Merger converted into the right to receive 1.22423 common units of partnership interest in OP II and each Series A Cumulative Participating Redeemable Preferred Unit in OP I issued and outstanding immediately prior to the effective time of the REIT I Partnership Merger converted into the right to receive one Series A Cumulative Participating Redeemable Preferred Unit in OP II.

REIT III Merger

On September 8, 2020, the Company, OP II, Revolution III Merger Sub, LLC (“Merger Sub III”), the Company’s wholly-owned subsidiary, REIT III, and Resource Apartment OP III, LP (“OP III”), the operating partnership of REIT III, entered into an Agreement and Plan of Merger (the “REIT III Merger Agreement”).

Effective January 28, 2021, REIT III merged with and into Merger Sub III, with Merger Sub III surviving as its direct, wholly-owned subsidiary (the “REIT III Company Merger”) and (ii) OP III merged with and into OP II (the “REIT III Partnership Merger” and, together with the REIT III Company Merger, the “REIT III Merger”), with OP II surviving the REIT III Partnership Merger. At such time, the separate existence of REIT III and OP III ceased. The REIT I Merger and the REIT III Merger are hereinafter together referred to as the “Merger”.

At the effective time of the REIT III Company Merger, each issued and outstanding share of REIT III’s common stock (or fraction thereof) converted into the right to receive 0.925862 shares of the Company’s common stock. At the effective time of the REIT III Partnership Merger, each common unit of partnership interests in OP III outstanding immediately prior to the effective time of the REIT III Partnership Merger was retired and ceased to exist. In addition, for each share of the Company’s common stock issued in the REIT III Company Merger, a common unit of partnership interest was issued to the Company by OP II. 

COVID-19 Pandemic

One of the most significant risks and uncertainties facing the Company and the real estate industry generally continues to be the effect of the ongoing public health crisis of the novel coronavirus disease (COVID-19) pandemic. The Company continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business, including how the pandemic is impacting its tenants. The Company did not incur significant disruptions from the COVID-19 pandemic during the year ended December 31, 2020; however, a small percentage of its tenants have requested rent deferral as a result of the pandemic. The Company is evaluating each tenant rent relief request on an individual basis, considering a number of factors. Not all tenant requests will ultimately result in modified agreements, nor is the Company forgoing its contractual rights under its lease agreements. Executed short-term rent relief plans that are outstanding at December 31, 2020 are not significant in terms of either number of requests or dollar value.

The extent to which the COVID-19 pandemic impacts the Company’s operations and those of its tenants depends on future developments, which cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures. The Company is unable to predict the ultimate impact that the pandemic will have on its financial condition, results of operations and cash flows due to numerous uncertainties.

XML

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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:

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 Oak Hill Holdings, LLC ("Oak Hill")	N/A (1)	N/A		N/A
RRE Bear Creek Holdings, LLC ("Bear Creek")	Adair off Addison	152		Dallas, TX
RRE Buckhead Holdings, LLC ("Buckhead")	Uptown Buckhead	216		Atlanta, GA
RRE Farrington Holdings, LLC ("Farrington")	Crosstown at Chapel Hill	411		Chapel Hill, NC
RRE Mayfair Chateau Holdings, LLC ("Mayfair Chateau")	The Brookwood	274		Homewood, AL
RRE Fairways of Bent Tree Holdings, LLC ("Fairways of Bent Tree")	Adair off Addison Apartment Homes	200		Dallas, TX
RRE Montclair Terrace Holdings, LLC ("Montclair Holdings")	Montclair	188		Portland, OR
RRE Spalding Crossing Holdings, LLC ("Spalding Crossing")	1000 Spalding Crossing	252		Atlanta, GA
RRE Grand Reserve Holdings, LLC ("Grand Reserve")	Grand Reserve	319		Naperville, IL
RRE Canterwood Holdings, LLC ("Canterwood")	Verdant Apartment Homes	216		Boulder, CO
RRE Fox Ridge Holdings, LLC ("Fox Ridge")	Arcadia Apartment Homes	300		Centennial, CO
RRE Riverlodge Holdings, LLC ("Riverlodge")	Ravina Apartment Homes	498		Austin, TX
RRE Breckenridge Holdings, LLC ("Breckenridge")	81 Fifty at West Hills Apartment Homes	357		Portland, OR
RRE Santa Rosa Holdings, LLC ("Santa Rosa")	The Palmer at Las Colinas	476		Irving, TX
RRE Windbrooke Holdings, LLC ("Windbrooke Crossing")	Windbrooke Crossing	236		Buffalo Grove, IL
RRE Woods Holdings, LLC ("The Woods of Burnsville")	The Woods of Burnsville	400		Burnsville, MN
RRE Indigo Creek Holdings, LLC ("Indigo Creek")	Indigo Creek	408		Glendale, AZ
RRE Martin's Point Holdings, LLC ("Martin's Point"	Martin's Point	256		Lombard, IL
			5,159

N/A - Not Applicable

(1) Property was sold on February 28, 2019

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, 2020, the Company had $73.1 million of deposits at various banks, $64.9 million of which were over the insurance limit of the Federal Deposit Insurance Corporation.  No losses have been experienced on such deposits.

Contractual Obligations

The Company leases equipment under leases with varying expiration dates through 2023. As of December 31, 2020, the total payments due under these obligations were approximately $12,000.

	Payments due by period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Operating Lease Obligations	$	12,000	$	12,000	$	—	$	—	$	—

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:

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

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 of December 31, 2020, the Company's real estate investments located in Texas, Illinois, Colorado, Oregon and Georgia represent approximately 19.5%, 19.0%, 15.6%, 14.1% and 9.0% of the portfolio. This makes it 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

The Company periodically evaluates its long-lived assets, primarily investments in rental properties, for impairment indicators. The review considers factors such as past and expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for permanent impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. 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 would be the adjustment to fair value less the estimated cost to dispose of the asset. 

In conjunction with the Merger and for the Company’s annual estimated value per share calculation, the Company engaged with a third-party to provide the estimated fair value of its rental properties as of January 28, 2021. The Company compared these values to its carrying values and concluded that there was no indication that the carrying value of the Company’s investments in real estate were not recoverable as of December 31, 2020. There were no impairment losses recorded on long lived assets during the years ended December 31, 2020, 2019 and 2018.

Allocation of Purchase Price of Acquired Assets

On January 1, 2018, the Company adopted ASU No. 2017-01, Business Combinations (Topic 805):  Clarifying the Definition of a Business ("ASU No. 2017-01"). Acquisitions that do not meet the definition of a business under this guidance are accounted for as asset acquisitions.  In most cases, the Company believes that acquisitions of real estate will no longer be considered a business combination as in most cases substantially all of the fair value is concentrated in a single identifiable asset or group of tangible assets that are physically attached to each other (land and building).   However, if the Company determines that substantially all of the fair value of the gross assets acquired is not concentrated in either a single identifiable asset or in a group of similar identifiable assets, the screen is not met, and the Company will then perform an assessment to determine whether the set is a business by using the framework outlined in the ASU. If the Company determines that the acquired asset is not a business, the Company will allocate the cost of the acquisition including transaction costs to the assets acquired or liabilities assumed based on their related fair value.

Upon the acquisition of real properties, the Company allocates the purchase price to 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.

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 determined by independent appraisers (e.g., discounted cash flow analysis). Factors to be considered in the analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions and costs to execute similar leases.

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 underlying 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 does amortization periods for the intangible assets exceed the remaining depreciable life of the building.

The determination of the fair value of the assets and liabilities acquired requires the use of significant assumptions with regard to current market rental rates, discount rates and other variables.  The use of inappropriate estimates would result in an incorrect assessment of the fair value of these assets and liabilities, which could impact the Company's reported net income (loss).

Revenue Recognition and Receivables

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, which is accounted for in accordance with ASC 842, Leases (“ASC 842”). The future minimum rental payments to be received from noncancelable operating leases are approximately $42.8 million and $674,775 for the years ending December 31, 2021 and 2022, and none thereafter.

Revenue is primarily derived from the rental of residential housing units for which the Company receives minimum rents and utility reimbursements pursuant to underlying tenant lease agreements. The Company also receives other ancillary fees for administration of leases, late payments, amenities, and revenue sharing arrangements for cable income from contracts with cable providers at the Company's properties (discussed below). A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. The Company records the utility reimbursement income and ancillary charges in the period when the performance obligation is completed, either at a point in time or on a monthly basis as the service is utilized.

The Company has revenue sharing arrangements of cable income from contracts with cable providers at the Company's properties. Included in accrued expenses and other liabilities on the consolidated balance sheets at December 31, 2020 and 2019 is a contract liability related to deferred revenue from contracts with cable providers of approximately $499,000 and $573,000, respectively. The Company recognizes income from these contracts on a straight line basis over the contract period of 10 years to 12 years. During the years ended December 31, 2020 and 2019, approximately $102,000 and $138,000, respectively of revenue from the contract liability was recognized as income.

The Company evaluates its portfolio of operating leases for collectability at both the onset of the underlying leases and on an ongoing basis. Tenant receivables include amounts for which collectability was assessed as probable in accordance with the guidance in ASC 842-30. For tenant receivables, which include base rents, straight-line rentals, expense reimbursements and other revenue or income, the Company also estimates a general allowance for uncollectible accounts under ASC 450-20. The Company determines the collectability of its receivables related to rental revenue by considering a number of factors, including the length of time receivables are past due, security deposits held, the Company’s previous loss history, the tenants’ current ability to pay their obligations to the Company, and the condition of the general economy and the industry as a whole. If collectability is not probable, the Company adjusts rental income for the amount of the uncollectible revenue.

Due to the COVID-19 pandemic, some residents have experienced difficulty making rent payments and the Company’s receivables have increased compared to historical levels.  This caused the Company to further evaluate collectability during the year ended December 31, 2020. During the years ended December 31, 2020 and 2019, the Company recorded approximately $333,000 and $44,000, respectively, of provisions for bad debts to appropriately reflect management’s estimate for uncollectible accounts. The provision for bad debts was recorded as a reduction to rental income in the Company’s consolidated statements of operations and comprehensive loss. The age of the receivables included in the allowance balance at December 31, 2020 was: 21.9% less than 30 days past due, 20.8% 31-60 days past due, 1.3% 61-90 days past due and 56.0% over 90 days past due.

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 (“TRS”). In general, a TRS may hold assets and engage in activities that the Company cannot hold or engage in directly and generally may engage in any real estate or non-real estate-related business.  A TRS is subject to U.S. federal, state and local corporate income taxes. 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, 2020 and 2019, the Company did not treat any of its subsidiaries as a TRS.

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

The Company is subject to examination by the U.S. Internal Revenue Service and by the taxing authorities in other states in which the Company has significant business operations. The Company is not currently undergoing any examinations by taxing authorities. The Company is not subject to IRS examination for the tax return years 2016 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 share is computed by dividing income (loss) 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 50,000 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, 2020 (were such date to represent the end of the contingency period).  For the year ended December 31, 2020 and 2019, 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.

Reclassifications

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

Adoption of New Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, “Financial Instruments - Credit Losses”, which requires measurement and recognition of expected credit losses for financial assets held. On January 1, 2020, the Company adopted ASU No. 2016-13 and the adoption did not have a significant impact on its consolidated financial statements and disclosures.  

In August 2018, FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” This update removes, modifies and adds certain disclosure requirements in FASB ASC 820, “Fair Value Measurement” (“ASC 820”). The Company adopted the standard on January 1, 2020, and the adoption did not have a significant impact on its consolidated financial statements due to the fact there were no required changes to the Company’s disclosures.

In November 2018, FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” ASU No. 2018-19 clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842, Leases. The Company early adopted the standard on January 1, 2020, and the adoption did not have a significant impact on its consolidated financial statements and disclosures.

In March 2020, FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848).” ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. During the year ended December 31, 2020, the Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

In April 2020, FASB issued a Staff Q&A to respond to some frequently asked questions about accounting for lease concessions related to the effects of the COVID-19 pandemic. Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each lease to determine whether enforceable rights and obligations for concessions exist in the lease and can elect to apply or not apply the lease modification guidance to those leases. Entities may make the elections for any lessor-provided concessions related to the effects of the COVID-19 pandemic (e.g., deferrals of lease payments) as long as the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee.The Company has not elected to apply the lease modification guidance to our leases. To date, the impact of lease concessions granted has not had a material effect on the financial statements. The Company will continue to evaluate the impact of lease concessions and the appropriate accounting for those concessions.

Accounting Standards Issued But Not Yet Effective

In August 2020, FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”. ASU 2020-06 addresses the complexity of guidance for certain financial (convertible) instruments with characteristics of liabilities and equity. ASU No. 2020-06 will be effective for the Company beginning January 1, 2022. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU No. 2020-06 to have a material effect on its consolidated financial statements and disclosures due to the fact that the Company did not have instruments subject to this guidance at December 31, 2020.

XML

Supplemental Cash Flow Information

12 Months Ended

Dec. 31, 2020

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION

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

	Years Ended
	December 31,
	2020		2019		2018
Non-cash financing and investing activities:
Distributions on common stock declared but not yet paid	$	—	$	5,993	$	8,878
Stock issued pursuant to distribution reinvestment plan		3,131		14,724		20,693
Accruals for construction in process		447		1,955		424
Repayments on borrowings through refinancing		98,694		24,469		72,845
Escrow deposits funded through refinancing		3,993		580		—
Deferred financing costs, interest, and fees funded through refinancing		2,852		—		—
Non-cash activity related to sales:
Mortgage notes payable settled directly with proceeds from sale of rental property		—		29,497		—
Cash paid during the period for:
Interest	$	18,285	$	24,930	$	25,508

XML

Restricted Cash

12 Months Ended

Dec. 31, 2020

Cash And Cash Equivalents [Abstract]

Restricted Cash

NOTE 4 - RESTRICTED CASH

Restricted cash represents escrow deposits with lenders to be used to pay real estate taxes, insurance, capital improvements, and other. A summary of the components of restricted cash follows (in thousands):

	December 31, 2020		December 31, 2019
Real estate taxes	$	3,823	$	3,956
Insurance		824		877
Capital improvements		1,570		1,380
Other		3,258		321
Total	$	9,475	$	6,534
Unrestricted cash designated for capital expenditures	$	14,431	$	21,706

XML

Rental Properties, Net

12 Months Ended

Dec. 31, 2020

Real Estate [Abstract]

Rental Properties, Net

NOTE 5 - RENTAL PROPERTIES, NET

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

	December 31, 2020			December 31, 2019
Land	$	119,028		$	119,028
Building and improvements		726,037			720,420
Furniture, fixtures and equipment		26,205			25,906
Construction in progress		1,127			1,955
		872,397			867,309
Less: accumulated depreciation		(171,492	)		(131,779	)
	$	700,905		$	735,530

Depreciation expense for the years ended December 31, 2020, 2019, and 2018 was $40.2 million, $39.6 million, and $40.6 million, respectively.

XML

Disposition of Property

12 Months Ended

Dec. 31, 2020

Discontinued Operations And Disposal Groups [Abstract]

Disposition of Property

NOTE 6 – DISPOSITION OF PROPERTY

The Company disposed of one property during the year ended December 31, 2019. There were no dispositions during the years ended December 31, 2020 or 2018. The following table presents details of the Company’s disposition activity during the year ended December 31, 2019 (in thousands):

Multifamily Community	Location	Sale Date	Contract Sales Price		Net Gain on Disposition		Revenue Attributable to Property Sold		Net Loss to Property Sold (1)
Overton Trails	Fort Worth, Texas	February 28, 2019	$	64,000	$	20,619	$	1,143	$	(249	)

(1) Excludes net gain on disposition

XML

Identified Intangible Assets, Net

12 Months Ended

Dec. 31, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Identified Intangible Assets, Net

NOTE 7 - IDENTIFIED INTANGIBLE ASSETS, NET

Identified intangible assets, net, consist of in-place rental leases. The gross value of acquired in-place leases totaled $17.3 million as of both December 31, 2020 and 2019, which was reported net of accumulated amortization of $17.3 million. For the year ended December 31, 2018, amortization expense was $813,000. Intangible assets were fully amortized as of both December 31, 2020 and 2019.

