þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended September 30, 2017 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from _________ to _________ |
Maryland | 47-4871012 | |
(State or Other Jurisdiction of | (I.R.S. Employer | |
Incorporation or Organization) | Identification No.) |
18100 Von Karman Avenue, Suite 500 | ||
Irvine, California | 92612 | |
(Address of Principal Executive Offices) | (Zip Code) |
Large Accelerated filer o | Accelerated filer o |
Non-Accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company þ |
Emerging growth company þ |
Page | |||
September 30, 2017 | December 31, 2016 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Assets: | |||||||
Real Estate: | |||||||
Land | $ | 31,844,814 | $ | 12,019,503 | |||
Building and improvements | 251,429,619 | 85,653,391 | |||||
Tenant origination and absorption costs | 3,220,063 | 1,899,841 | |||||
Total real estate, cost | 286,494,496 | 99,572,735 | |||||
Less accumulated depreciation and amortization | (6,021,349 | ) | (625,232 | ) | |||
Total real estate, net | 280,473,147 | 98,947,503 | |||||
Cash and cash equivalents | 23,865,114 | 16,389,888 | |||||
Restricted cash | 3,597,926 | 752,311 | |||||
Rents and other receivables | 502,185 | 127,933 | |||||
Other assets | 557,534 | 1,230,766 | |||||
Total assets | $ | 308,995,906 | $ | 117,448,401 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 4,966,186 | $ | 991,685 | |||
Mortgage notes payable, net | 202,794,204 | 72,016,933 | |||||
Distributions payable | 617,741 | 241,258 | |||||
Due to affiliates | 3,482,300 | 3,991,733 | |||||
Total liabilities | 211,860,431 | 77,241,609 | |||||
Commitments and contingencies (Note 9) | |||||||
Redeemable common stock | 2,042,419 | 292,818 | |||||
Stockholders’ Equity: | |||||||
Preferred stock, $0.01 par value per share; 100,000,000 shares authorized, no shares issued and outstanding | — | — | |||||
Class A common stock, $0.01 par value per share; 480,000,000 shares authorized, 2,625,464 and 1,247,420 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 26,255 | 12,474 | |||||
Class R common stock, $0.01 par value per share; 240,000,000 shares authorized, 252,987 and 99,043 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 2,530 | 990 | |||||
Class T common stock, $0.01 par value per share; 480,000,000 shares authorized, 2,722,324 and 889,434 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 27,223 | 8,894 | |||||
Additional paid-in capital | 112,920,633 | 45,632,928 | |||||
Cumulative distributions and net losses | (17,883,585 | ) | (5,741,312 | ) | |||
Total stockholders’ equity | 95,093,056 | 39,913,974 | |||||
Total liabilities and stockholders’ equity | $ | 308,995,906 | $ | 117,448,401 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues: | |||||||||||||||
Rental income | $ | 5,150,289 | $ | 276,367 | $ | 11,190,720 | $ | 412,912 | |||||||
Tenant reimbursements and other | 593,829 | 16,134 | 1,270,920 | 24,335 | |||||||||||
Total revenues | 5,744,118 | 292,501 | 12,461,640 | 437,247 | |||||||||||
Expenses: | |||||||||||||||
Operating, maintenance and management | 1,553,149 | 117,584 | 3,166,733 | 161,393 | |||||||||||
Real estate taxes and insurance | 900,704 | 44,258 | 1,939,729 | 64,607 | |||||||||||
Fees to affiliates | 678,849 | 23,778 | 1,335,360 | 212,457 | |||||||||||
Depreciation and amortization | 3,254,894 | 161,777 | 8,171,160 | 237,091 | |||||||||||
Interest expense | 1,741,955 | 44,901 | 3,865,967 | 74,575 | |||||||||||
General and administrative expenses | 699,575 | 383,132 | 2,037,728 | 854,543 | |||||||||||
Acquisition costs | — | 19,421 | — | 209,875 | |||||||||||
Total expenses | 8,829,126 | 794,851 | 20,516,677 | 1,814,541 | |||||||||||
Net loss | (3,085,008 | ) | (502,350 | ) | (8,055,037 | ) | (1,377,294 | ) | |||||||
Net loss attributable to noncontrolling interest | — | — | — | (100 | ) | ||||||||||
Net loss attributable to common stockholders | $ | (3,085,008 | ) | $ | (502,350 | ) | $ | (8,055,037 | ) | $ | (1,377,194 | ) | |||
Net loss attributable to Class A common stockholders — basic and diluted | $ | (1,478,634 | ) | $ | (360,526 | ) | $ | (4,067,918 | ) | $ | (1,030,947 | ) | |||
Net loss per Class A common share — basic and diluted | $ | (0.58 | ) | $ | (0.81 | ) | $ | (1.95 | ) | $ | (5.98 | ) | |||
Weighted average number of Class A common shares outstanding — basic and diluted | 2,434,892 | 431,975 | 1,995,953 | 171,215 | |||||||||||
Distributions declared per Class A common share | $ | 0.378 | $ | 0.377 | $ | 1.122 | $ | 0.553 | |||||||
Net loss attributable to Class R common stockholders — basic and diluted | $ | (139,604 | ) | $ | (5,428 | ) | $ | (363,178 | ) | $ | (13,148 | ) | |||
Net loss per Class R common share — basic and diluted | $ | (0.59 | ) | $ | (0.86 | ) | $ | (1.99 | ) | $ | (6.08 | ) | |||
Weighted average number of Class R common shares outstanding — basic and diluted | 229,888 | 6,503 | 178,196 | 2,184 | |||||||||||