XML

Mortgage Notes Payable, Net

12 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

Mortgage Notes Payable, Net

NOTE 8 - MORTGAGE NOTES PAYABLE, NET

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

	December 31, 2020									December 31, 2019
Collateral	Outstanding borrowings		Premium, net		Deferred Financing Costs, net			Carrying Value		Outstanding borrowings		Premium, net		Deferred Financing Costs, net			Carrying Value
Uptown Buckhead	$	18,876	$	—	$	(144	)	$	18,732	$	19,264	$	—	$	(178	)	$	19,086
Crosstown at Chapel Hill		42,650		—		(264	)		42,386		42,650		—		(325	)		42,325
The Brookwood - Key Bank		16,632		83		(39	)		16,676		17,063		186		(88	)		17,161
The Brookwood - Capital One		2,517		6		(7	)		2,516		2,566		14		(15	)		2,565
Adair off Addison and Adair off Addison Apartment Homes		33,210		—		(317	)		32,893		33,210		—		(380	)		32,830
1000 Spalding Crossing		35,035		—		(329	)		34,706		23,737		—		(113	)		23,624
Montclair Terrace		19,479		—		(127	)		19,352		19,958		—		(182	)		19,776
Grand Reserve		47,845		—		(473	)		47,372		47,845		—		(539	)		47,306
Verdant Apartment Homes		47,146		—		(372	)		46,774		36,913		—		(178	)		36,735
Arcadia Apartment Homes		56,810		—		(494	)		56,316		39,782		—		(195	)		39,587
Ravina Apartment Homes		25,506		—		(93	)		25,413		26,241		—		(165	)		26,076
81 Fifty at West Hills Apartment Homes		50,708		—		(260	)		50,448		51,833		—		(368	)		51,465
The Palmer at Las Colinas		45,700		—		(370	)		45,330		45,700		—		(437	)		45,263
Windbrooke Crossing		36,437		—		(202	)		36,235		37,222		—		(272	)		36,950
Woods of Burnsville		36,918		—		(265	)		36,653		37,744		—		(355	)		37,389
Indigo Creek		39,498		—		(243	)		39,255		40,402		—		(320	)		40,082
Martin's Point		29,283		—		(226	)		29,057		29,944		—		(289	)		29,655
	$	584,250	$	89	$	(4,225	)	$	580,114	$	552,074	$	200	$	(4,399	)	$	547,875

The following table presents additional information about the Company's mortgage notes payable, net (in thousands, except percentages):

	Maturity Date	Margin over LIBOR			Annual Interest Rate			Average Monthly Debt  Service		Average Monthly Escrow
Uptown Buckhead	7/1/2025		2.22	%		2.36	%	$	70	$	55	(1)(3)(5)(9)
Crosstown at Chapel Hill	7/1/2025		1.77	%		1.91	%		106		68	(1)(3)(4)
The Brookwood - Key Bank	11/1/2021		—			4.73	%		104		66	(2)(6)
The Brookwood - Capital One	11/1/2021		—			5.40	%		16		—	(2)(6)
Adair off Addison and Adair off Addison Apartment Homes	5/1/2026		1.64	%		1.78	%		91		74	(1)(3)(4)(7)(9)
1000 Spalding Crossing	12/1/2027		—			2.51	%		74		60	(2)(4)(8)
Montclair Terrace	6/1/2023		2.45	%		2.59	%		80		30	(1)(3)(6)(9)
Grand Reserve	5/1/2028		1.72	%		1.86	%		76		184	(1)(3)(4)
Verdant Apartment Homes	12/1/2027		—			2.57	%		102		40	(2)(4)(8)
Arcadia Apartment Homes	12/1/2027		—			2.57	%		123		43	(2)(4)(8)
Ravina Apartment Homes	5/1/2022		—			3.76	%		144		148	(2)(6)
81 Fifty at West Hills Apartment Homes	7/1/2023		2.36	%		2.50	%		205		58	(1)(3)(6)(9)
The Palmer at Las Colinas	9/1/2026		2.11	%		2.25	%		104		156	(1)(3)(4)(9)
Windbrooke Crossing	1/1/2024		2.69	%		2.83	%		154		180	(1)(3)(6)
Woods of Burnsville	2/1/2024		2.13	%		2.27	%		145		95	(1)(3)(6)
Indigo Creek	5/1/2024		1.93	%		2.07	%		127		59	(1)(3)(6)
Martin's Point	11/1/2024		1.86	%		2.00	%		111		78	(1)(3)(6)

(1) Variable rate based on one-month LIBOR of 0.14388% (as of December 31, 2020) plus a fixed margin

(2) Fixed rate

(3) Variable rate hedged with interest rate cap cash flow hedge

(4) Monthly interest-only payment currently required

(5) Monthly fixed principal plus interest payment required

(6) Fixed monthly payment of principal and interest payment required

(7) Originated during the year ended December 31, 2019 through refinancing

(8) Originated during the year ended December 31, 2020 through refinancing

(9) Loan refinanced with new credit facility in January 2021

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 mortgage loans using the effective interest method. As of December 31, 2020, the net unamortized mortgage premium of $89,307 was included as a component of mortgage loans payable in the accompanying consolidated balance sheets.

As of December 31, 2020, the weighted average interest rate of all the Company’s outstanding indebtedness was 2.44% 

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, 2020 and 2019, the Company had $9.5 million and $6.5 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):

2021	$	26,486
2022		33,110
2023		75,024
2024		136,526
2025		59,722
Thereafter		253,382
	$	584,250

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 these exceptions under 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 the lender, failure to pay water, sewer and other public assessments or charges, failure to pay environmental compliance costs or to deliver books and records, in each case as required in the loan documents. The exceptions also require the Company to guarantee payment of audit costs, lender’s enforcement of its rights under the loan documents and payment of the loan if the borrower voluntarily files for bankruptcy or seeks reorganization, or if a related party of the borrower does so with respect to the subsidiary.

The Company refinanced the loans on 1000 Spalding Crossing, Verdant Apartment Homes, and Arcadia Apartment Homes during the year ended December 31, 2020. The new loans for in the amounts of $35.0 million, $47.1 million and $56.8 million, respectively, and all three loans mature on December 1, 2027. Loss on extinguishment of debt of approximately $65,000, $132,000, and $145,000, respectively, was included in interest expense on the consolidated statement of operations for the year ended December 31, 2020. Prepayment penalties of approximately $233,000, $363,000, and $391,000, respectively, was included in interest expense on the consolidated statement of operations for the year ended December 31, 2020.

Deferred financing costs incurred to obtain financing are amortized over the term of the related debt. As of December 31, 2020 and 2019, accumulated amortization of deferred financing costs was $3.7 million and $3.4 million respectively.  Amortization of deferred financing costs for the next five years ending December 31, and thereafter, are as follows (in thousands):

2021	$	1,035
2022		927
2023		807
2024		527
2025		398
Thereafter		531
	$	4,225

XML

Accumulated Other Comprehensive Loss

12 Months Ended

Dec. 31, 2020

Equity [Abstract]

Accumulated Other Comprehensive Loss

NOTE 9 – ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents the changes in accumulated other comprehensive loss for the years ended December 31, 2020, 2019 and 2018 (in thousands):

	Net unrealized (loss) gain on derivatives
Balance, January 1, 2018	$	(444	)
Reclassification adjustment for realized loss on designated derivatives		130
Unrealized loss on designated derivatives		(65	)
Balance, December 31, 2018		(379	)
Reclassification adjustment for realized loss on designated derivatives		268
Unrealized loss on designated derivatives		(78	)
Balance, December 31, 2019		(189	)
Reclassification adjustment for realized loss on designated derivatives		95
Unrealized loss on designated derivatives		(137	)
Balance, December 31, 2020	$	(231	)

XML

Related Party Transactions

12 Months Ended

Dec. 31, 2020

Related Party Transactions [Abstract]

Related Party Transactions

NOTE 10 – RELATED PARTY TRANSACTIONS

Relationship with the Advisor

Prior to the Self-Management Transaction on September 8, 2020, the Company was externally managed and the Advisor was an indirect wholly-owned subsidiary of RAI. After the Self-Management Transaction, the Advisor became an indirect wholly-owned subsidiary of OP I, the operating partnership of REIT I. As a result of the REIT I Merger on January 28, 2021, the Company no longer has an external advisor.  See Note 16, Subsequent Events, for additional details.

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 is 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 REIT I, our sponsor following the Self-Management Transaction, 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.

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. As a result of the REIT I Merger on January 28, 2021, these fees are now eliminated:

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. Pursuant to the Advisory Agreement, the Advisor agreed to waive an acquisition fee and debt financing fee in connection with the REIT III Merger.  No such waiver was sought with respect to the REIT I Merger because, if owed, it would be paid with OP II funds to an entity that would then be wholly-owned by OP II.

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 (i) one-half of the aggregate brokerage commission paid, or if none is paid, the amount that customarily would be paid at a market rate or (ii) 2.0% of the contract sales price.

Debt financing fees. The Advisor earns a debt financing fee equal to 0.5% of the amount available under any debt financing obtained. As described above, the Advisor has waived any debt financing fee in connection with the REIT III Merger.

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 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

Prior to the Self-Management Transaction on September 8, 2020, RAI and C-III were related parties of the Company.

Property loss pool:  The Company participates (with other properties directly or indirectly managed by RAI and C-III) in a catastrophic insurance policy, which covers claims up to $250 million, after either a $25,000 or $100,000 deductible per incident, depending on location and/or type of loss. Therefore, unforeseen or catastrophic losses in excess of the Company's insured limits could have a material adverse effect on the Company's financial condition and operating results. This policy will expire on March 1, 2021.

General liability coverage:  The Company (with other properties directly managed by RAI) has an insured and dedicated limit for the general liability policy of $1.0 million per occurrence. Total claims are limited to $2.0 million per premium year. In excess of these limits, the Company participates (with other properties directly or indirectly managed by RAI and C-III) in a $50.0 million per occurrence excess liability program. Therefore, the total insured limit per occurrence is $51.0 million for the general and excess liability program, after a $25,000 deductible per incident. This policy will expire on March 1, 2021.

Internal audit fees. REIT I performs internal audit services for the Company.  Prior to the Self-Management Transaction, RAI performed internal audit services for the Company.

Directors and officers insurance: The Company participates in a liability insurance program for directors and officers coverage with REIT I and REIT III.  Prior to the Self-Management Transaction, the Company participated in a liability insurance program for directors and officers’ coverage with other C-III managed entities and subsidiaries.

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 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. Prior to the Self-Management Transaction on September 8, 2020, the Manager was an indirect wholly-owned subsidiary of RAI. After the Self-Management Transaction, the Manager is an indirect wholly-owned subsidiary of Resource Real Estate Opportunity OP, LP.  See Note 16, Subsequent Events, for additional details.  As a result of the REIT I Merger on January 28, 2021, these fees are now eliminated:

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. The Manager subcontracts certain services to an unaffiliated third-party and pays for those services from its property management fee.  After the REIT I Merger on January 28, 2021, the Company continues to subcontract certain services from the same unaffiliated third-party.

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, 2020, 2019 and 2018.

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

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

	December 31, 2020		December 31, 2019
Due from related parties:
RAI - self-insurance funds held	$	—	$	33
Operating expense reimbursements		—		264
		—	$	297
Due to related parties:
Advisor:
Operating expense reimbursements		1,588		6
Manager:
Property management fees		327		328
Operating expense reimbursements		—		96
Properties
Meridian		—		2
	$	1,915	$	432

	Years Ended
	December 31,
	2020		2019		2018
Fees earned / expenses incurred:
Advisor
Asset management fees (1)(6)(7)	$	9,081	$	9,374	$	9,840
Debt financing fees (2)(11)		184		39		78
Disposition fees (3)		—		274		—
Operating expense reimbursements (4)(9)		3,902		3,462		3,708
Internal audit (10)		106		—		—
Manager
Property management fees (1)(8)	$	3,813	$	3,834	$	3,888
Construction management fees (5)		352		255		859
Construction payroll reimbursements (5)		—		63		121
Operating expense reimbursements (4)		—		70		201

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

(2) Included in Mortgage notes payable, net on the consolidated balance sheets.

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

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

(5) Capitalized and included in Rental properties, net on the consolidated balance sheets.

(6) Net with acquisition fees returned as a result of capital expense reallocation.

(7) After the Self-Management Transaction on September 8, 2020, $2.9 million of this balance was earned by OP I.

(8) After the Self-Management Transaction on September 8, 2020, $1.2 million of this balance was earned by OP I.

(9) After the Self-Management Transaction on September 8, 2020, $1.5 million of this balance was earned by OP I.

(10) After the Self-Management Transaction on September 8, 2020, approximately $33,000 of this balance was earned by OP I.

(11) After the Self-Management Transaction on September 8, 2020, approximately $184,000 of this balance was earned by OP I.

XML

Equity

12 Months Ended

Dec. 31, 2020

Equity [Abstract]

Equity

NOTE 11 – 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 both December 31, 2020 and 2019, no shares of preferred stock were issued or outstanding.

Convertible Stock

As of December 31, 2020, 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:

(A) the lesser of

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

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

(2) the sum of the aggregate issue price of those outstanding shares plus a 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

(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.

As of December 31, 2020, no Triggering Events had occurred or were probable to occur.

Common Stock

As of December 31, 2020, the Company had an aggregate of 60,026,513 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):

	Shares			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		10,197,726			88,479
Advisor's initial investment, net of 5,000 share conversion		15,000			150
Total		66,250,388		$	644,826
Shares redeemed and retired		(6,223,875	)
Total shares outstanding		60,026,513

Redemptions

During the year ended December 31, 2020, the Company redeemed shares of common stock as follows (in thousands, except per share data):

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 2020		—		—		—	(2)
February 2020		—		—		—	(2)
March 2020	140		$	8.77	140		(2)
April 2020		—		—		—	(2)
May 2020		—		—		—	(2)
June 2020		120	$	9.08		260	(2)
July 2020		—		—		—	(2)
August 2020		—		—		—	(2)
September 2020		—		—		—	(2)
October 2020		—		—		—	(2)
November 2020		—		—		—	(2)
December 2020		179	$	9.08		439	(2)

(1) All purchases of equity securities by the Company in the year ended December 31, 2020 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.

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.

Effective November 22, 2020, the share redemption program was suspended except for redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility (collectively, “special redemptions”). On September 8, 2020, the share redemption program was fully suspended in connection with signing the merger agreements with respect to the REIT I Merger and the REIT III Merger and subsequently resumed with respect to special redemptions on October 22, 2020.  While the partial suspension of the share redemption program is in effect, the Company will only accept requests for redemption in connection with a special redemption and all other pending or new requests will not be honored or retained, but will be cancelled with the ability to resubmit when, if ever, the share redemption program is fully resumed.

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, 2020, the Company paid aggregate distributions of $6.0 million including $2.9 million of distributions paid in cash and $3.1 million of distributions reinvested in shares of common stock through the Company's distribution reinvestment plan, as follows (in thousands):

Authorization Date	Per Common Share		Record Dates	Distribution Date	Distributions reinvested in shares of Common Stock		Net Cash Distributions		Total Aggregate Distributions
December 11, 2019	$	0.001095890	December 31, 2019 through January 30, 2020	January 31, 2020	$	1,074	$	968	$	2,042
December 11, 2019	$	0.001095890	January 31, 2020 through February 27, 2020	February 28, 2020		965		883		1,848
December 11, 2019	$	0.001095890	February 28, 2020 through March 30, 2020	March 31, 2020		1,092		1,022		2,114
					$	3,131	$	2,873	$	6,004

The Company announced on March 30, 2020 that it was suspending distributions as of April 1, 2020 in order to preserve cash and offset any impact to the Company’s liquidity that may occur as a result of the impact of the COVID-19 pandemic on its operations.

The following is a reconciliation of total aggregate distributions paid to total distributions declared for the year ended December 31, 2020 (in thousands):

Total aggregate distributions paid	$	6,004
Less: distribution payable at December 31, 2019		(5,993	)
Add: distribution payable at December 31, 2020		—
True-up of prior year cash distributions declared	$	11

Distributions are payable in cash or reinvested in shares of common stock at the discretion of the shareholder.

XML

Fair Value Measures and Disclosures

12 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value Measures and Disclosures

NOTE 12 - 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) which are reported at fair value in the consolidated balance sheets are valued by a third-party pricing agent using an income approach with models that use, as their primary inputs, readily observable market parameters. This valuation process considers factors including interest rate yield curves, time value, credit and volatility factors. (Level 2)

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

	Level 1		Level 2		Level 3		Total
December 31, 2020
Assets:
Interest rate caps	$	—	$	25	$	—	$	25
	$	—	$	25	$	—	$	25
December 31, 2019
Assets:
Interest rate caps	$	—	$	9	$	—	$	9
	$	—	$	9	$	—	$	9

Interest rate caps 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):

	December 31, 2020				December 31, 2019
	Outstanding Balance		Estimated Fair Value		Outstanding Balance		Estimated Fair Value
Mortgage notes payable	$	584,250	$	576,693	$	552,074	$	545,249

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).

XML

Derivatives and Hedging Activities

12 Months Ended

Dec. 31, 2020

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivatives and Hedging Activities

NOTE 13 - 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, 2020, 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.

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 $83,099 will be reclassified as an increase to interest expense.

As of December 31, 2020, the Company had the following outstanding interest rate derivatives (dollars in thousands):

Interest Rate Derivative	Number of Instruments	Notional		Maturity Dates
Interest rate caps	11	$	405,264	July 1, 2021 through September 1, 2024

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, 2020 and 2019 (in thousands):

Asset Derivatives

Liabilities Derivatives

December 31, 2020

December 31, 2019

December 31, 2020

December 31, 2019

Balance Sheet

Fair Value

Balance Sheet

Fair Value

Balance Sheet

Fair Value

Balance Sheet

Fair Value

Interest rate caps

$

25

Interest rate caps

$

9

—

$

—

—

$

—

Interest rate caps 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, 2020 and 2019 (in thousands):

	December 31, 2020		December 31, 2019				December 31, 2020			December 31, 2019
Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivative for the Years Ended					Location of Loss Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Loss Reclassified from Accumulated OCI into Income for the Years Ended
Interest rate caps	$	137	$	(95	)	Interest expense	$	(95	)	$	(285	)

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, 2020, the Company has not posted any collateral related to these agreements.

XML

Operating Expenses

12 Months Ended

Dec. 31, 2020

Other Income And Expenses [Abstract]

Operating Expenses

NOTE 14 - 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 fiscal quarters ended December 31, 2020 exceeded the charter-imposed limitation; however, the conflicts committee of the Company's board of directors determined that the relationship of the Company's operating expenses to its average invested assets was justified for these periods given the non-recurring nature of the expenses incurred during the year ended December 31, 2020 in connection with the mergers with REIT I and REIT III.

XML

Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2020

Quarterly Financial Data [Abstract]

Quarterly Financial Data (Unaudited)

NOTE 15 – QUARTERLY FINANCIAL DATA (UNAUDITED)

The following tables present the Company's operating results by quarter (in thousands, except share data):

Quarterly Results for 2020	March 31			June 30			September 30			December 30
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues	$	21,407		$	21,353		$	21,411		$	21,639
Net loss	$	(7,926	)	$	(6,863	)	$	(9,369	)	$	(9,066	)
Basic and diluted net loss per common share	$	(0.13	)	$	(0.11	)	$	(0.16	)	$	(0.15	)
Quarterly Results for 2019	March 31			June 30			September 30			December 30
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues	$	21,959		$	21,222		$	21,312		$	21,188
Net income (loss)	$	11,697		$	(8,109	)	$	(8,688	)	$	(6,844	)
Basic and diluted net income (loss) per common share	$	0.19		$	(0.13	)	$	(0.14	)	$	(0.12	)

XML

Subsequent Events

12 Months Ended

Dec. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

NOTE 16 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the filing of this report and determined that there have not been any events that have occurred that would require adjustments to or disclosures in the consolidated financial statements, except for the following:

Mergers with Resource Real Estate Opportunity REIT, Inc. and Resource Apartment REIT III, Inc.

On September 8, 2020, the Company entered into merger agreements (as described herein) to acquire each of REIT I and REIT III in stock-for-stock transactions whereby each of REIT I and REIT III were to be merged into its wholly owned subsidiary. Each of the Mergers was intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended.  The Mergers were effective as of January 28, 2021 and upon consummation of the Mergers, the Company owns 51 properties in 15 states, comprising a total of 14,995 multifamily units.

REIT I Merger

On September 8, 2020, the Company, OP II, Revolution I Merger Sub, LLC, a wholly-owned subsidiary of the Company (“Merger Sub I”), REIT I, and OP I, entered into an Agreement and Plan of Merger (the “REIT I Merger Agreement”).

Effective January 28, 2021, REIT I merged with and into Merger Sub I, with Merger Sub I surviving as direct, wholly-owned subsidiary (the “REIT I Company Merger”) and OP I merged with and into OP II (the “REIT I Partnership Merger” and, together with the REIT I Company Merger, the “REIT I Merger”), with OP II surviving the REIT I Partnership Merger. At such time, the separate existence of REIT I and OP I ceased.

At the effective time of the REIT I Company Merger, each issued and outstanding share of REIT I’s common stock (or fraction thereof) converted into the right to receive 1.22423 shares of the Company’s common stock, and each issued and outstanding share of REIT I’s convertible stock converted into the right to receive $0.02 in cash (without interest).

At the effective time of the REIT I Partnership Merger, each common unit of partnership interests in OP I outstanding immediately prior to the effective time of the REIT I Partnership Merger converted into the right to receive 1.22423 common units of partnership interest in OP II and each Series A Cumulative Participating Redeemable Preferred Unit in OP I issued and outstanding immediately prior to the effective time of the REIT I Partnership Merger converted into the right to receive one Series A Cumulative Participating Redeemable Preferred Unit in OP II.

REIT III Merger

On September 8, 2020, the Company, OP II, Revolution III Merger Sub, LLC (“Merger Sub III”), the Company’s wholly-owned subsidiary, REIT III, and Resource Apartment OP III, LP (“OP III”), the operating partnership of REIT III, entered into an Agreement and Plan of Merger (the “REIT III Merger Agreement”).

Effective January 28, 2021, REIT III merged with and into Merger Sub III, with Merger Sub III surviving as its direct, wholly-owned subsidiary (the “REIT III Company Merger”) and (ii) OP III merged with and into OP II (the “REIT III Partnership Merger” and, together with the REIT III Company Merger, the “REIT III Merger”), with OP II surviving the REIT III Partnership Merger. At such time, the separate existence of REIT III and OP III ceased. The REIT I Merger and the REIT III Merger are hereinafter together referred to as the “Merger”.

At the effective time of the REIT III Company Merger, each issued and outstanding share of REIT III’s common stock (or fraction thereof) converted into the right to receive 0.925862 shares of the Company’s common stock.

At the effective time of the REIT III Partnership Merger, each unit of partnership interests in OP III outstanding immediately prior to the effective time of the REIT III Partnership Merger was retired and ceased to exist. In addition, for each share of the Company’s common stock issued in the REIT III Company Merger, a common partnership unit was issued to the Company by OP II. 

Employment Agreements

In connection with the REIT I Merger, the Company assumed from REIT I, the employment agreements dated September 8, 2020 for the following executive officers: Alan F. Feldman, Chief Executive Officer and President, Thomas C. Elliott, Executive Vice President, Chief Financial Officer and Treasurer, and Michele (“Shelle”) R. Weisbaum, Senior Vice President and Chief Legal Officer. The Company assumed REIT I’s obligations under the employment agreements in their entirety. Information about the REIT I employment agreements is included under Item 5.02 in the Current Report on Form 8-K for REIT I as filed with the SEC on September 11, 2020.  In addition, the employment agreements for Messrs. Feldman and Elliott and Ms. Weisbaum were filed as exhibits to the Current Report on Form 8-K filed by the Company on January 29, 2021.

Long-Term Incentive Plan

As of the effective time of the REIT I Merger, the Company assumed the 2020 Long-Term Incentive Plan of REIT I as amended to replace all references to REIT I to the Company.  In addition, upon the effective time of the REIT I Merger, the shares of restricted stock of REIT I granted to Alan F. Feldman, Thomas C. Elliott, Steven R. Saltzman and Michele R. Weisbaum under the 2020 Long-Term Incentive Plan of REIT I were cancelled and converted into the right to receive 1.22423 shares of the Company’s common stock. Each such share of common stock issued has, and is subject to, the same terms and conditions (including with respect to vesting) set forth in the 2020 Long-Term Incentive Plan of REIT I (which has been assumed and adopted by the Company as its own) and the related restricted stock agreements as in effect immediately prior to the REIT I Merger. The terms of the restricted stock are described under Item 5.02 in the Current Report on Form 8-K for REIT I as filed with the SEC on September 11, 2020. In addition, a copy of the form of restricted stock agreement (time based) is filed as an exhibit to the Company’s Current Report on Form 8-K filed by the Company on January 29, 2021 and a copy of the form of restricted stock agreement (performance based) is filed as an exhibit to the Company’s Current Report on Form 8-K filed by the Company on February 23, 2021. The compensation committee of the board of directors granted time-based and performance-based equity incentive awards to employees of The Company, including its executive officers effective February 17, 2021.

Structured Credit Facility Transaction

On January 28, 2021, subsidiaries of the Company (collectively, “Borrower”) entered into a structured credit facility transaction with CBRE Multifamily Capital, Inc. for delivery of loans and/or advances to Fannie Mae (the “Facility”) for a term of 15 years (the “Facility Termination Date”). Pursuant to the terms of the loan documents for the Facility, the lender agreed to make fixed advances and variable advances to Borrower during the term of the Facility provided that Borrower satisfies certain customary conditions as set forth in the Facility loan documents (the “Loan Documents”), including debt service coverage tests and loan-to-value tests. The fixed advances in the Facility may have terms not less than five or more than 15 years from the closing of such advance and variable advances in the Facility may have terms not less than five or more than 10 years from the closing of such advance. All advances must have maturity dates that do not exceed the Facility Termination Date. Borrower has the option to convert variable advances to fixed advances beginning on the first day of the second year of the variable advance term and ending seven years prior to the Facility Termination Date, subject to the satisfaction of customary requirements set forth in the Loan Documents.

The Facility is non-recourse to the Borrower except for the customary exceptions to non-recourse provisions of the Loan Documents (“carve-outs”). The Borrower’s obligations for the carve-outs are guaranteed solely by the Borrowers. The Company is the key principal under the Facility and as such must continue to indirectly own an interest in each Borrower and is subject to certain transfer restrictions with respect to its ownership interest in each Borrower as provided in the Loan Documents. In addition, the Facility contains customary representations and warranties, financial and other covenants, events of default and remedies typical for this type of facility.

The initial advance of $495.2 million under the Facility occurred on January 28, 2021 and is secured by mortgages on the following twelve multifamily properties located in Arizona, Colorado, Georgia, Oregon and Texas: Estates at Johns Creek, Heritage Pointe, Providence in the Park, South Lamar Village, Verona Apartments, Westside, 81 Fifty at West Hills, Adair off Addison I & II, Montclair Terrace, Palmer at Las Colinas, and Uptown Buckhead. The mortgages contain cross-collateralization and cross-default provisions so a default on a single property could affect multiple properties securing the Facility. The proceeds from the initial advance were used to refinance or pay off $462.0 million of the Borrower’s debt. Additional information about the initial advance is as follows:

Advance	Loan Amount	Term (years)	Interest Only	Total Rate	Payments
Fixed Advance 1	$      235,205,000	10	Yes	2.79%	Monthly
Fixed Advance 2	$      235,205,000	7	Yes	2.62%	Monthly
Variable Advance 1	$        24,760,000	10	Yes	2.15%	Monthly

Amended and Restated Share Redemption Program

On February 3, 2021, the Board of Directors of the Company (the “Board’) adopted the Fifth Amended and Restated Share Redemption Program (the “Amended SRP”) pursuant to which, subject to significant conditions and limitations of the program, stockholders can have their shares repurchased by the Company. The Amended SRP provides that redemptions will continue to be made quarterly but in an amount not to exceed proceeds from the sale of shares in the DRP in the immediately preceding calendar quarter; provided that, for any quarter in which no DRP proceeds are available, the funding limitation for the quarter will be set by the Board upon ten business days’ notice to stockholders. As there were no DRP proceeds for the fourth quarter of 2020, the Board has set the funding limitation for redemptions in the first quarter of 2021 at $2.0 million.  Additional changes to the share redemption program in the Amended SRP clarify the timing of redemption procedures.  The share redemption program remains suspended except with respect to redemptions sought up on a stockholder’s death, disability, or confinement to a long-term care facility (each as defined in the Amended SRP).

Distributions Declared

On February 3, 2021, the Board authorized a quarterly distribution for the first quarter of 2021 in the amount of $0.07 per share of common stock to stockholders of record as of the close of business on March 30, 2021, which the Company expects to pay on March 31, 2021. Investors may choose to receive cash distributions or purchase additional shares through the DRP.

XML

Schedule III Real Estate and Accumulated Depreciation

12 Months Ended

Dec. 31, 2020

Real Estate And Accumulated Depreciation Disclosure [Abstract]

Schedule III Real Estate and Accumulated Depreciation

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	$	—	$	9,149	$	3,402	$	12,551	$	(4,655	)	1980	6/4/2014
Dallas, Texas
Residential		18,876		31,856		5,114		36,970		(8,990	)	1989	3/30/2015
Atlanta, Georgia
Residential		42,650		45,653		8,415		54,068		(13,715	)	1990	5/19/2015
Chapel Hill, North Carolina
Residential		19,149		30,003		7,420		37,423		(9,388	)	1968	8/21/2015
Homewood, Alabama
Residential		33,210		20,667		3,349		24,016		(6,077	)	1979	8/27/2015
Dallas, Texas
Residential		35,035		40,194		5,268		45,462		(10,415	)	1995	9/24/2015
Atlanta Georgia
Residential		19,479		32,130		3,789		35,919		(7,555	)	2004	10/29/2015
Portland, Oregon
Residential		47,845		66,213		6,051		72,264		(14,648	)	1991	12/18/2015
Naperville, Illinois
Residential		47,146		64,181		4,373		68,554		(11,072	)	1997	12/18/2015
Boulder, Colorado
Residential		56,810		59,059		5,938		64,997		(12,807	)	1984	1/22/2016
Centennial, Colorado
Residential		25,506		55,466		7,338		62,804		(13,807	)	2001	3/23/2016
Austin, Texas
Residential		50,708		80,155		6,024		86,179		(15,510	)	1985	5/17/2016
Portland, Oregon
Residential		45,700		68,454		8,216		76,670		(14,948	)	1991	6/28/2016
Irving, Texas
Residential		36,437		47,817		1,509		49,326		(7,320	)	1986	12/22/2016
Buffalo Grove, Illinois
Residential		36,918		49,775		1,695		51,470		(8,494	)	1984	12/23/2016
Burnsville, Minnesota
Residential		39,498		54,057		1,740		55,797		(7,876	)	1998	4/4/2017
Glendale, Arizona
Residential		29,283		37,205		722		37,927		(4,215	)	1989	10/31/2017
Lombard, Illinois
	$	584,250	$	792,034	$	80,363	$	872,397	$	(171,492	)

	Years Ended December 31,
	2020			2019			2018
Investments in real estate:
Balance at beginning of the year	$	867,309		$	912,534		$	898,729
Improvements, etc.		7,297			8,156			15,486
Disposals during the year		(2,209	)		—			—
Dispositions during the year		—			(53,381	)		(1,681	)
Balance at end of year	$	872,397		$	867,309		$	912,534
Accumulated Depreciation:
Balance at beginning of year	$	(131,779	)	$	(101,933	)	$	(61,758	)
Depreciation		(40,195	)		(39,599	)		(40,611	)
Disposals		482			9,753			436
Balance at end of year	$	(171,492	)	$	(131,779	)	$	(101,933	)

XML

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2020

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").