Distributions declared per Class R common share | $ | 0.363 | $ | 0.236 | $ | 1.073 | $ | 0.236 | |||||||
Net loss attributable to Class T common stockholders — basic and diluted | $ | (1,466,769 | ) | $ | (136,396 | ) | $ | (3,623,941 | ) | $ | (333,099 | ) | |||
Net loss per Class T common share — basic and diluted | $ | (0.64 | ) | $ | (0.89 | ) | $ | (2.14 | ) | $ | (6.16 | ) | |||
Weighted average number of Class T common shares outstanding — basic and diluted | 2,415,355 | 163,427 | 1,778,113 | 55,320 | |||||||||||
Distributions declared per Class T common share | $ | 0.320 | $ | 0.309 | $ | 0.931 | $ | 0.454 |
Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-In Capital | Cumulative Distributions & Net Losses | Total Stockholders’ Equity | Noncontrolling Interest | Total Equity | ||||||||||||||||||||||||||||||||||||
Class A | Class R | Class T | |||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||
BALANCE, December 31, 2015 | 8,000 | $ | 80 | — | $ | — | — | $ | — | $ | 199,920 | $ | — | $ | 200,000 | $ | — | $ | 200,000 | ||||||||||||||||||||||
Issuance of common stock | 1,239,420 | 12,394 | 99,043 | 990 | 889,434 | 8,894 | 53,633,875 | — | 53,656,153 | — | 53,656,153 | ||||||||||||||||||||||||||||||
Commissions on sales of common stock and related dealer manager fees to affiliates | — | — | — | — | — | — | (4,639,146 | ) | — | (4,639,146 | ) | — | (4,639,146 | ) | |||||||||||||||||||||||||||
Transfers to redeemable common stock | — | — | — | — | — | — | (292,818 | ) | — | (292,818 | ) | — | (292,818 | ) | |||||||||||||||||||||||||||
Other offering costs to affiliates | — | — | — | — | — | — | (3,329,974 | ) | — | (3,329,974 | ) | — | (3,329,974 | ) | |||||||||||||||||||||||||||
Distributions declared | — | — | — | — | — | — | — | (820,700 | ) | (820,700 | ) | — | (820,700 | ) | |||||||||||||||||||||||||||
Amortization of stock-based compensation | — | — | — | — | — | — | 61,071 | — | 61,071 | — | 61,071 | ||||||||||||||||||||||||||||||
Contribution from noncontrolling interest | — | — | — | — | — | — | — | — | — | 100 | 100 | ||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (4,920,612 | ) | (4,920,612 | ) | (100 | ) | (4,920,712 | ) | ||||||||||||||||||||||||||
BALANCE, December 31, 2016 | 1,247,420 | 12,474 | 99,043 | 990 | 889,434 | 8,894 | 45,632,928 | (5,741,312 | ) | 39,913,974 | — | 39,913,974 | |||||||||||||||||||||||||||||
Issuance of common stock | 1,378,044 | 13,781 | 153,944 | 1,540 | 1,832,890 | 18,329 | 80,876,482 | — | 80,910,132 | — | 80,910,132 | ||||||||||||||||||||||||||||||
Commissions on sales of common stock and related dealer manager fees to affiliates | — | — | — | — | — | — | (7,080,846 | ) | — | (7,080,846 | ) | — | (7,080,846 | ) | |||||||||||||||||||||||||||
Transfers to redeemable common stock | — | — | — | — | — | — | (1,770,380 | ) | — | (1,770,380 | ) | — | (1,770,380 | ) | |||||||||||||||||||||||||||
Other offering costs to affiliates | — | — | — | — | — | — | (4,787,024 | ) | — | (4,787,024 | ) | — | (4,787,024 | ) | |||||||||||||||||||||||||||
Distributions declared | — | — | — | — | — | — | — | (4,087,236 | ) | (4,087,236 | ) | — | (4,087,236 | ) | |||||||||||||||||||||||||||
Amortization of stock-based compensation | — | — | — | — | — | — | 49,473 | — | 49,473 | — | 49,473 | ||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (8,055,037 | ) | (8,055,037 | ) | — | (8,055,037 | ) | |||||||||||||||||||||||||||
BALANCE, September 30, 2017 | 2,625,464 | $ | 26,255 | 252,987 | $ | 2,530 | 2,722,324 | $ | 27,223 | $ | 112,920,633 | $ | (17,883,585 | ) | $ | 95,093,056 | $ | — | $ | 95,093,056 |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cash Flows from Operating Activities: | |||||||
Net loss | $ | (8,055,037 | ) | $ | (1,377,294 | ) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 8,171,160 | 237,091 | |||||
Amortization of deferred financing costs | 74,595 | 2,833 | |||||
Amortization of stock-based compensation | 49,473 | 51,642 | |||||
Amortization of stock-based annual compensation and meeting fees | 20,625 | 41,625 | |||||
Change in fair value of interest rate cap agreements | 503,935 | 8,780 | |||||
Changes in operating assets and liabilities: | |||||||
Restricted cash for operating activities | (2,951,322 | ) | (132,282 | ) | |||
Rents and other receivables | (330,902 | ) | (8,524 | ) | |||
Other assets | (192,063 | ) | (56,367 | ) | |||
Accounts payable and accrued liabilities | 3,863,682 | 320,570 | |||||
Due to affiliates | (970,340 | ) | 242,212 | ||||
Net cash provided by (used in) operating activities | 183,806 | (669,714 | ) | ||||
Cash Flows from Investing Activities: | |||||||
Acquisition of real estate investments | (183,623,803 | ) | (7,525,000 | ) | |||
Additions to real estate investments | (2,010,474 | ) | (74,405 | ) | |||
Escrow deposits for pending real estate acquisitions | (3,300,000 | ) | — | ||||