Principles of Consolidation

Principles of Consolidation

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

Subsidiary	Apartment Complex	Number of Units		Property Location
RRE Opportunity Holdings II, LLC	N/A	N/A		N/A
RRE Opportunity OP II, LP	N/A	N/A		N/A
RRE Oak Hill Holdings, LLC ("Oak Hill")	N/A (1)	N/A		N/A
RRE Bear Creek Holdings, LLC ("Bear Creek")	Adair off Addison	152		Dallas, TX
RRE Buckhead Holdings, LLC ("Buckhead")	Uptown Buckhead	216		Atlanta, GA
RRE Farrington Holdings, LLC ("Farrington")	Crosstown at Chapel Hill	411		Chapel Hill, NC
RRE Mayfair Chateau Holdings, LLC ("Mayfair Chateau")	The Brookwood	274		Homewood, AL
RRE Fairways of Bent Tree Holdings, LLC ("Fairways of Bent Tree")	Adair off Addison Apartment Homes	200		Dallas, TX
RRE Montclair Terrace Holdings, LLC ("Montclair Holdings")	Montclair	188		Portland, OR
RRE Spalding Crossing Holdings, LLC ("Spalding Crossing")	1000 Spalding Crossing	252		Atlanta, GA
RRE Grand Reserve Holdings, LLC ("Grand Reserve")	Grand Reserve	319		Naperville, IL
RRE Canterwood Holdings, LLC ("Canterwood")	Verdant Apartment Homes	216		Boulder, CO
RRE Fox Ridge Holdings, LLC ("Fox Ridge")	Arcadia Apartment Homes	300		Centennial, CO
RRE Riverlodge Holdings, LLC ("Riverlodge")	Ravina Apartment Homes	498		Austin, TX
RRE Breckenridge Holdings, LLC ("Breckenridge")	81 Fifty at West Hills Apartment Homes	357		Portland, OR
RRE Santa Rosa Holdings, LLC ("Santa Rosa")	The Palmer at Las Colinas	476		Irving, TX
RRE Windbrooke Holdings, LLC ("Windbrooke Crossing")	Windbrooke Crossing	236		Buffalo Grove, IL
RRE Woods Holdings, LLC ("The Woods of Burnsville")	The Woods of Burnsville	400		Burnsville, MN
RRE Indigo Creek Holdings, LLC ("Indigo Creek")	Indigo Creek	408		Glendale, AZ
RRE Martin's Point Holdings, LLC ("Martin's Point"	Martin's Point	256		Lombard, IL
			5,159

N/A - Not Applicable

(1) Property was sold on February 28, 2019

All intercompany accounts and transactions have been eliminated in consolidation.

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.

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.

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, 2020, the Company had $73.1 million of deposits at various banks, $64.9 million of which were over the insurance limit of the Federal Deposit Insurance Corporation.  No losses have been experienced on such deposits.

Contractual Obligations

Contractual Obligations

The Company leases equipment under leases with varying expiration dates through 2023. As of December 31, 2020, the total payments due under these obligations were approximately $12,000.

	Payments due by period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Operating Lease Obligations	$	12,000	$	12,000	$	—	$	—	$	—

Rental Properties

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:

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

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 of December 31, 2020, the Company's real estate investments located in Texas, Illinois, Colorado, Oregon and Georgia represent approximately 19.5%, 19.0%, 15.6%, 14.1% and 9.0% of the portfolio. This makes it 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

Impairment of Long Lived Assets

The Company periodically evaluates its long-lived assets, primarily investments in rental properties, for impairment indicators. The review considers factors such as past and expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for permanent impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. 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 would be the adjustment to fair value less the estimated cost to dispose of the asset. 

In conjunction with the Merger and for the Company’s annual estimated value per share calculation, the Company engaged with a third-party to provide the estimated fair value of its rental properties as of January 28, 2021. The Company compared these values to its carrying values and concluded that there was no indication that the carrying value of the Company’s investments in real estate were not recoverable as of December 31, 2020. There were no impairment losses recorded on long lived assets during the years ended December 31, 2020, 2019 and 2018.

Allocation of Purchase Price of Acquired Assets

Allocation of Purchase Price of Acquired Assets

On January 1, 2018, the Company adopted ASU No. 2017-01, Business Combinations (Topic 805):  Clarifying the Definition of a Business ("ASU No. 2017-01"). Acquisitions that do not meet the definition of a business under this guidance are accounted for as asset acquisitions.  In most cases, the Company believes that acquisitions of real estate will no longer be considered a business combination as in most cases substantially all of the fair value is concentrated in a single identifiable asset or group of tangible assets that are physically attached to each other (land and building).   However, if the Company determines that substantially all of the fair value of the gross assets acquired is not concentrated in either a single identifiable asset or in a group of similar identifiable assets, the screen is not met, and the Company will then perform an assessment to determine whether the set is a business by using the framework outlined in the ASU. If the Company determines that the acquired asset is not a business, the Company will allocate the cost of the acquisition including transaction costs to the assets acquired or liabilities assumed based on their related fair value.

Upon the acquisition of real properties, the Company allocates the purchase price to 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.

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 determined by independent appraisers (e.g., discounted cash flow analysis). Factors to be considered in the analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions and costs to execute similar leases.

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 underlying 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 does amortization periods for the intangible assets exceed the remaining depreciable life of the building.

The determination of the fair value of the assets and liabilities acquired requires the use of significant assumptions with regard to current market rental rates, discount rates and other variables.  The use of inappropriate estimates would result in an incorrect assessment of the fair value of these assets and liabilities, which could impact the Company's reported net income (loss).

Revenue Recognition And Receivables

Revenue Recognition and Receivables

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, which is accounted for in accordance with ASC 842, Leases (“ASC 842”). The future minimum rental payments to be received from noncancelable operating leases are approximately $42.8 million and $674,775 for the years ending December 31, 2021 and 2022, and none thereafter.

Revenue is primarily derived from the rental of residential housing units for which the Company receives minimum rents and utility reimbursements pursuant to underlying tenant lease agreements. The Company also receives other ancillary fees for administration of leases, late payments, amenities, and revenue sharing arrangements for cable income from contracts with cable providers at the Company's properties (discussed below). A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. The Company records the utility reimbursement income and ancillary charges in the period when the performance obligation is completed, either at a point in time or on a monthly basis as the service is utilized.

The Company has revenue sharing arrangements of cable income from contracts with cable providers at the Company's properties. Included in accrued expenses and other liabilities on the consolidated balance sheets at December 31, 2020 and 2019 is a contract liability related to deferred revenue from contracts with cable providers of approximately $499,000 and $573,000, respectively. The Company recognizes income from these contracts on a straight line basis over the contract period of 10 years to 12 years. During the years ended December 31, 2020 and 2019, approximately $102,000 and $138,000, respectively of revenue from the contract liability was recognized as income.

The Company evaluates its portfolio of operating leases for collectability at both the onset of the underlying leases and on an ongoing basis. Tenant receivables include amounts for which collectability was assessed as probable in accordance with the guidance in ASC 842-30. For tenant receivables, which include base rents, straight-line rentals, expense reimbursements and other revenue or income, the Company also estimates a general allowance for uncollectible accounts under ASC 450-20. The Company determines the collectability of its receivables related to rental revenue by considering a number of factors, including the length of time receivables are past due, security deposits held, the Company’s previous loss history, the tenants’ current ability to pay their obligations to the Company, and the condition of the general economy and the industry as a whole. If collectability is not probable, the Company adjusts rental income for the amount of the uncollectible revenue.

Due to the COVID-19 pandemic, some residents have experienced difficulty making rent payments and the Company’s receivables have increased compared to historical levels.  This caused the Company to further evaluate collectability during the year ended December 31, 2020. During the years ended December 31, 2020 and 2019, the Company recorded approximately $333,000 and $44,000, respectively, of provisions for bad debts to appropriately reflect management’s estimate for uncollectible accounts. The provision for bad debts was recorded as a reduction to rental income in the Company’s consolidated statements of operations and comprehensive loss. The age of the receivables included in the allowance balance at December 31, 2020 was: 21.9% less than 30 days past due, 20.8% 31-60 days past due, 1.3% 61-90 days past due and 56.0% over 90 days past due.

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 (“TRS”). In general, a TRS may hold assets and engage in activities that the Company cannot hold or engage in directly and generally may engage in any real estate or non-real estate-related business.  A TRS is subject to U.S. federal, state and local corporate income taxes. 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, 2020 and 2019, the Company did not treat any of its subsidiaries as a TRS.

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

The Company is subject to examination by the U.S. Internal Revenue Service and by the taxing authorities in other states in which the Company has significant business operations. The Company is not currently undergoing any examinations by taxing authorities. The Company is not subject to IRS examination for the tax return years 2016 and prior.

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 share is computed by dividing income (loss) 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 50,000 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, 2020 (were such date to represent the end of the contingency period).  For the year ended December 31, 2020 and 2019, 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.

Reclassifications

Reclassifications

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

Adoption of New Accounting Standards

Adoption of New Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, “Financial Instruments - Credit Losses”, which requires measurement and recognition of expected credit losses for financial assets held. On January 1, 2020, the Company adopted ASU No. 2016-13 and the adoption did not have a significant impact on its consolidated financial statements and disclosures.  

In August 2018, FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” This update removes, modifies and adds certain disclosure requirements in FASB ASC 820, “Fair Value Measurement” (“ASC 820”). The Company adopted the standard on January 1, 2020, and the adoption did not have a significant impact on its consolidated financial statements due to the fact there were no required changes to the Company’s disclosures.

In November 2018, FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” ASU No. 2018-19 clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842, Leases. The Company early adopted the standard on January 1, 2020, and the adoption did not have a significant impact on its consolidated financial statements and disclosures.

In March 2020, FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848).” ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. During the year ended December 31, 2020, the Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

In April 2020, FASB issued a Staff Q&A to respond to some frequently asked questions about accounting for lease concessions related to the effects of the COVID-19 pandemic. Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each lease to determine whether enforceable rights and obligations for concessions exist in the lease and can elect to apply or not apply the lease modification guidance to those leases. Entities may make the elections for any lessor-provided concessions related to the effects of the COVID-19 pandemic (e.g., deferrals of lease payments) as long as the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee.The Company has not elected to apply the lease modification guidance to our leases. To date, the impact of lease concessions granted has not had a material effect on the financial statements. The Company will continue to evaluate the impact of lease concessions and the appropriate accounting for those concessions.

Accounting Standards Issued But Not Yet Effective

In August 2020, FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”. ASU 2020-06 addresses the complexity of guidance for certain financial (convertible) instruments with characteristics of liabilities and equity. ASU No. 2020-06 will be effective for the Company beginning January 1, 2022. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU No. 2020-06 to have a material effect on its consolidated financial statements and disclosures due to the fact that the Company did not have instruments subject to this guidance at December 31, 2020.

XML

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2020

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:

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 Oak Hill Holdings, LLC ("Oak Hill")	N/A (1)	N/A		N/A
RRE Bear Creek Holdings, LLC ("Bear Creek")	Adair off Addison	152		Dallas, TX
RRE Buckhead Holdings, LLC ("Buckhead")	Uptown Buckhead	216		Atlanta, GA
RRE Farrington Holdings, LLC ("Farrington")	Crosstown at Chapel Hill	411		Chapel Hill, NC
RRE Mayfair Chateau Holdings, LLC ("Mayfair Chateau")	The Brookwood	274		Homewood, AL
RRE Fairways of Bent Tree Holdings, LLC ("Fairways of Bent Tree")	Adair off Addison Apartment Homes	200		Dallas, TX
RRE Montclair Terrace Holdings, LLC ("Montclair Holdings")	Montclair	188		Portland, OR
RRE Spalding Crossing Holdings, LLC ("Spalding Crossing")	1000 Spalding Crossing	252		Atlanta, GA
RRE Grand Reserve Holdings, LLC ("Grand Reserve")	Grand Reserve	319		Naperville, IL
RRE Canterwood Holdings, LLC ("Canterwood")	Verdant Apartment Homes	216		Boulder, CO
RRE Fox Ridge Holdings, LLC ("Fox Ridge")	Arcadia Apartment Homes	300		Centennial, CO
RRE Riverlodge Holdings, LLC ("Riverlodge")	Ravina Apartment Homes	498		Austin, TX
RRE Breckenridge Holdings, LLC ("Breckenridge")	81 Fifty at West Hills Apartment Homes	357		Portland, OR
RRE Santa Rosa Holdings, LLC ("Santa Rosa")	The Palmer at Las Colinas	476		Irving, TX
RRE Windbrooke Holdings, LLC ("Windbrooke Crossing")	Windbrooke Crossing	236		Buffalo Grove, IL
RRE Woods Holdings, LLC ("The Woods of Burnsville")	The Woods of Burnsville	400		Burnsville, MN
RRE Indigo Creek Holdings, LLC ("Indigo Creek")	Indigo Creek	408		Glendale, AZ
RRE Martin's Point Holdings, LLC ("Martin's Point"	Martin's Point	256		Lombard, IL
			5,159

N/A - Not Applicable

(1) Property was sold on February 28, 2019

Schedule of Contractual Obligations

	Payments due by period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Operating Lease Obligations	$	12,000	$	12,000	$	—	$	—	$	—

Schedule of Estimated Useful Lives

The Company's estimated useful lives of its assets by class are as follows:

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

XML

Supplemental Cash Flow Information (Tables)

12 Months Ended

Dec. 31, 2020

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

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

	Years Ended
	December 31,
	2020		2019		2018
Non-cash financing and investing activities:
Distributions on common stock declared but not yet paid	$	—	$	5,993	$	8,878
Stock issued pursuant to distribution reinvestment plan		3,131		14,724		20,693
Accruals for construction in process		447		1,955		424
Repayments on borrowings through refinancing		98,694		24,469		72,845
Escrow deposits funded through refinancing		3,993		580		—
Deferred financing costs, interest, and fees funded through refinancing		2,852		—		—
Non-cash activity related to sales:
Mortgage notes payable settled directly with proceeds from sale of rental property		—		29,497		—
Cash paid during the period for:
Interest	$	18,285	$	24,930	$	25,508

XML

Restricted Cash (Tables)

12 Months Ended

Dec. 31, 2020

Cash And Cash Equivalents [Abstract]

Summary of Components of Restricted Cash

A summary of the components of restricted cash follows (in thousands):

	December 31, 2020		December 31, 2019
Real estate taxes	$	3,823	$	3,956
Insurance		824		877
Capital improvements		1,570		1,380
Other		3,258		321
Total	$	9,475	$	6,534
Unrestricted cash designated for capital expenditures	$	14,431	$	21,706

XML

Rental Properties, Net (Tables)

12 Months Ended

Dec. 31, 2020

Real Estate [Abstract]

Schedule of Investments in Rental Properties

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

	December 31, 2020			December 31, 2019
Land	$	119,028		$	119,028
Building and improvements		726,037			720,420
Furniture, fixtures and equipment		26,205			25,906
Construction in progress		1,127			1,955
		872,397			867,309
Less: accumulated depreciation		(171,492	)		(131,779	)
	$	700,905		$	735,530

XML

Disposition of Property (Tables)

12 Months Ended

Dec. 31, 2020

Discontinued Operations And Disposal Groups [Abstract]

Summary of Details of Disposition Activity

The Company disposed of one property during the year ended December 31, 2019. There were no dispositions during the years ended December 31, 2020 or 2018. The following table presents details of the Company’s disposition activity during the year ended December 31, 2019 (in thousands):

Multifamily Community	Location	Sale Date	Contract Sales Price		Net Gain on Disposition		Revenue Attributable to Property Sold		Net Loss to Property Sold (1)
Overton Trails	Fort Worth, Texas	February 28, 2019	$	64,000	$	20,619	$	1,143	$	(249	)

(1) Excludes net gain on disposition

XML

Mortgage Notes Payable, Net (Tables)

12 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

Summary of Mortgage Notes Payable

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

	December 31, 2020									December 31, 2019
Collateral	Outstanding borrowings		Premium, net		Deferred Financing Costs, net			Carrying Value		Outstanding borrowings		Premium, net		Deferred Financing Costs, net			Carrying Value
Uptown Buckhead	$	18,876	$	—	$	(144	)	$	18,732	$	19,264	$	—	$	(178	)	$	19,086
Crosstown at Chapel Hill		42,650		—		(264	)		42,386		42,650		—		(325	)		42,325
The Brookwood - Key Bank		16,632		83		(39	)		16,676		17,063		186		(88	)		17,161
The Brookwood - Capital One		2,517		6		(7	)		2,516		2,566		14		(15	)		2,565
Adair off Addison and Adair off Addison Apartment Homes		33,210		—		(317	)		32,893		33,210		—		(380	)		32,830
1000 Spalding Crossing		35,035		—		(329	)		34,706		23,737		—		(113	)		23,624
Montclair Terrace		19,479		—		(127	)		19,352		19,958		—		(182	)		19,776
Grand Reserve		47,845		—		(473	)		47,372		47,845		—		(539	)		47,306
Verdant Apartment Homes		47,146		—		(372	)		46,774		36,913		—		(178	)		36,735
Arcadia Apartment Homes		56,810		—		(494	)		56,316		39,782		—		(195	)		39,587
Ravina Apartment Homes		25,506		—		(93	)		25,413		26,241		—		(165	)		26,076
81 Fifty at West Hills Apartment Homes		50,708		—		(260	)		50,448		51,833		—		(368	)		51,465
The Palmer at Las Colinas		45,700		—		(370	)		45,330		45,700		—		(437	)		45,263
Windbrooke Crossing		36,437		—		(202	)		36,235		37,222		—		(272	)		36,950
Woods of Burnsville		36,918		—		(265	)		36,653		37,744		—		(355	)		37,389
Indigo Creek		39,498		—		(243	)		39,255		40,402		—		(320	)		40,082
Martin's Point		29,283		—		(226	)		29,057		29,944		—		(289	)		29,655
	$	584,250	$	89	$	(4,225	)	$	580,114	$	552,074	$	200	$	(4,399	)	$	547,875

The following table presents additional information about the Company's mortgage notes payable, net (in thousands, except percentages):

	Maturity Date	Margin over LIBOR			Annual Interest Rate			Average Monthly Debt  Service		Average Monthly Escrow
Uptown Buckhead	7/1/2025		2.22	%		2.36	%	$	70	$	55	(1)(3)(5)(9)
Crosstown at Chapel Hill	7/1/2025		1.77	%		1.91	%		106		68	(1)(3)(4)
The Brookwood - Key Bank	11/1/2021		—			4.73	%		104		66	(2)(6)
The Brookwood - Capital One	11/1/2021		—			5.40	%		16		—	(2)(6)
Adair off Addison and Adair off Addison Apartment Homes	5/1/2026		1.64	%		1.78	%		91		74	(1)(3)(4)(7)(9)
1000 Spalding Crossing	12/1/2027		—			2.51	%		74		60	(2)(4)(8)
Montclair Terrace	6/1/2023		2.45	%		2.59	%		80		30	(1)(3)(6)(9)
Grand Reserve	5/1/2028		1.72	%		1.86	%		76		184	(1)(3)(4)
Verdant Apartment Homes	12/1/2027		—			2.57	%		102		40	(2)(4)(8)
Arcadia Apartment Homes	12/1/2027		—			2.57	%		123		43	(2)(4)(8)
Ravina Apartment Homes	5/1/2022		—			3.76	%		144		148	(2)(6)
81 Fifty at West Hills Apartment Homes	7/1/2023		2.36	%		2.50	%		205		58	(1)(3)(6)(9)
The Palmer at Las Colinas	9/1/2026		2.11	%		2.25	%		104		156	(1)(3)(4)(9)
Windbrooke Crossing	1/1/2024		2.69	%		2.83	%		154		180	(1)(3)(6)
Woods of Burnsville	2/1/2024		2.13	%		2.27	%		145		95	(1)(3)(6)
Indigo Creek	5/1/2024		1.93	%		2.07	%		127		59	(1)(3)(6)
Martin's Point	11/1/2024		1.86	%		2.00	%		111		78	(1)(3)(6)

(1) Variable rate based on one-month LIBOR of 0.14388% (as of December 31, 2020) plus a fixed margin

(2) Fixed rate

(3) Variable rate hedged with interest rate cap cash flow hedge

(4) Monthly interest-only payment currently required

(5) Monthly fixed principal plus interest payment required

(6) Fixed monthly payment of principal and interest payment required

(7) Originated during the year ended December 31, 2019 through refinancing

(8) Originated during the year ended December 31, 2020 through refinancing

(9) Loan refinanced with new credit facility in January 2021

Schedule of Annual Principal Payments

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):

2021	$	26,486
2022		33,110
2023		75,024
2024		136,526
2025		59,722
Thereafter		253,382
	$	584,250

Amortization of Deferred Financing Costs

Amortization of deferred financing costs for the next five years ending December 31, and thereafter, are as follows (in thousands):

2021	$	1,035
2022		927
2023		807
2024		527
2025		398
Thereafter		531
	$	4,225

XML

Accumulated Other Comprehensive Loss (Tables)

12 Months Ended

Dec. 31, 2020

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Loss

The following table presents the changes in accumulated other comprehensive loss for the years ended December 31, 2020, 2019 and 2018 (in thousands):

	Net unrealized (loss) gain on derivatives
Balance, January 1, 2018	$	(444	)
Reclassification adjustment for realized loss on designated derivatives		130
Unrealized loss on designated derivatives		(65	)
Balance, December 31, 2018		(379	)
Reclassification adjustment for realized loss on designated derivatives		268
Unrealized loss on designated derivatives		(78	)
Balance, December 31, 2019		(189	)
Reclassification adjustment for realized loss on designated derivatives		95
Unrealized loss on designated derivatives		(137	)
Balance, December 31, 2020	$	(231	)

XML

Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2020

Related Party Transactions [Abstract]

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):

	December 31, 2020		December 31, 2019
Due from related parties:
RAI - self-insurance funds held	$	—	$	33
Operating expense reimbursements		—		264
		—	$	297
Due to related parties:
Advisor:
Operating expense reimbursements		1,588		6
Manager:
Property management fees		327		328
Operating expense reimbursements		—		96
Properties
Meridian		—		2
	$	1,915	$	432

	Years Ended
	December 31,
	2020		2019		2018
Fees earned / expenses incurred:
Advisor
Asset management fees (1)(6)(7)	$	9,081	$	9,374	$	9,840
Debt financing fees (2)(11)		184		39		78
Disposition fees (3)		—		274		—
Operating expense reimbursements (4)(9)		3,902		3,462		3,708
Internal audit (10)		106		—		—
Manager
Property management fees (1)(8)	$	3,813	$	3,834	$	3,888
Construction management fees (5)		352		255		859
Construction payroll reimbursements (5)		—		63		121
Operating expense reimbursements (4)		—		70		201

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

(2) Included in Mortgage notes payable, net on the consolidated balance sheets.

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

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

(5) Capitalized and included in Rental properties, net on the consolidated balance sheets.

(6) Net with acquisition fees returned as a result of capital expense reallocation.

(7) After the Self-Management Transaction on September 8, 2020, $2.9 million of this balance was earned by OP I.

(8) After the Self-Management Transaction on September 8, 2020, $1.2 million of this balance was earned by OP I.

(9) After the Self-Management Transaction on September 8, 2020, $1.5 million of this balance was earned by OP I.

(10) After the Self-Management Transaction on September 8, 2020, approximately $33,000 of this balance was earned by OP I.

(11) After the Self-Management Transaction on September 8, 2020, approximately $184,000 of this balance was earned by OP I.

XML

Equity (Tables)

12 Months Ended

Dec. 31, 2020

Equity [Abstract]

Schedule of Common Stock

As of December 31, 2020, the Company had an aggregate of 60,026,513 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):

	Shares			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		10,197,726			88,479
Advisor's initial investment, net of 5,000 share conversion		15,000			150
Total		66,250,388		$	644,826
Shares redeemed and retired		(6,223,875	)
Total shares outstanding		60,026,513

During the year ended December 31, 2020, the Company redeemed shares of common stock as follows (in thousands, except per share data):

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 2020		—		—		—	(2)
February 2020		—		—		—	(2)
March 2020	140		$	8.77	140		(2)
April 2020		—		—		—	(2)
May 2020		—		—		—	(2)
June 2020		120	$	9.08		260	(2)
July 2020		—		—		—	(2)
August 2020		—		—		—	(2)
September 2020		—		—		—	(2)
October 2020		—		—		—	(2)
November 2020		—		—		—	(2)
December 2020		179	$	9.08		439	(2)

(1) All purchases of equity securities by the Company in the year ended December 31, 2020 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.

Schedule of Distributions

For the year ended December 31, 2020, the Company paid aggregate distributions of $6.0 million including $2.9 million of distributions paid in cash and $3.1 million of distributions reinvested in shares of common stock through the Company's distribution reinvestment plan, as follows (in thousands):

Authorization Date	Per Common Share		Record Dates	Distribution Date	Distributions reinvested in shares of Common Stock		Net Cash Distributions		Total Aggregate Distributions
December 11, 2019	$	0.001095890	December 31, 2019 through January 30, 2020	January 31, 2020	$	1,074	$	968	$	2,042
December 11, 2019	$	0.001095890	January 31, 2020 through February 27, 2020	February 28, 2020		965		883		1,848
December 11, 2019	$	0.001095890	February 28, 2020 through March 30, 2020	March 31, 2020		1,092		1,022		2,114
					$	3,131	$	2,873	$	6,004

The following is a reconciliation of total aggregate distributions paid to total distributions declared for the year ended December 31, 2020 (in thousands):

Total aggregate distributions paid	$	6,004
Less: distribution payable at December 31, 2019		(5,993	)
Add: distribution payable at December 31, 2020		—
True-up of prior year cash distributions declared	$	11

XML

Fair Value Measures and Disclosures (Tables)

12 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Assets Measured at Fair Value on a Recurring Basis

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

	Level 1		Level 2		Level 3		Total
December 31, 2020
Assets:
Interest rate caps	$	—	$	25	$	—	$	25
	$	—	$	25	$	—	$	25
December 31, 2019
Assets:
Interest rate caps	$	—	$	9	$	—	$	9
	$	—	$	9	$	—	$	9

Carrying Amounts and Fair Values of Mortgage Notes Payable

The outstanding balance and estimated fair value of the Company’s mortgage notes payable are as follows (in thousands):

	December 31, 2020				December 31, 2019
	Outstanding Balance		Estimated Fair Value		Outstanding Balance		Estimated Fair Value
Mortgage notes payable	$	584,250	$	576,693	$	552,074	$	545,249

XML

Derivatives and Hedging Activities (Tables)

12 Months Ended

Dec. 31, 2020

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Outstanding Interest Rate Derivatives

As of December 31, 2020, the Company had the following outstanding interest rate derivatives (dollars in thousands):

Interest Rate Derivative	Number of Instruments	Notional		Maturity Dates
Interest rate caps	11	$	405,264	July 1, 2021 through September 1, 2024

Fair Value of Derivative Financial Instruments and Balance Sheet Classification

The table below presents the fair value of the Company’s derivative financial instruments on the consolidated balance sheets as of December 31, 2020 and 2019 (in thousands):

Asset Derivatives

Liabilities Derivatives

December 31, 2020

December 31, 2019

December 31, 2020

December 31, 2019

Balance Sheet

Fair Value

Balance Sheet

Fair Value

Balance Sheet

Fair Value

Balance Sheet

Fair Value

Interest rate caps

$

25

Interest rate caps

$

9

—

$

—

—

$

—

Effect of Derivative Financial Instruments on The 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, 2020 and 2019 (in thousands):

	December 31, 2020		December 31, 2019				December 31, 2020			December 31, 2019
Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivative for the Years Ended					Location of Loss Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Loss Reclassified from Accumulated OCI into Income for the Years Ended
Interest rate caps	$	137	$	(95	)	Interest expense	$	(95	)	$	(285	)

XML

Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2020

Quarterly Financial Data [Abstract]

Summary of Operating Results by Quarter

The following tables present the Company's operating results by quarter (in thousands, except share data):

Quarterly Results for 2020	March 31			June 30			September 30			December 30
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues	$	21,407		$	21,353		$	21,411		$	21,639
Net loss	$	(7,926	)	$	(6,863	)	$	(9,369	)	$	(9,066	)
Basic and diluted net loss per common share	$	(0.13	)	$	(0.11	)	$	(0.16	)	$	(0.15	)
Quarterly Results for 2019	March 31			June 30			September 30			December 30
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues	$	21,959		$	21,222		$	21,312		$	21,188
Net income (loss)	$	11,697		$	(8,109	)	$	(8,688	)	$	(6,844	)
Basic and diluted net income (loss) per common share	$	0.19		$	(0.13	)	$	(0.14	)	$	(0.12	)

XML

Subsequent Events (Tables)

12 Months Ended

Dec. 31, 2020

Subsequent Events [Abstract]

Summary of Additional Information about Initial Advance

Additional information about the initial advance is as follows:

Advance	Loan Amount	Term (years)	Interest Only	Total Rate	Payments
Fixed Advance 1	$      235,205,000	10	Yes	2.79%	Monthly
Fixed Advance 2	$      235,205,000	7	Yes	2.62%	Monthly
Variable Advance 1	$        24,760,000	10	Yes	2.15%	Monthly