Restricted cash for investing activities | 105,707 | (123,206 | ) | ||||
Purchase of interest rate cap agreements | (288,740 | ) | (8,800 | ) | |||
Net cash used in investing activities | (189,117,310 | ) | (7,731,411 | ) | |||
Cash Flows from Financing Activities: | |||||||
Proceeds from issuance of mortgage notes payable | 131,578,000 | 5,700,000 | |||||
Contributions from noncontrolling interest | — | 100 | |||||
Proceeds from issuance of Class A common stock | 33,052,652 | 15,715,295 | |||||
Proceeds from issuance of Class R common stock | 3,418,549 | 970,000 | |||||
Proceeds from issuance of Class T common stock | 42,604,576 | 7,829,148 | |||||
Payments of commissions on sale of common stock and related dealer manager fees | (5,500,593 | ) | (1,593,900 | ) | |||
Reimbursement of other offering costs to affiliates | (5,928,757 | ) | (742,531 | ) | |||
Payment of deferred financing costs | (875,324 | ) | (57,000 | ) | |||
Distributions to common stockholders | (1,940,373 | ) | (71,088 | ) | |||
Net cash provided by financing activities | 196,408,730 | 27,750,024 | |||||
Net increase in cash and cash equivalents | 7,475,226 | 19,348,899 | |||||
Cash and cash equivalents, beginning of period | 16,389,888 | 200,000 | |||||
Cash and cash equivalents, end of period | $ | 23,865,114 | $ | 19,548,899 |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Supplemental Disclosures of Cash Flow Information: | |||||||
Interest paid | $ | 2,774,169 | $ | 48,736 | |||
Supplemental Disclosures of Noncash Flow Transactions: | |||||||
Increase in distributions payable | $ | 376,483 | $ | 101,659 | |||
Application of escrow deposits to acquire real estate | $ | 3,950,100 | $ | — | |||
(Decrease) increase in amounts receivable from transfer agent for Class A common stock | $ | (60,600 | ) | $ | 105,750 | ||
Increase in amounts receivable from transfer agent for Class T common stock | $ | 103,950 | $ | 124,740 | |||
(Decrease) increase in amounts payable to affiliates for other offering costs | $ | (1,141,733 | ) | $ | 970,955 | ||
Distributions paid to common stockholders through common stock issuances pursuant to the distribution reinvestment plan | $ | 1,770,380 | $ | 70,228 | |||
Increase in redeemable common stock | $ | 1,770,380 | $ | 70,228 | |||
Increase in redemptions payable | $ | 20,779 | $ | — | |||
Increase in accounts payable and accrued liabilities from additions to real estate investments | $ | 90,040 | $ | 53,465 | |||
Increase in due to affiliates from additions to real estate investments | $ | 22,387 | $ | 1,486 | |||
Increase in due to affiliates from distribution and shareholder servicing fee | $ | 1,580,253 | $ | 377,372 |
• | Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities; |
• | Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and |
• | Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable. |
September 30, 2017 | ||||||||||||
Fair Value Measurements Using | ||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||
Assets: | ||||||||||||
Interest rate cap agreements | $ | — | $ | 197,936 | $ | — |
December 31, 2016 | ||||||||||||
Fair Value Measurements Using | ||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||
Assets: | ||||||||||||
Interest rate cap agreements | $ | — | $ | 413,131 | $ | — |
Purchase Price Allocation | |||||||||||||||||||||||||
Property Name | Location | Purchase Date | Units | Land | Buildings and Improvements | Tenant Origination and Absorption Costs | Total Purchase Price | ||||||||||||||||||
Reflections on Sweetwater Apartments | Lawrenceville, GA | 1/12/2017 | 280 | $ | 5,041,375 | $ | 27,371,760 | $ | 875,202 | $ | 33,288,337 | ||||||||||||||
The Pointe at Vista Ridge Apartments | Lewisville, TX | 5/25/2017 | 300 | 4,610,773 | 39,663,440 | 914,010 | 45,188,223 | ||||||||||||||||||
Belmar Villas | Lakewood, CO | 7/21/2017 | 318 | 7,105,266 | 56,203,707 | 1,194,282 | 64,503,255 | ||||||||||||||||||
Ansley at Princeton Lakes | — | Atlanta, GA | — | 8/31/2017 | 306 | 3,067,897 | 40,414,419 | 1,111,771 | 44,594,087 | ||||||||||||||||
1,204 | $ | 19,825,311 | $ | 163,653,326 | $ | 4,095,265 | $ | 187,573,902 |
September 30, 2017 | ||||||||||||||||
Assets | ||||||||||||||||
Land | Building and Improvements | Tenant Origination and Absorption Costs | Total Real Estate | |||||||||||||
Investments in real estate | $ | 31,844,814 | $ | 251,429,619 | $ | 3,220,063 | $ | 286,494,496 | ||||||||
Less: Accumulated depreciation and amortization | — | (4,717,615 | ) | (1,303,734 | ) | (6,021,349 | ) | |||||||||
Net investments in real estate and related lease intangibles | $ | 31,844,814 | $ | 246,712,004 | $ | 1,916,329 | $ | 280,473,147 |
December 31, 2016 | ||||||||||||||||
Assets | ||||||||||||||||
Land | Building and Improvements | Tenant Origination and Absorption Costs | Total Real Estate | |||||||||||||