XML

Nature of Business and Operations (Details) - USD ($) $ / shares in Units, $ in Thousands		12 Months Ended
	Jan. 28, 2021	Dec. 31, 2020	Dec. 31, 2019
Class Of Stock [Line Items]
Common stock, shares issued (in shares)		60,026,513	60,094,623
Issuance of common stock		$ 644,826
REIT I Merger Agreement
Class Of Stock [Line Items]
Date of merger agreement		Sep. 08, 2020
REIT I Merger Agreement | Subsequent Events
Class Of Stock [Line Items]
Effective date of merger agreement	Jan. 28, 2021
REIT I Company Merger | Subsequent Events
Class Of Stock [Line Items]
Convertible common stock, right to receive number of shares at the effective time of merger	1.22423
Convertible common stock, right to receive cash per share without interest at the effective time of merger	$ 0.02
REIT I Partnership Merger | Subsequent Events
Class Of Stock [Line Items]
Convertible common stock, right to receive number of shares at the effective time of merger	1.22423
Series A cumulative participating redeemable preferred unit, description	each Series A Cumulative Participating Redeemable Preferred Unit in OP I issued and outstanding immediately prior to the effective time of the REIT I Partnership Merger converted into the right to receive one Series A Cumulative Participating Redeemable Preferred Unit in OP II.
REIT III Merger Agreement
Class Of Stock [Line Items]
Date of merger agreement		Sep. 08, 2020
REIT III Merger Agreement | Subsequent Events
Class Of Stock [Line Items]
Effective date of merger agreement	Jan. 28, 2021
Convertible common stock, right to receive number of shares at the effective time of merger	0.925862
Shares issued through distribution reinvestment plan
Class Of Stock [Line Items]
Common stock, purchase price percentage equal to estimated net asset value per share		95.00%
Common stock, shares issued (in shares)		10,197,726
Issuance of common stock		$ 88,479
Shares issued through initial public offering
Class Of Stock [Line Items]
Shares issued through the distribution reinvestment plan (in shares)		60,026,513
Common stock, shares issued (in shares)		55,791,297
Issuance of common stock		$ 556,197

XML

Summary of Significant Accounting Policies - Subsidiaries (Details)	Dec. 31, 2020 unit
Property, Plant and Equipment [Line Items]
Number of Units	5,159
Adair off Addison
Property, Plant and Equipment [Line Items]
Number of Units	152
Uptown Buckhead
Property, Plant and Equipment [Line Items]
Number of Units	216
Crosstown at Chapel Hill
Property, Plant and Equipment [Line Items]
Number of Units	411
The Brookwood
Property, Plant and Equipment [Line Items]
Number of Units	274
Adair off Addison Apartment Homes
Property, Plant and Equipment [Line Items]
Number of Units	200
Montclair Terrace
Property, Plant and Equipment [Line Items]
Number of Units	188
1000 Spalding Apartment Homes
Property, Plant and Equipment [Line Items]
Number of Units	252
Grand Reserve
Property, Plant and Equipment [Line Items]
Number of Units	319
Verdant Apartment Homes
Property, Plant and Equipment [Line Items]
Number of Units	216
Arcadia Apartment Homes
Property, Plant and Equipment [Line Items]
Number of Units	300
Ravina Apartment Homes
Property, Plant and Equipment [Line Items]
Number of Units	498
81 Fifty at West Hills Apartment Homes
Property, Plant and Equipment [Line Items]
Number of Units	357
The Palmer at Las Colinas
Property, Plant and Equipment [Line Items]
Number of Units	476
Windbrooke Crossing
Property, Plant and Equipment [Line Items]
Number of Units	236
The Woods of Burnsville
Property, Plant and Equipment [Line Items]
Number of Units	400
Indigo Creek
Property, Plant and Equipment [Line Items]
Number of Units	408
Martin's Point
Property, Plant and Equipment [Line Items]
Number of Units	256

XML

Summary of Significant Accounting Policies (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Property, Plant and Equipment [Line Items]
Deposits at various banks	$ 73,100,000
Cash, uninsured amount	64,900,000
Total payments due under lease obligations	12,000
Improvements and replacements in excess of threshold, capitalized amount	$ 1,000
Improvements and replacements, useful life greater than or equal to one year, capitalization threshold (in years)	1 year
Management fee (as percent)	5.00%
Impairment of real estate	$ 0	$ 0	$ 0
Future minimum rental payments to be received from noncancelable operating leases, current	42,800,000
Future minimum rental payments to be received from noncancelable operating leases, in two years	674,775
Future minimum rental payments to be received from noncancelable operating leases, thereafter	0
Allowance for uncollectible receivables	$ 333,000	$ 44,000
Minimum distribution percentage of taxable net income excluding net capital gains	90.00%
Distribution percentage of taxable net income not subject to federal corporate income tax	100.00%
Number of years entity may be precluded from REIT qualifications	4 years
Common stock, shares outstanding (in shares)	60,026,513	60,094,623
Convertible Stock
Property, Plant and Equipment [Line Items]
Common stock, shares outstanding (in shares)	50,000	50,000	50,000	50,000
Less Than 30 Days Past Due
Property, Plant and Equipment [Line Items]
Receivables percentage included in the allowance balance	21.90%
31-60 Days Past Due
Property, Plant and Equipment [Line Items]
Receivables percentage included in the allowance balance	20.80%
61-90 Days Past Due
Property, Plant and Equipment [Line Items]
Receivables percentage included in the allowance balance	1.30%
Over 90 Days Past Due
Property, Plant and Equipment [Line Items]
Receivables percentage included in the allowance balance	56.00%
ASU No 2014-09
Property, Plant and Equipment [Line Items]
Revenue recognized from contract with customer liability	$ 102,000	$ 138,000
ASU No. 2016-13
Property, Plant and Equipment [Line Items]
Change in accounting principle, accounting standards update, adopted	true
Change in accounting principle, accounting standards update, adoption date	Jan. 01, 2020
Change in accounting principle, accounting standards update, immaterial effect	true
ASU No. 2018-13
Property, Plant and Equipment [Line Items]
Change in accounting principle, accounting standards update, adopted	true
Change in accounting principle, accounting standards update, adoption date	Jan. 01, 2020
Change in accounting principle, accounting standards update, immaterial effect	true
ASU 2018-19
Property, Plant and Equipment [Line Items]
Change in accounting principle, accounting standards update, early adoption	true
Change in accounting principle, accounting standards update, adoption date	Jan. 01, 2020
Change in accounting principle, accounting standards update, immaterial effect	true
Minimum | ASU No 2014-09
Property, Plant and Equipment [Line Items]
Revenue recognized over straight line basis term	10 years
Maximum | ASU No 2014-09
Property, Plant and Equipment [Line Items]
Revenue recognized over straight line basis term	12 years
Accounts Payable And Accrued Liabilities | ASU No 2014-09
Property, Plant and Equipment [Line Items]
Contract with customer liability	$ 499,000	$ 573,000
Texas | Geographic concentration risk
Property, Plant and Equipment [Line Items]
Real estate investment	19.50%
Illinois | Geographic concentration risk
Property, Plant and Equipment [Line Items]
Real estate investment	19.00%
Colorado | Geographic concentration risk
Property, Plant and Equipment [Line Items]
Real estate investment	15.60%
Oregon | Geographic concentration risk
Property, Plant and Equipment [Line Items]
Real estate investment	14.10%
Georgia | Geographic concentration risk
Property, Plant and Equipment [Line Items]
Real estate investment	9.00%

XML

Summary of Significant Accounting Policies - Schedule of Contractual Obligations (Details)	Dec. 31, 2020 USD ($)
Accounting Policies [Abstract]
Total payments due under lease obligations	$ 12,000
Operating lease obligations, payments due by period, Less than 1 Year	$ 12,000

XML

Summary of Significant Accounting Policies - Estimated Useful Lives (Details)	12 Months Ended
	Dec. 31, 2020
Buildings
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

XML

Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Non-cash financing and investing activities:
Distributions on common stock declared but not yet paid	$ 0	$ 5,993	$ 8,878
Stock issued pursuant to distribution reinvestment plan	3,131	14,724	20,693
Accruals for construction in process	447	1,955	424
Repayments on borrowings through refinancing	98,694	24,469	72,845
Escrow deposits funded through refinancing	3,993	580
Deferred financing costs, interest, and fees funded through refinancing	2,852
Non-cash activity related to sales:
Mortgage notes payable settled directly with proceeds from sale of rental property		29,497
Cash paid during the period for:
Interest	$ 18,285	$ 24,930	$ 25,508

XML

Restricted Cash (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash	$ 9,475	$ 6,534	$ 7,813
Unrestricted cash designated for capital expenditures	14,431	21,706
Real Estate Taxes
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash	3,823	3,956
Insurance
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash	824	877
Capital Improvements
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash	1,570	1,380
Other
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash	$ 3,258	$ 321

XML

Rental Properties, Net - Schedule of Investments in Rental Properties (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Rental Properties, Net:
Land	$ 119,028	$ 119,028
Building and improvements	726,037	720,420
Furniture, fixtures and equipment	26,205	25,906
Construction in progress	1,127	1,955
Rental properties, gross	872,397	867,309
Less: accumulated depreciation	(171,492)	(131,779)
Rental properties, net	$ 700,905	$ 735,530

XML

Rental Properties, Net - Additional Information (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Rental Properties, Net:
Depreciation expense	$ 40.2	$ 39.6	$ 40.6

XML

Disposition of Property - Additional Information (Details) - property	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Disposed of by Sale
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Number of real estate properties	0	1	0

XML

Disposition of Property - Summary of Details of Disposition Activity (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Net Gain on Disposition	$ 0	$ 20,619	$ 0
Overton Trails | Texas
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Contract Sales Price	64,000
Net Gain on Disposition	20,619
Revenue Attributable to Property Sold	1,143
Net Loss to Property Sold	$ (249)

XML

Identified Intangible Assets, Net (Details) - Acquired in-place leases - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2020	Dec. 31, 2019
Finite-Lived Intangible Assets [Line Items]
Gross value of leases		$ 17,300,000	$ 17,300,000
Acquired in-place leases, accumulated amortization		$ 17,300,000	$ 17,300,000
Amortization expense	$ 813,000

XML

Mortgage Notes Payable, Net - Summary of Mortgage Notes Payable (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Outstanding borrowings		$ 584,250
Deferred Financing Costs, net		(4,225)
Carrying Value		580,114	$ 547,875
Mortgage notes payable
Debt Instrument [Line Items]
Outstanding borrowings		584,250	552,074
Premium, net		(89)	(200)
Deferred Financing Costs, net		(4,225)	(4,399)
Carrying Value		580,114	547,875
Mortgage notes payable | Uptown Buckhead
Debt Instrument [Line Items]
Outstanding borrowings		18,876	19,264
Deferred Financing Costs, net		(144)	(178)
Carrying Value		$ 18,732	19,086
Maturity Date	[1],[2],[3],[4]	Jul. 01, 2025
Annual Interest Rate	[1],[2],[3],[4]	2.36%
Average Monthly Debt Service	[1],[2],[3],[4]	$ 70
Average Monthly Escrow	[1],[2],[3],[4]	$ 55
Mortgage notes payable | Uptown Buckhead | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[1],[2],[3],[4]	2.22%
Mortgage notes payable | Crosstown at Chapel Hill
Debt Instrument [Line Items]
Outstanding borrowings		$ 42,650	42,650
Deferred Financing Costs, net		(264)	(325)
Carrying Value		$ 42,386	42,325
Maturity Date	[3],[4],[5],[6]	Jul. 01, 2025
Annual Interest Rate	[3],[4],[5],[6]	1.91%
Average Monthly Debt Service	[3],[4],[5],[6]	$ 106
Average Monthly Escrow	[3],[4],[5],[6]	$ 68
Mortgage notes payable | Crosstown at Chapel Hill | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[3],[4],[5],[6]	1.77%
Mortgage notes payable | The Brookwood - Key Bank
Debt Instrument [Line Items]
Outstanding borrowings		$ 16,632	17,063
Premium, net		(83)	(186)
Deferred Financing Costs, net		(39)	(88)
Carrying Value		$ 16,676	17,161
Maturity Date	[7],[8]	Nov. 01, 2021
Annual Interest Rate	[7],[8]	4.73%
Average Monthly Debt Service	[7],[8]	$ 104
Average Monthly Escrow	[7],[8]	66
Mortgage notes payable | The Brookwood - Capital One
Debt Instrument [Line Items]
Outstanding borrowings		2,517	2,566
Premium, net		(6)	(14)
Deferred Financing Costs, net		(7)	(15)
Carrying Value		$ 2,516	2,565
Maturity Date	[7],[8]	Nov. 01, 2021
Annual Interest Rate	[7],[8]	5.40%
Average Monthly Debt Service	[7],[8]	$ 16
Mortgage notes payable | Adair off Addison and Adair off Addison Apartment Homes
Debt Instrument [Line Items]
Outstanding borrowings		33,210	33,210
Deferred Financing Costs, net		(317)	(380)
Carrying Value		$ 32,893	32,830
Maturity Date	[1],[3],[4],[9]	May 01, 2026
Annual Interest Rate	[1],[3],[4],[9]	1.78%
Average Monthly Debt Service	[1],[3],[4],[9]	$ 91
Average Monthly Escrow	[1],[3],[4],[9]	$ 74
Mortgage notes payable | Adair off Addison and Adair off Addison Apartment Homes | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[1],[3],[4],[9]	1.64%
Mortgage notes payable | 1000 Spalding Crossing
Debt Instrument [Line Items]
Outstanding borrowings		$ 35,035	23,737
Deferred Financing Costs, net		(329)	(113)
Carrying Value		$ 34,706	23,624
Maturity Date	[5],[8]	Dec. 01, 2027
Annual Interest Rate	[5],[8]	2.51%
Average Monthly Debt Service	[5],[8]	$ 74
Average Monthly Escrow	[5],[8]	60
Mortgage notes payable | Ravina Apartment Homes
Debt Instrument [Line Items]
Outstanding borrowings		25,506	26,241
Deferred Financing Costs, net		(93)	(165)
Carrying Value		$ 25,413	26,076
Maturity Date	[7],[8]	May 01, 2022
Annual Interest Rate	[7],[8]	3.76%
Average Monthly Debt Service	[7],[8]	$ 144
Average Monthly Escrow	[7],[8]	148
Mortgage notes payable | Verdant Apartment Homes
Debt Instrument [Line Items]
Outstanding borrowings		47,146	36,913
Deferred Financing Costs, net		(372)	(178)
Carrying Value		$ 46,774	36,735
Maturity Date	[5],[8]	Dec. 01, 2027
Annual Interest Rate	[5],[8]	2.57%
Average Monthly Debt Service	[5],[8]	$ 102
Average Monthly Escrow	[5],[8]	40
Mortgage notes payable | Arcadia Apartment Homes
Debt Instrument [Line Items]
Outstanding borrowings		56,810	39,782
Deferred Financing Costs, net		(494)	(195)
Carrying Value		$ 56,316	39,587
Maturity Date	[5],[8]	Dec. 01, 2027
Annual Interest Rate	[5],[8]	2.57%
Average Monthly Debt Service	[5],[8]	$ 123
Average Monthly Escrow	[5],[8]	43
Mortgage notes payable | Grand Reserve
Debt Instrument [Line Items]
Outstanding borrowings		47,845	47,845
Deferred Financing Costs, net		(473)	(539)
Carrying Value		$ 47,372	47,306
Maturity Date	[3],[4],[5],[6]	May 01, 2028
Annual Interest Rate	[3],[4],[5],[6]	1.86%
Average Monthly Debt Service	[3],[4],[5],[6]	$ 76
Average Monthly Escrow	[3],[4],[5],[6]	$ 184
Mortgage notes payable | Grand Reserve | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[3],[4],[5],[6]	1.72%
Mortgage notes payable | Montclair Terrace
Debt Instrument [Line Items]
Outstanding borrowings		$ 19,479	19,958
Deferred Financing Costs, net		(127)	(182)
Carrying Value		$ 19,352	19,776
Maturity Date	[1],[3],[4],[7]	Jun. 01, 2023
Annual Interest Rate	[1],[3],[4],[7]	2.59%
Average Monthly Debt Service	[1],[3],[4],[7]	$ 80
Average Monthly Escrow	[1],[3],[4],[7]	$ 30
Mortgage notes payable | Montclair Terrace | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[1],[3],[4],[7]	2.45%
Mortgage notes payable | 81 Fifty at West Hills Apartment Homes
Debt Instrument [Line Items]
Outstanding borrowings		$ 50,708	51,833
Deferred Financing Costs, net		(260)	(368)
Carrying Value		$ 50,448	51,465
Maturity Date	[1],[3],[4],[5]	Jul. 01, 2023
Annual Interest Rate	[1],[3],[4],[5]	2.50%
Average Monthly Debt Service	[1],[3],[4],[5]	$ 205
Average Monthly Escrow	[1],[3],[4],[5]	$ 58
Mortgage notes payable | 81 Fifty at West Hills Apartment Homes | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[1],[3],[4],[5]	2.36%
Mortgage notes payable | The Palmer at Las Colinas
Debt Instrument [Line Items]
Outstanding borrowings		$ 45,700	45,700
Deferred Financing Costs, net		(370)	(437)
Carrying Value		$ 45,330	45,263
Maturity Date	[1],[3],[4],[5]	Sep. 01, 2026
Annual Interest Rate	[1],[3],[4],[5]	2.25%
Average Monthly Debt Service	[1],[3],[4],[5]	$ 104
Average Monthly Escrow	[1],[3],[4],[5]	$ 156
Mortgage notes payable | The Palmer at Las Colinas | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[1],[3],[4],[5]	2.11%
Mortgage notes payable | Windbrooke Crossing
Debt Instrument [Line Items]
Outstanding borrowings		$ 36,437	37,222
Deferred Financing Costs, net		(202)	(272)
Carrying Value		$ 36,235	36,950
Maturity Date	[3],[4],[5]	Jan. 01, 2024
Annual Interest Rate	[3],[4],[5]	2.83%
Average Monthly Debt Service	[3],[4],[5]	$ 154
Average Monthly Escrow	[3],[4],[5]	$ 180
Mortgage notes payable | Windbrooke Crossing | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[3],[4],[5]	2.69%
Mortgage notes payable | Woods of Burnsville
Debt Instrument [Line Items]
Outstanding borrowings		$ 36,918	37,744
Deferred Financing Costs, net		(265)	(355)
Carrying Value		$ 36,653	37,389
Maturity Date	[3],[4],[5]	Feb. 01, 2024
Annual Interest Rate	[3],[4],[5]	2.27%
Average Monthly Debt Service	[3],[4],[5]	$ 145
Average Monthly Escrow	[3],[4],[5]	$ 95
Mortgage notes payable | Woods of Burnsville | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[3],[4],[5]	2.13%
Mortgage notes payable | Indigo Creek
Debt Instrument [Line Items]
Outstanding borrowings		$ 39,498	40,402
Deferred Financing Costs, net		(243)	(320)
Carrying Value		$ 39,255	40,082
Maturity Date	[3],[4],[5]	May 01, 2024
Annual Interest Rate	[3],[4],[5]	2.07%
Average Monthly Debt Service	[3],[4],[5]	$ 127
Average Monthly Escrow	[3],[4],[5]	$ 59
Mortgage notes payable | Indigo Creek | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[3],[4],[5]	1.93%
Mortgage notes payable | Martin's Point
Debt Instrument [Line Items]
Outstanding borrowings		$ 29,283	29,944
Deferred Financing Costs, net		(226)	(289)
Carrying Value		$ 29,057	$ 29,655
Maturity Date	[3],[4],[5]	Nov. 01, 2024
Annual Interest Rate	[3],[4],[5]	2.00%
Average Monthly Debt Service	[3],[4],[5]	$ 111
Average Monthly Escrow	[3],[4],[5]	$ 78
Mortgage notes payable | Martin's Point | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[3],[4],[5]	1.86%