Investments in real estate | $ | 12,019,503 | $ | 85,653,391 | $ | 1,899,841 | $ | 99,572,735 | ||||||||
Less: Accumulated depreciation and amortization | — | (357,649 | ) | (267,583 | ) | (625,232 | ) | |||||||||
Net investments in real estate and related lease intangibles | $ | 12,019,503 | $ | 85,295,742 | $ | 1,632,258 | $ | 98,947,503 |
September 30, 2017 | December 31, 2016 | ||||||
Prepaid expenses | $ | 251,165 | $ | 113,150 | |||
Interest rate cap agreements | 197,936 | 413,131 | |||||
Escrow deposits for pending real estate acquisitions | — | 650,100 | |||||
Other deposits | 108,433 | 54,385 | |||||
Other assets | $ | 557,534 | $ | 1,230,766 |
September 30, 2017 | ||||||||||||||||
Interest Rate Range | Weighted Average Interest Rate | |||||||||||||||
Type | Number of Instruments | Maturity Date Range | Minimum | Maximum | Principal Outstanding | |||||||||||
Variable rate(1) | 6 | 6/1/2026 - 9/1/2027 | 1-Mo LIBOR + 2.195% | 1-Mo LIBOR + 2.52% | 3.57% | $ | 156,892,000 | |||||||||
Fixed rate | 1 | 8/1/2024 | 3.91 | % | 3.91 | % | 3.91% | 47,112,000 | ||||||||
Mortgage notes payable, gross | 7 | 3.65% | 204,004,000 | |||||||||||||
Deferred financing costs, net(2) | (1,209,796 | ) | ||||||||||||||
Mortgage notes payable, net | $ | 202,794,204 |
December 31, 2016 | ||||||||||||||
Interest Rate Range | Weighted Average Interest Rate | |||||||||||||
Type | Number of Instruments | Maturity Date Range | Minimum | Maximum | Principal Outstanding | |||||||||
Variable rate(1) | 3 | 6/1/2026 - 1/1/2027 | 1-Mo LIBOR + 2.31% | 1-Mo LIBOR + 2.52% | 3.20% | $ | 72,426,000 | |||||||
Mortgage notes payable, gross | 3 | 3.20% | 72,426,000 | |||||||||||
Deferred financing costs, net(2) | (409,067 | ) | ||||||||||||
Mortgage notes payable, net | $ | 72,016,933 |
(1) | See Note 10 for a discussion of the interest rate cap agreements used to manage the exposure to interest rate movement on the Company’s variable rate loans. |
(2) | Accumulated amortization related to deferred financing costs, net as of September 30, 2017 and December 31, 2016 was $81,526 and $6,931, respectively. |
Maturities During the Years Ending December 31, | ||||||||||||||||||||||||||||
Contractual Obligations | Total | Remainder of 2017 | 2018 | 2019 | 2020 | 2021 | Thereafter | |||||||||||||||||||||
Principal payments on outstanding debt obligations(1) | $ | 204,004,000 | $ | — | $ | — | $ | 53,989 | $ | 374,945 | $ | 935,679 | $ | 202,639,387 |
(1) | Projected principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude the deferred financing costs, net associated with the notes payable. |
September 30, 2017 | ||||||||||||||||
Class A | Class R | Class T | Total | |||||||||||||
Shares of common stock issued - Primary Offering | 2,561,829 | 250,762 | 2,679,073 | 5,491,664 | ||||||||||||
Shares of common stock issued - DRP | 43,570 | 2,225 | 43,251 | 89,046 | ||||||||||||
Total shares of common stock issued - Public Offering | 2,605,399 | 252,987 | 2,722,324 | 5,580,710 | ||||||||||||
Gross offering proceeds - Primary Offering | $ | 62,996,077 | $ | 5,641,649 | $ | 63,788,737 | $ | 132,426,463 | ||||||||
Gross offering proceeds - DRP | 1,034,795 | 50,065 | 978,337 | 2,063,197 | ||||||||||||
Total offering proceeds - Public Offering | $ | 64,030,872 | $ | 5,691,714 | $ | 64,767,074 | $ | 134,489,660 | ||||||||
Offering costs, before distribution and shareholder servicing fees | (16,950,075 | ) | ||||||||||||||
Offering proceeds, net of offering costs | $ | 117,539,585 |
Nine Months Ended September 30, 2017 | Year Ended December 31, 2016 | |||||
Nonvested shares at the beginning of the period | 4,500 | — | ||||
Granted shares | 3,000 | 6,000 | ||||
Vested shares | (2,250 | ) | (1,500 | ) | ||
Nonvested shares at the end of the period | 5,250 | 4,500 |
Share Purchase Anniversary | Repurchase Price on Repurchase Date(1) | |
Less than 1 year | No Repurchase Allowed | |
1 year | 92.5% of Purchase Price | |
2 years | 95.0% of Purchase Price | |
3 years | 97.5% of Purchase Price | |
4 years | 100.0% of Purchase Price | |
In the event of a stockholder’s death or disability | Average Issue Price for Shares(2) |
Share Purchase Anniversary | Repurchase Price on Repurchase Date(1)(3)(4) | |
Less than 1 year | No Repurchase Allowed | |
1 year | 92.5% of the Lesser of Purchase Price or Estimated Value per Share | |
2 years | 95.0% of the Lesser of Purchase Price or Estimated Value per Share | |
3 years | 97.5% of the Lesser of Purchase Price or Estimated Value per Share | |
4 years | 100.0% of the Lesser of Purchase Price or Estimated Value per Share | |
In the event of a stockholder’s death or disability | Average Issue Price for Shares(2) |
2017(1) | 2016(1) | |||||||||||||||||||||||
1st Quarter | 2nd Quarter | 3rd Quarter | 1st Quarter | 2nd Quarter | 3rd Quarter | |||||||||||||||||||
Daily Distribution per Class A share(2)(3) | $ | 0.004110 | $ | 0.004110 | $ | 0.004110 | $ | — | $ | 0.004098 | $ | 0.004098 | ||||||||||||