[1] Loan refinanced with new credit facility in January 2021

[2] Monthly fixed principal plus interest payment required

[3] Variable rate based on one-month LIBOR of 0.14388% (as of December 31, 2020) plus a fixed margin

[4] Variable rate hedged with interest rate cap cash flow hedge

[5] Monthly interest-only payment currently required

[6] Originated during the year ended December 31, 2019 through refinancing

[7] Fixed monthly payment of principal and interest payment required

[8] Fixed rate

[9] Originated during the year ended December 31, 2020 through refinancing

XML

Mortgage Notes Payable, Net - Narrative (Details) - USD ($)		12 Months Ended
		Dec. 31, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Weighted average interest rate (as percent)		2.44%
Restricted cash related to escrow deposits		$ 9,500,000	$ 6,500,000
Outstanding borrowings		584,250,000
Accumulated amortization of deferred financing costs		3,700,000	3,400,000
Mortgage notes payable
Debt Instrument [Line Items]
Net unamortized fair value of debt assumed adjustment		(89,000)	(200,000)
Outstanding borrowings		584,250,000	552,074,000
Mortgage notes payable | 1000 Spalding Crossing
Debt Instrument [Line Items]
Outstanding borrowings		$ 35,035,000	23,737,000
Maturity Date	[1],[2]	Dec. 01, 2027
Mortgage notes payable | Verdant Apartment Homes
Debt Instrument [Line Items]
Outstanding borrowings		$ 47,146,000	36,913,000
Maturity Date	[1],[2]	Dec. 01, 2027
Mortgage notes payable | Arcadia Apartment Homes
Debt Instrument [Line Items]
Outstanding borrowings		$ 56,810,000	$ 39,782,000
Maturity Date	[1],[2]	Dec. 01, 2027
Mortgage notes payable | Interest Expense | 1000 Spalding Crossing
Debt Instrument [Line Items]
Gain (loss) on extinguishment of debt		$ 65,000
Prepayment penalties		233,000
Mortgage notes payable | Interest Expense | Verdant Apartment Homes
Debt Instrument [Line Items]
Gain (loss) on extinguishment of debt		132,000
Prepayment penalties		363,000
Mortgage notes payable | Interest Expense | Arcadia Apartment Homes
Debt Instrument [Line Items]
Gain (loss) on extinguishment of debt		145,000
Prepayment penalties		391,000
The Brookwood
Debt Instrument [Line Items]
Net unamortized fair value of debt assumed adjustment		$ 89,307

[1] Fixed rate

[2] Monthly interest-only payment currently required

XML

Mortgage Notes Payable, Net - Annual Principal Payments on Mortgage Notes Payable (Details) $ in Thousands	Dec. 31, 2020 USD ($)
Debt Disclosure [Abstract]
2021	$ 26,486
2022	33,110
2023	75,024
2024	136,526
2025	59,722
Thereafter	253,382
Total principal payments	$ 584,250

XML

Mortgage Notes Payable, Net - Deferred Finance Costs (Details) $ in Thousands	Dec. 31, 2020 USD ($)
Debt Disclosure [Abstract]
2021	$ 1,035
2022	927
2023	807
2024	527
2025	398
Thereafter	531
Total deferred finance costs	$ 4,225

XML

Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Balance, beginning of period	$ 216,313	$ 263,466	$ 330,660
Unrealized loss on designated derivatives	(42)	190	65
Balance, end of period	182,215	216,313	263,466
Accumulated Net Gain (Loss) from Cash Flow Hedges Attributable to Parent
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Balance, beginning of period	(189)	(379)	(444)
Reclassification adjustment for realized loss on designated derivatives	95	268	130
Unrealized loss on designated derivatives	(137)	(78)	(65)
Balance, end of period	$ (231)	$ (189)	$ (379)

XML

Related Party Transactions - Narrative (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Related Party Transaction [Line Items]
Catastrophic insurance, losses in excess of insurance pool, limit	$ 250,000,000
Catastrophic insurance policy expiration date	Mar. 01, 2021
General liability insured and dedicated limit per occurrence	$ 1,000,000
General liability pool claim amount limit	2,000,000
General liability loss per occurrence excess liability program	50,000,000
General liability insurance, loss covered in excess of insurance pool, limit	51,000,000
General liability pool, deductible amount per incident	$ 25,000
General liability loss policy expiration date	Mar. 01, 2021
Minimum
Related Party Transaction [Line Items]
Catastrophic insurance, deductible amount per incident	$ 25,000
Maximum
Related Party Transaction [Line Items]
Catastrophic insurance, deductible amount per incident	$ 100,000
Advisor
Related Party Transaction [Line Items]
Term of Advisory Agreement	1 year
Advisory Agreement, renewal period	1 year
Acquisition fee (as percent)	2.00%
Disposition fee as a percentage of the aggregate brokerage commission paid	50.00%
Disposition fee (as percent)	2.00%
Debt financing fee (as percent)	0.50%
Manager
Related Party Transaction [Line Items]
Property management fee (as percent)	4.50%
Construction management fee (as percent)	5.00%
Debt servicing fee (as percent)	2.75%
Debt servicing fee	$ 0	$ 0	$ 0

XML

Related Party Transactions - Fees Earned/Expenses Incurred and Amounts Payable to Related Parties (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Related Party Transaction [Line Items]
Due from related parties	$ 0	$ 297
Due to related parties	1,915	432
RAI | Self-Insurance Funds Held
Related Party Transaction [Line Items]
Due from related parties		33
RAI | Operating Expense Reimbursements
Related Party Transaction [Line Items]
Due from related parties		264
Advisor | Operating Expense Reimbursements
Related Party Transaction [Line Items]
Due to related parties	1,588	6
Fees earned / expenses incurred	3,902	3,462	$ 3,708
Advisor | Asset Management Fees
Related Party Transaction [Line Items]
Fees earned / expenses incurred	9,081	9,374	9,840
Advisor | Debt Financing Fees
Related Party Transaction [Line Items]
Fees earned / expenses incurred	184	39	78
Advisor | Disposition Fees
Related Party Transaction [Line Items]
Fees earned / expenses incurred		274
Advisor | Related Party Internal Audit
Related Party Transaction [Line Items]
Fees earned / expenses incurred	106
Manager | Operating Expense Reimbursements
Related Party Transaction [Line Items]
Due to related parties		96
Fees earned / expenses incurred		70	201
Manager | Property Management Fees
Related Party Transaction [Line Items]
Due to related parties	327	328
Fees earned / expenses incurred	3,813	3,834	3,888
Manager | Construction Management Fees
Related Party Transaction [Line Items]
Fees earned / expenses incurred	$ 352	255	859
Manager | Construction Payroll Reimbursements
Related Party Transaction [Line Items]
Fees earned / expenses incurred		63	$ 121
Property | Meridian
Related Party Transaction [Line Items]
Due to related parties		$ 2

XML

Related Party Transactions - Fees Earned/Expenses Incurred and Amounts Payable to Related Parties (Parenthetical) (Details) - Resource Real Estate Opportunity OP, LP.	12 Months Ended
	Dec. 31, 2020 USD ($)
Advisor | Asset Management Fees
Related Party Transaction [Line Items]
Recognized as revenue	$ 2,900,000
Advisor | Operating Expense Reimbursements
Related Party Transaction [Line Items]
Recognized as revenue	1,500,000
Advisor | Related Party Internal Audit
Related Party Transaction [Line Items]
Recognized as revenue	33,000
Advisor | Debt Financing Fees
Related Party Transaction [Line Items]
Recognized as revenue	184,000
Manager | Property Management Fees
Related Party Transaction [Line Items]
Recognized as revenue	$ 1,200,000

XML

Equity - Preferred Stock and Convertible Stock (Details)	12 Months Ended
	Dec. 31, 2020 event $ / shares shares	Dec. 31, 2019 $ / shares shares	Dec. 31, 2018 shares	Dec. 31, 2017 shares
Class Of Stock [Line Items]
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, par value (in dollars per share) | $ / shares	$ 0.01	$ 0.01
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, shares outstanding (in shares)	60,026,513	60,094,623
Common stock, par value (in dollars per share) | $ / shares	$ 0.01	$ 0.01
Non-compounded annual return, option 2 (as percent)	7.00%
Number of possible triggering events | event	2
Conversion basis	0.00002
Converted if the lesser of, option 2 (as percent)	15.00%
Number of triggering events | event	0
Advisor
Class Of Stock [Line Items]
Common stock, shares outstanding (in shares)	117,778
Convertible Stock
Class Of Stock [Line Items]
Common stock, shares outstanding (in shares)	50,000	50,000	50,000	50,000
Common stock, par value (in dollars per share) | $ / shares	$ 0.01	$ 0.01
Common stock, conversion terms, percent of paid distributions equal to price at which shares were originally sold	100.00%
Percent of annual return on shares at price equal to distributions paid	7.00%
Convertible Stock | Advisor
Class Of Stock [Line Items]
Common stock, shares outstanding (in shares)	50,000
Common stock, par value (in dollars per share) | $ / shares	$ 0.01

XML

Equity - Common Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Class Of Stock [Line Items]
Common stock, shares outstanding (in shares)	60,026,513	60,094,623
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, outstanding	$ 599	$ 600
Shares Issued (in shares)	60,026,513	60,094,623
Gross Proceeds	$ 644,826
Shares issued before redemption and retirement (in shares)	66,250,388
Share redeemed and retired (in shares)	(6,223,875)
Shares issued through initial public offering
Class Of Stock [Line Items]
Shares Issued (in shares)	55,791,297
Gross Proceeds	$ 556,197
Shares issued through stock distributions
Class Of Stock [Line Items]
Shares Issued (in shares)	246,365
Gross Proceeds	$ 0
Shares issued through distribution reinvestment plan
Class Of Stock [Line Items]
Shares Issued (in shares)	10,197,726
Gross Proceeds	$ 88,479
Advisor's initial investment, net of 5,000 share conversion
Class Of Stock [Line Items]
Shares Issued (in shares)	15,000
Gross Proceeds	$ 150
Conversion of stock (in shares)	5,000
Advisor
Class Of Stock [Line Items]
Common stock, shares outstanding (in shares)	117,778
Common stock, outstanding	$ 1,100

XML

Equity - Redemptions (Details) - $ / shares shares in Thousands	1 Months Ended												12 Months Ended
	Dec. 31, 2020	Nov. 30, 2020	Oct. 31, 2020	Sep. 30, 2020	Aug. 31, 2020	Jul. 31, 2020	Jun. 30, 2020	May 31, 2020	Apr. 30, 2020	Mar. 31, 2020	Feb. 29, 2020	Jan. 31, 2020	Dec. 31, 2020
Equity [Abstract]
Total Number of Shares Redeemed (in shares)	179	0	0	0	0	0	120	0	0	140	0	0
Average Price Paid per Share (in dollars per share)	$ 9.08	$ 0	$ 0	$ 0	$ 0	$ 0	$ 9.08	$ 0	$ 0	$ 8.77	$ 0	$ 0	$ 9.08
Cumulative Number of Shares Purchased as Part of a Publicly Announced Plan or Program (in shares)	439	0	0	0	0	0	260	0	0	140	0	0
Maximum redemption of stock based on weighted-average number of shares outstanding (as percent)													5.00%
Measurement period for weighting the average number of shares available for redemption													12 months
Percentage of operating cash flow from prior fiscal year available for stock redemption (as percent)													1.00%
Changes that do not require stockholder approval													30 days

XML

Equity - Distributions (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Class Of Stock [Line Items]
Distributions reinvested in shares of Common Stock	$ 3,131	$ 14,724	$ 20,693
Net Cash Distributions	2,873
Total Aggregate Distributions	6,004
Less: distribution payable at December 31, 2019	(5,993)
Distribution payable	0	$ 5,993	$ 8,878
True-up of prior year cash distributions declared	11
December 31, 2019 through January 30, 2020
Class Of Stock [Line Items]
Distributions reinvested in shares of Common Stock	1,074
Net Cash Distributions	968
Total Aggregate Distributions	$ 2,042
Per Common Share per day (in dollars per share)	$ 0.001095890
Distribution Date	Jan. 31, 2020
January 31, 2020 through February 27, 2020
Class Of Stock [Line Items]
Distributions reinvested in shares of Common Stock	$ 965
Net Cash Distributions	883
Total Aggregate Distributions	$ 1,848
Per Common Share per day (in dollars per share)	$ 0.001095890
Distribution Date	Feb. 28, 2020
February 28, 2020 through March 30, 2020
Class Of Stock [Line Items]
Distributions reinvested in shares of Common Stock	$ 1,092
Net Cash Distributions	1,022
Total Aggregate Distributions	$ 2,114
Per Common Share per day (in dollars per share)	$ 0.001095890
Distribution Date	Mar. 31, 2020

XML

Fair Value Measures and Disclosures (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Outstanding Balance | Mortgage notes payable
Assets:
Mortgage notes payable	$ 584,250	$ 552,074
Estimated Fair Value | Mortgage notes payable
Assets:
Mortgage notes payable	576,693	545,249
Fair Value, Measurements, Recurring
Assets:
Assets at fair value	25	9
Fair Value, Measurements, Recurring | Interest Rate Caps
Assets:
Derivative asset	25	9
Level 1 | Fair Value, Measurements, Recurring
Assets:
Assets at fair value	0	0
Level 1 | Fair Value, Measurements, Recurring | Interest Rate Caps
Assets:
Derivative asset	0	0
Level 2 | Fair Value, Measurements, Recurring
Assets:
Assets at fair value	25	9
Level 2 | Fair Value, Measurements, Recurring | Interest Rate Caps
Assets:
Derivative asset	25	9
Level 3 | Fair Value, Measurements, Recurring
Assets:
Assets at fair value	0	0
Level 3 | Fair Value, Measurements, Recurring | Interest Rate Caps
Assets:
Derivative asset	$ 0	$ 0

XML

Derivatives and Hedging Activities - Narrative (Details)	Dec. 31, 2020 USD ($)
Derivative Instruments And Hedging Activities Disclosure [Abstract]
Estimated loss that will be reclassified to interest expense	$ 83,099

XML

Derivatives and Hedging Activities - Outstanding Interest Rate Derivatives (Details) - Derivatives Designated as Hedging Instruments $ in Thousands	12 Months Ended
	Dec. 31, 2020 USD ($) derivative_contract
Number of Instruments
Interest rate caps | derivative_contract	11
Notional Amount
Interest rate caps | $	$ 405,264
Minimum
Notional Amount
Maturity Dates	Jul. 01, 2021
Maximum
Notional Amount
Maturity Dates	Sep. 01, 2024

XML

Derivatives and Hedging Activities - Fair Value of Derivative Financial Instruments and Balance Sheet Classification (Details) - Derivatives Designated as Hedging Instruments - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Derivative [Line Items]
Liabilities Derivatives, Fair Value	$ 0	$ 0
Interest Rate Caps
Derivative [Line Items]
Asset Derivatives, Fair Value	$ 25	$ 9

XML

Derivatives and Hedging Activities - Gain (Loss) Recognized in Income (Details) - Derivatives Designated as Hedging Instruments - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Interest Expense
Derivative Instruments Gain Loss [Line Items]
Amount of Loss Reclassified from Accumulated OCI into Income for the Years Ended	$ (95)	$ (285)
Interest Rate Caps
Derivative Instruments Gain Loss [Line Items]
Amount of Gain (Loss) Recognized in OCI on Derivative	$ 137	$ (95)

XML

Operating Expenses (Details)	12 Months Ended
	Dec. 31, 2020
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%

XML

Quarterly Financial Data (Unaudited) - Summary of Operating Results by Quarter (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Quarterly Financial Data [Abstract]
Rental income	$ 21,639	$ 21,411	$ 21,353	$ 21,407	$ 21,188	$ 21,312	$ 21,222	$ 21,959	$ 85,810	$ 85,681	$ 87,256
Net loss	$ (9,066)	$ (9,369)	$ (6,863)	$ (7,926)	$ (6,844)	$ (8,688)	$ (8,109)	$ 11,697	$ (33,224)	$ (11,944)	$ (35,441)
Basic and diluted net loss per common share	$ (0.15)	$ (0.16)	$ (0.11)	$ (0.13)	$ (0.12)	$ (0.14)	$ (0.13)	$ 0.19	$ (0.55)	$ (0.20)	$ (0.58)

XML

Subsequent Events - Additional Information (Details)			3 Months Ended		12 Months Ended
	Feb. 03, 2021 $ / shares	Jan. 28, 2021 USD ($) unit property State $ / shares shares	Mar. 31, 2021 USD ($)	Dec. 31, 2020 USD ($) unit	Dec. 31, 2020 USD ($) unit	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Subsequent Event [Line Items]
Number of multifamily units owned | unit				5,159	5,159
Refinance or pay off of borrower's debt					$ 8,121,000	$ 5,760,000	$ 4,660,000
DRP proceeds				$ 0
Scenario Forecast
Subsequent Event [Line Items]
Funding limitation for redemptions			$ 2,000,000
Subsequent Events
Subsequent Event [Line Items]
Number of properties owned | property		51
Number of states in which entity owns properties | State		15
Share redemption program description	The Amended SRP provides that redemptions will continue to be made quarterly but in an amount not to exceed proceeds from the sale of shares in the DRP in the immediately preceding calendar quarter; provided that, for any quarter in which no DRP proceeds are available, the funding limitation for the quarter will be set by the Board upon ten business days’ notice to stockholders
Dividend distribution declared date	Feb. 03, 2021
Dividends payable, amount per share | $ / shares	$ 0.07
Dividend distribution record date	Mar. 30, 2021
Dividend distribution payable date	Mar. 31, 2021
Subsequent Events | Structured Credit Facility Transaction | CBRE Multifamily Capital, Inc. | Borrowers
Subsequent Event [Line Items]
Facility termination period		15 years
Convertible loan advances from variable to fixed Description		Borrower has the option to convert variable advances to fixed advances beginning on the first day of the second year of the variable advance term and ending seven years prior to the Facility Termination Date, subject to the satisfaction of customary requirements set forth in the Loan Documents.
Initial advance amount		$ 495,200,000
Number of real estate properties secured by mortgage | property		12
Refinance or pay off of borrower's debt		$ 462,000,000
Subsequent Events | Fixed Advances | Minimum | Structured Credit Facility Transaction | CBRE Multifamily Capital, Inc. | Borrowers
Subsequent Event [Line Items]
Facility termination period		5 years
Subsequent Events | Fixed Advances | Maximum | Structured Credit Facility Transaction | CBRE Multifamily Capital, Inc. | Borrowers
Subsequent Event [Line Items]
Facility termination period		15 years
Subsequent Events | Variable Advances | Structured Credit Facility Transaction | CBRE Multifamily Capital, Inc. | Borrowers
Subsequent Event [Line Items]
Facility termination period		10 years
Initial advance amount		$ 24,760,000
Subsequent Events | Variable Advances | Minimum | Structured Credit Facility Transaction | CBRE Multifamily Capital, Inc. | Borrowers
Subsequent Event [Line Items]
Facility termination period		5 years
Subsequent Events | Variable Advances | Maximum | Structured Credit Facility Transaction | CBRE Multifamily Capital, Inc. | Borrowers
Subsequent Event [Line Items]
Facility termination period		10 years
Subsequent Events | Multifamily
Subsequent Event [Line Items]
Number of multifamily units owned | unit		14,995
REIT I Merger Agreement
Subsequent Event [Line Items]
Date of merger agreement					Sep. 08, 2020
REIT I Merger Agreement | Subsequent Events
Subsequent Event [Line Items]
Effective date of merger agreement		Jan. 28, 2021
REIT III Merger Agreement
Subsequent Event [Line Items]
Date of merger agreement					Sep. 08, 2020
REIT III Merger Agreement | Subsequent Events
Subsequent Event [Line Items]
Effective date of merger agreement		Jan. 28, 2021
Convertible common stock, right to receive number of shares at the effective time of merger | shares		0.925862
REIT I Company Merger | Subsequent Events
Subsequent Event [Line Items]
Convertible common stock, right to receive number of shares at the effective time of merger | shares		1.22423
Convertible common stock, right to receive cash per share without interest at the effective time of merger | $ / shares		$ 0.02
REIT I Partnership Merger | Subsequent Events
Subsequent Event [Line Items]
Convertible common stock, right to receive number of shares at the effective time of merger | shares		1.22423
Series A cumulative participating redeemable preferred unit, description		each Series A Cumulative Participating Redeemable Preferred Unit in OP I issued and outstanding immediately prior to the effective time of the REIT I Partnership Merger converted into the right to receive one Series A Cumulative Participating Redeemable Preferred Unit in OP II.

XML

Subsequent Events - Summary of Additional Information about Initial Advance (Details) - Structured Credit Facility Transaction - Subsequent Events - CBRE Multifamily Capital, Inc. - Borrowers	Jan. 28, 2021 USD ($)
Debt Instrument [Line Items]
Loan Amount	$ 495,200,000
Term (years)	15 years
Fixed Advance 1
Debt Instrument [Line Items]
Loan Amount	$ 235,205,000
Term (years)	10 years
Interest Only	Yes
Payments	Monthly
Total Rate	2.79%
Fixed Advance 2
Debt Instrument [Line Items]
Loan Amount	$ 235,205,000
Term (years)	7 years
Interest Only	Yes
Payments	Monthly
Total Rate	2.62%
Variable Advance 1
Debt Instrument [Line Items]
Loan Amount	$ 24,760,000
Term (years)	10 years
Interest Only	Yes
Payments	Monthly
Total Rate	2.15%

XML

Schedule III Real Estate and Accumulated Depreciation - Schedule of Real Estate Owned (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2017
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		$ 584,250
Initial cost to Company		792,034
Cost capitalized subsequent to acquisition		80,363
Gross Amount at which carried at close of period	$ 912,534	872,397	$ 867,309	$ 898,729
Accumulated Depreciation	$ (101,933)	(171,492)	$ (131,779)	$ (61,758)
Residential, Dallas, Texas
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		0
Initial cost to Company		9,149
Cost capitalized subsequent to acquisition		3,402
Gross Amount at which carried at close of period		12,551
Accumulated Depreciation		(4,655)
Date of Construction	1980
Date Acquired	Jun. 04, 2014
Residential, Fort Worth, Texas
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		18,876
Initial cost to Company		31,856
Cost capitalized subsequent to acquisition		5,114
Gross Amount at which carried at close of period		36,970
Accumulated Depreciation		(8,990)
Date of Construction	1989
Date Acquired	Mar. 30, 2015
Residential, Chapel Hill, North Carolina
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		42,650
Initial cost to Company		45,653
Cost capitalized subsequent to acquisition		8,415
Gross Amount at which carried at close of period		54,068
Accumulated Depreciation		(13,715)
Date of Construction	1990
Date Acquired	May 19, 2015
Residential, Homewood, Alabama
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		19,149
Initial cost to Company		30,003
Cost capitalized subsequent to acquisition		7,420
Gross Amount at which carried at close of period		37,423
Accumulated Depreciation		(9,388)
Date of Construction	1968
Date Acquired	Aug. 21, 2015
Residential, Dallas, Texas, Property 2
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		33,210
Initial cost to Company		20,667
Cost capitalized subsequent to acquisition		3,349
Gross Amount at which carried at close of period		24,016
Accumulated Depreciation		(6,077)
Date of Construction	1979
Date Acquired	Aug. 27, 2015
Residential, Atlanta, Georgia, Property 2
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		35,035
Initial cost to Company		40,194
Cost capitalized subsequent to acquisition		5,268
Gross Amount at which carried at close of period		45,462
Accumulated Depreciation		(10,415)
Date of Construction	1995
Date Acquired	Sep. 24, 2015
Residential, Portland, Oregon
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		19,479
Initial cost to Company		32,130
Cost capitalized subsequent to acquisition		3,789
Gross Amount at which carried at close of period		35,919
Accumulated Depreciation		(7,555)
Date of Construction	2004
Date Acquired	Oct. 29, 2015
Residential, Naperville, Illinois
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		47,845
Initial cost to Company		66,213
Cost capitalized subsequent to acquisition		6,051
Gross Amount at which carried at close of period		72,264
Accumulated Depreciation		(14,648)
Date of Construction	1991
Date Acquired	Dec. 18, 2015
Residential, Boulder, Colorado
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		47,146
Initial cost to Company		64,181
Cost capitalized subsequent to acquisition		4,373
Gross Amount at which carried at close of period		68,554
Accumulated Depreciation		(11,072)
Date of Construction	1997
Date Acquired	Dec. 18, 2015
Residential, Centennial, Colorado
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		56,810
Initial cost to Company		59,059
Cost capitalized subsequent to acquisition		5,938
Gross Amount at which carried at close of period		64,997
Accumulated Depreciation		(12,807)
Date of Construction	1984
Date Acquired	Jan. 22, 2016
Residential, Austin, Texas
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		25,506
Initial cost to Company		55,466
Cost capitalized subsequent to acquisition		7,338
Gross Amount at which carried at close of period		62,804
Accumulated Depreciation		(13,807)
Date of Construction	2001
Date Acquired	Mar. 23, 2016
Residential, Portland, Oregon, Property 2
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		50,708
Initial cost to Company		80,155
Cost capitalized subsequent to acquisition		6,024
Gross Amount at which carried at close of period		86,179
Accumulated Depreciation		(15,510)
Date of Construction	1985
Date Acquired	May 17, 2016
Residential, Irving, Texas
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		45,700
Initial cost to Company		68,454
Cost capitalized subsequent to acquisition		8,216
Gross Amount at which carried at close of period		76,670
Accumulated Depreciation		(14,948)
Date of Construction	1991
Date Acquired	Jun. 28, 2016
Residential, Buffalo Grove, Illinois
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		36,437
Initial cost to Company		47,817
Cost capitalized subsequent to acquisition		1,509
Gross Amount at which carried at close of period		49,326
Accumulated Depreciation		(7,320)
Date of Construction	1986
Date Acquired	Dec. 22, 2016
Residential, Burnsville, Minnesota
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		36,918
Initial cost to Company		49,775
Cost capitalized subsequent to acquisition		1,695
Gross Amount at which carried at close of period		51,470
Accumulated Depreciation		(8,494)
Date of Construction	1984
Date Acquired	Dec. 23, 2016
Residential, Glendale, Arizona
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		39,498
Initial cost to Company		54,057
Cost capitalized subsequent to acquisition		1,740
Gross Amount at which carried at close of period		55,797
Accumulated Depreciation		(7,876)
Date of Construction	1998
Date Acquired	Apr. 04, 2017
Residential, Lombard, Illinois
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		29,283
Initial cost to Company		37,205
Cost capitalized subsequent to acquisition		722
Gross Amount at which carried at close of period		37,927
Accumulated Depreciation		$ (4,215)
Date of Construction	1989
Date Acquired	Oct. 31, 2017

XML

Schedule III Real Estate and Accumulated Depreciation - Reconciliations (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Investments in real estate:
Balance at beginning of the year	$ 867,309	$ 912,534	$ 898,729
Improvements, etc.	7,297	8,156	15,486
Disposals during the year	(2,209)
Dispositions during the year		(53,381)	(1,681)
Balance at end of year	872,397	867,309	912,534
Accumulated Depreciation:
Balance at beginning of year	(131,779)	(101,933)	(61,758)
Depreciation	(40,195)	(39,599)	(40,611)
Disposals	482	9,753	436
Balance at end of year	$ (171,492)	$ (131,779)	$ (101,933)