Daily Distribution per Class R share(2)(3)(4) | $ | 0.00394521 | $ | 0.00394521 | $ | 0.00394521 | $ | — | $ | — | $ | 0.00393443 | ||||||||||||
Daily Distribution per Class T share(2)(3)(5) | $ | 0.003376 | $ | 0.003376 | $ | 0.003457 | $ | — | $ | 0.003366 | $ | 0.003366 | ||||||||||||
Annualized Rate Based on Purchase Price: | ||||||||||||||||||||||||
Per Class A share | 6.00 | % | 6.00 | % | 6.00 | % | — | % | 6.00 | % | 6.00 | % | ||||||||||||
Per Class R share | 6.40 | % | 6.40 | % | 6.40 | % | — | % | — | % | 6.40 | % | ||||||||||||
Per Class T share | 5.17 | % | 5.17 | % | 5.30 | % | — | % | 5.17 | % | 5.17 | % |
(1) | The Company’s board of directors approved a cash distribution that accrues at the above rates per day for each share of the Company’s Class A common stock, Class R common stock and Class T common stock, which if paid each day over a 365-day period and 366-day period during fiscal years 2017 and 2016, respectively, is equivalent to the per share annualized rates reflected above based on a purchase price of $25.00 per share of Class A common stock, $22.50 per share of Class R common stock and $23.81 per share of Class T common stock. |
(2) | The Company’s board of directors approved a cash distribution that began to accrue on May 19, 2016, at the above rates per day for each share of the Company’s Class A common stock and Class T common stock. The Company’s board of directors also approved a cash distribution that began to accrue on August 2, 2016 at the above rates per day for each share of the Company’s Class R common stock. |
(3) | The distributions declared accrue daily to stockholders of record as of the close of business on each day and are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month. There is no guarantee that the Company will continue to pay distributions at these rates or at all. |
(4) | Distributions during the three months ended March 31, 2017, were based on daily record dates and calculated at a rate of $0.00394521 per share of Class R common stock per day for Class R common stock subject to an annual distribution and shareholder servicing fee of 0.27%. In some instances, the Company paid distributions of $0.00369863 per share of Class R common stock per day for Class R common stock subject to an annual distribution and shareholder servicing fee of 0.67%. |
(5) | Distributions during the three months ended September 30, 2017, were based on daily record dates and calculated at a rate of $0.003457 per share of Class T common stock per day for Class T common stock subject to an annual distribution and shareholder servicing fee of 1.0%. |
Three Months Ended September 30, 2017 | Nine Months Ended September 30, 2017 | ||||||||||||||||||||||||||||||
Class A | Class R | Class T | Total | Class A | Class R | Class T | Total | ||||||||||||||||||||||||
DRP distributions declared (in shares) | 15,779 | 937 | 20,012 | 36,728 | 38,075 | 2,219 | 44,072 | 84,366 | |||||||||||||||||||||||
DRP distributions declared (value) | $ | 374,749 | $ | 21,071 | $ | 452,661 | $ | 848,481 | $ | 904,284 | $ | 49,918 | $ | 996,898 | $ | 1,951,100 | |||||||||||||||
Cash distributions declared | 546,925 | 62,302 | 314,762 | 923,989 | 1,334,483 | 143,616 | 658,037 | 2,136,136 | |||||||||||||||||||||||
Total distributions declared | $ | 921,674 | $ | 83,373 | $ | 767,423 | $ | 1,772,470 | $ | 2,238,767 | $ | 193,534 | $ | 1,654,935 | $ | 4,087,236 | |||||||||||||||
DRP distributions paid (in shares) | 14,900 | 826 | 18,243 | 33,969 | 35,356 | 1,986 | 39,168 | 76,510 | |||||||||||||||||||||||
DRP distributions paid (value) | $ | 353,878 | $ | 18,596 | $ | 412,662 | $ | 785,136 | $ | 839,713 | $ | 44,690 | $ | 885,977 | $ | 1,770,380 | |||||||||||||||
Cash distributions paid | 526,004 | 58,612 | 282,104 | 866,720 | 1,232,281 | 130,622 | 577,470 | 1,940,373 | |||||||||||||||||||||||
Total distributions paid | $ | 879,882 | $ | 77,208 | $ | 694,766 | $ | 1,651,856 | $ | 2,071,994 | $ | 175,312 | $ | 1,463,447 | $ | 3,710,753 |
Three Months Ended September 30, 2016 | Nine Months Ended September 30, 2016 | ||||||||||||||||||||||||||||||
Class A | Class R | Class T | Total | Class A | Class R | Class T | Total | ||||||||||||||||||||||||
DRP distributions declared (in shares) | 3,232 | 48 | 1,316 | 4,596 | 3,812 | 48 | 1,332 | 5,192 | |||||||||||||||||||||||
DRP distributions declared (value) | $ | 76,757 | $ | 1,084 | $ | 29,772 | $ | 107,613 | $ | 90,536 | $ | 1,084 | $ | 30,130 | $ | 121,750 | |||||||||||||||
Cash distributions declared | 87,932 | 1,109 | 20,947 | 109,988 | 99,029 | 1,109 | 21,087 | 121,225 | |||||||||||||||||||||||
Total distributions declared | $ | 164,689 | $ | 2,193 | $ | 50,719 | $ | 217,601 | $ | 189,565 | $ | 2,193 | $ | 51,217 | $ | 242,975 | |||||||||||||||
DRP distributions paid (in shares) | 2,236 | 2 | 600 | 2,838 | 2,384 | 2 | 600 | 2,986 | |||||||||||||||||||||||
DRP distributions paid (value) | $ | 53,105 | $ | 35 | $ | 13,577 | $ | 66,717 | $ | 56,616 | $ | 35 | $ | 13,577 | $ | 70,228 | |||||||||||||||
Cash distributions paid | 58,713 | 16 | 9,964 | 68,693 | 61,108 | 16 | 9,964 | 71,088 | |||||||||||||||||||||||
Total distributions paid | $ | 111,818 | $ | 51 | $ | 23,541 | $ | 135,410 | $ | 117,724 | $ | 51 | $ | 23,541 | $ | 141,316 |
Incurred For the | Incurred For the | ||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | Payable (Prepaid) as of | |||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | September 30, 2017 | December 31, 2016 | ||||||||||||||||||
Consolidated Statements of Operations: | |||||||||||||||||||||||
Expensed | |||||||||||||||||||||||
Organization costs(1) | $ | — | $ | — | $ | — | $ | 26,980 | $ | — | $ | — | |||||||||||
Investment management fees(2) | 458,470 | 11,286 | 837,109 | 16,615 | 37,686 | 40,050 | |||||||||||||||||
Acquisition fees(3) | — | — | — | 175,664 | — | 949,131 | |||||||||||||||||
Acquisition expenses(3) | — | 19,421 | — | 134,726 | — | 56,191 | |||||||||||||||||
Property management: | |||||||||||||||||||||||
Fees(2) | 166,986 | 8,927 | 388,178 | 12,798 | 99,960 | 24,767 | |||||||||||||||||
Reimbursement of onsite personnel(4) | 478,447 | 51,902 | 1,011,226 | 72,471 | 132,561 | 21,165 | |||||||||||||||||
Other fees(2) | 53,393 | 3,565 | 110,073 | 7,380 | 6,216 | 1,446 | |||||||||||||||||
Other fees - property operations(4) | 9,855 | — | 14,942 | — | — | — | |||||||||||||||||
Other fees - G&A(1) | 3,950 | 322 | 7,777 | 322 | — | — | |||||||||||||||||
Other operating expenses(1) | 246,348 | 276,308 | 748,908 | 530,901 | 155,361 | 309,374 | |||||||||||||||||
Property insurance(5) | 41,305 | 507 | 42,319 | 507 | (15,548 | ) | (1,014 | ) | |||||||||||||||
Consolidated Balance Sheets: | |||||||||||||||||||||||
Assets | |||||||||||||||||||||||
Property escrow deposits(6) | — | — | — | 234,000 | — | — | |||||||||||||||||
Capitalized | |||||||||||||||||||||||
Acquisition fees(7) | 2,210,153 | — | 3,852,776 | — | — | — | |||||||||||||||||
Acquisition expenses(7) | 276,508 | — | 649,787 | — | — | — | |||||||||||||||||
Construction management: | |||||||||||||||||||||||
Fees(8) | 35,004 | 6,349 | 78,301 | 6,433 | 4,974 | 1,335 | |||||||||||||||||
Reimbursements of labor costs(8) | 67,236 | 56 | 138,384 | 84 | 18,760 | 12 | |||||||||||||||||
Additional paid-in capital | |||||||||||||||||||||||
Other offering costs reimbursement | 1,470,881 | 1,169,737 | 4,787,024 | 1,713,486 | 474,754 | 1,616,487 | |||||||||||||||||
Selling commissions: | |||||||||||||||||||||||
Class A | 481,489 | 564,235 | 1,865,239 | 736,323 | — | — | |||||||||||||||||
Class T | 447,639 | 220,017 | 1,281,256 | 238,617 | — | — | |||||||||||||||||
Dealer manager fees: | |||||||||||||||||||||||
Class A | 238,940 | 307,469 | 984,152 | 414,964 | — | — | |||||||||||||||||
Class T | 373,033 | 183,347 | 1,067,714 | 198,847 | — | — | |||||||||||||||||
Distribution and shareholder servicing fee: | |||||||||||||||||||||||
Class R(9) | 20,667 | 24,596 | 111,642 | 24,596 | 159,746 | 55,821 | |||||||||||||||||
Class T(9) | 537,485 | 330,025 | 1,770,843 | 357,925 | 2,392,282 | 915,954 | |||||||||||||||||
$ | 7,617,789 | $ | 3,178,069 | $ | 19,747,650 | $ | 4,903,639 | $ | 3,466,752 | $ | 3,990,719 |
(1) | Included in general and administrative expenses in the accompanying consolidated statements of operations. |
(2) | Included in fees to affiliates in the accompanying consolidated statements of operations. |
(3) | Prior to the adoption of ASU 2017-01 as of January 1, 2017, acquisition fees and acquisition expenses were included in fees to affiliates and acquisition costs, respectively, on the accompanying statements of operations. |
(4) | Included in operating, maintenance and management in the accompanying consolidated statements of operations. |
(5) | Property related insurance expense and the amortization of the prepaid insurance deductible account are included in general and administrative expenses in the accompanying consolidated statements of operations. The amortization of the prepaid property insurance is included in operating, maintenance and management expenses in the accompanying consolidated statements of operations. The prepaid insurance is included in other assets in the accompanying consolidated balance sheets upon payment. |
(6) | Escrow deposit paid on behalf of the Company by an affiliate of the Advisor in connection with the acquisition of Carriage House Apartment Homes. |
(7) | Included in total real estate, cost in the accompanying consolidated balance sheets following the adoption of ASU 2017-01 as of January 1, 2017. |
(8) | Included in building and improvements in the accompanying consolidated balance sheets. |
(9) | Included in additional paid-in capital as commissions on sales of common stock and related dealer manager fees to affiliates in the accompanying consolidated statements of stockholders’ equity. |
Amount | Percentage of Gross Offering Proceeds | ||||||
Gross offering proceeds: | $ | 132,426,463 | 100.00 | % | |||
O&O limitation | 15.00 | % | |||||
Total O&O costs available to be paid/reimbursed | $ | 19,863,970 | 15.00 | % | |||
O&O expenses recorded: | |||||||
Sales commissions | $ | 5,414,203 | 4.09 | % | |||
Broker Dealer fees(1) | 3,418,874 | 2.58 | % | ||||
Distribution and shareholder servicing fees(2) | 2,886,915 | 2.18 | % | ||||
Offering cost reimbursements | 8,116,998 | 6.13 | % | ||||
Organizational costs reimbursements | 26,980 | 0.02 | % | ||||
Total O&O cost reimbursements recorded by the Company | $ | 19,863,970 | 15.00 | % |
(1) | Includes $1,281,574 of marketing reallowance paid to participating broker dealers. |
(2) | Includes the distribution and shareholder servicing fees incurred from inception through September 30, 2017 for Class R shares of 0.27% and 0.67% and Class T shares of up to 1.125% of the purchase price per share sold in the Company’s Public Offering. The distribution and shareholder servicing fees are paid from sources other than Public Offering proceeds. |
September 30, 2017 | ||||||||||||||||||
Type | Maturity Date Range | Based on | Number of Instruments | Notional Amount | Variable Rate | Weighted Average Rate Cap | Fair Value | |||||||||||
Interest Rate Cap | 6/1/2019 - 12/1/2020 | One-Month LIBOR | 6 | $ | 156,892,000 | 1.23% | 2.59% | $ | 197,936 |
December 31, 2016 | ||||||||||||||||||
Type | Maturity Date Range | Based on | Number of Instruments | Notional Amount | Variable Rate | Weighted Average Rate Cap | Fair Value | |||||||||||
Interest Rate Cap | 6/1/2019 - 12/1/2020 | One-Month LIBOR | 3 | $ | 72,426,000 | 0.77% | 2.70% | $ | 413,131 |
• | the fact that we have a limited operating history and commenced operations on May 19, 2016; |
• | the fact that we have had a net loss for each quarterly and annual period since inception; |
• | our ability to raise proceeds in our Public Offering; |
• | our ability to effectively deploy the proceeds raised in our Public Offering; |
• | changes in economic conditions generally and the real estate and debt markets specifically; |
• | our ability to successfully identify and acquire multifamily properties and senior-living properties on terms that are favorable to us; |
• | our ability to secure resident leases for our multifamily properties and senior-living properties at favorable rental rates; |
• | risks inherent in the real estate business, including resident defaults, potential liability relating to environmental matters and the lack of liquidity of real estate investments; |
• | the fact that we pay fees and expenses to our Advisor and its affiliates that were not negotiated on an arm’s length basis and the fact that the payment of these fees and expenses increases the risk that our stockholders will not earn a profit on their investment in us; |
• | our ability to retain our executive officers and other key personnel of our Advisor, our Property Manager and other affiliates of our Advisor; |
• | our ability to generate sufficient cash flows to pay distributions for our stockholders; |
• | legislative or regulatory changes (including changes to the laws governing the taxation of REITs); |
• | the availability of capital; |
• | changes in interest rates; and |
• | changes to U.S. GAAP. |
Average Monthly Occupancy(2) | Average Monthly Rent(3) | ||||||||||||||||||||||||||||||
Property Name | Location | Purchase Date | Number of Units | Total Purchase Price | Mortgage Debt Outstanding(1) | Sep 30, 2017 | Dec 31, 2016 | Sep 30, 2017 | Dec 31, 2016 | ||||||||||||||||||||||
1 | Carriage House Apartment Homes | Gurnee, IL | 5/19/2016 | 136 | $ | 7,525,000 | $ | 5,652,449 | 94.1 | % | 95.6 | % | $ | 734 | $ | 685 | |||||||||||||||
2 | Bristol Village Apartments | Aurora, CO | 11/17/2016 | 240 | 47,400,000 | 34,858,701 | 97.1 | % | 96.3 | % | 1,316 | 1,254 | |||||||||||||||||||
3 | Canyon Resort at Great Hills Apartments | Austin, TX | 12/29/2016 | 256 | 44,500,000 | 31,542,369 | 87.9 | % | 95.7 | % | 1,303 | 1,332 | |||||||||||||||||||
4 | Reflections on Sweetwater Apartments | Lawrenceville, GA | 1/12/2017 | 280 | 33,288,337 | 22,789,339 | 88.9 | % | — | % | 1,018 | — | |||||||||||||||||||
5 | The Pointe at Vista Ridge Apartments | Lewisville, TX | 5/25/2017 | 300 | 45,188,223 | 28,939,645 | 95.3 | % | — | % | 1,220 | — | |||||||||||||||||||
6 | Belmar Villas | Lakewood, CO | 7/21/2017 | 318 | 64,503,255 | 46,834,755 | 95.6 | % | — | % | 1,311 | — | |||||||||||||||||||
7 | Ansley at Princeton Lakes | Atlanta, GA | 8/31/2017 | 306 | 44,594,087 | 32,176,946 | 94.4 | % | — | % | 1,206 | — | |||||||||||||||||||
1,836 | $ | 286,998,902 | $ | 202,794,204 | 93.4 | % | 95.9 | % | $ | 1,193 | $ | 1,163 |
(1) | Mortgage debt outstanding is net of deferred financing costs associated with the loans for the properties listed above. |
(2) | At September 30, 2017, our portfolio was approximately 95.9% leased, calculated using the number of occupied and contractually leased units divided by total units. |
(3) | Average monthly rent is based upon the effective rental income after considering the effect of vacancies, concessions and write-offs. |
Distributions Paid(2) | Sources of Distributions Paid | |||||||||||||||||||||||||||||||||||||||
Period | Distributions Declared(1) | Distributions Declared Per Class A Share(1) | Distributions Declared Per Class R Share(1) | Distributions Declared Per Class T Share(1) | Cash | Reinvested | Total | Cash Flow From Operations | Offering Proceeds | Net Cash (Used In) Provided by Operating Activities | ||||||||||||||||||||||||||||||
First Quarter 2017 | $ | 952,632 | $ | 0.370 | $ | 0.353 | $ | 0.304 | $ | 424,176 | $ | 395,811 | $ | 819,987 | $ | — | $ | 819,987 | $ | (537,830 | ) | |||||||||||||||||||
Second Quarter 2017 | 1,362,134 | 0.374 | 0.357 | 0.307 | 649,477 | 589,433 | 1,238,910 | 527,154 | 711,756 | 527,154 | ||||||||||||||||||||||||||||||
Third Quarter 2017 | 1,772,470 | 0.378 | 0.363 | 0.320 | 866,720 | 785,136 | 1,651,856 | 194,482 | 1,457,374 | 194,482 | ||||||||||||||||||||||||||||||
$ | 4,087,236 | $ | 1.122 | $ | 1.073 | $ | 0.931 | $ | 1,940,373 | $ | 1,770,380 | $ | 3,710,753 | $ | 721,636 | $ | 2,989,117 | $ | 183,806 |
• | current unrestricted cash balance, which was $23,865,114 as of September 30, 2017; |
• | proceeds from our Public Offering; |
• | various forms of secured and unsecured financing; |
• | borrowings under master repurchase agreements; |
• | equity capital from joint venture partners; |
• | proceeds from our DRP; and |
• | cash from operations. |
• | $183,623,803 of cash used related to the acquisition of our multifamily properties; |
• | $2,010,474 of cash used for improvements to real estate investments; |
• | $3,300,000 of cash used for deposits for potential real estate investments; |
• | $105,707 of cash provided by restricted cash accounts related to replacement reserves; and |
• | $288,740 of cash used to purchase interest rate cap agreements. |
• | $67,646,427 of cash provided by offering proceeds related to our Public Offering, net of (1) payments of commissions on sales of common stock, related dealer manager fees and distribution and shareholder servicing fees in the amount of $5,500,593 and (2) the reimbursement of other offering costs to affiliates in the amount of $5,928,757; |
• | $130,702,676 of proceeds from the issuance of mortgage notes payable, net of deferred financing costs in the amount of $875,324; and |
• | $1,940,373 of net cash distributions, after giving effect to distributions reinvested by stockholders of $1,770,380. |
Payments due by period | ||||||||||||||||||||
Contractual Obligations | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
Interest payments on outstanding debt obligations(1) | $ | 65,618,253 | $ | 1,882,311 | $ | 15,098,424 | $ | 15,080,820 | $ | 33,556,698 | ||||||||||
Principal payments on outstanding debt obligations(2) | 204,004,000 | — | 53,989 | 1,310,624 | 202,639,387 | |||||||||||||||
Distribution and shareholder servicing fee for Class R shares(3) | 159,746 | 8,214 | 37,409 | 37,409 | 76,714 | |||||||||||||||
Distribution and shareholder servicing fee for Class T shares(4) | 2,392,282 | 251,301 | 1,410,073 | 730,908 | — | |||||||||||||||
Total | $ | 272,174,281 | $ | 2,141,826 | $ | 16,599,895 | $ | 17,159,761 | $ | 236,272,799 |
(1) | Projected interest payments on outstanding debt obligations are based on the outstanding principal amounts and interest rates in effect at September 30, 2017. We incurred interest expense of $1,741,955 and $3,865,967 during the three and nine months ended September 30, 2017, including amortization of deferred financing costs totaling $35,396 and $74,595 and net unrealized losses from the change in fair value of interest rate cap agreements of $89,571 and $503,935, respectively. |
(2) | Projected principal payments on outstanding debt obligations are based on the terms of the mortgage note agreements. Amounts exclude the net deferred financing costs associated with the mortgage notes payable. |
(3) | Represents an annualized distribution and shareholder servicing fee for Class R shares of 0.27% or 0.67%, as applicable, of the purchase price per share (or, once reported, the amount of our estimated value per share) sold in our Public Offering. |
(4) | Represents an annualized distribution and shareholder servicing fee for Class T shares of 1.125% or 1.0%, as applicable, of the purchase price per share (or, once reported, the amount of our estimated value per share) sold in our Public Offering. |
For the Three Months Ended September 30, | |||||||||||||||
2017 | 2016 | Change $ | Change % | ||||||||||||
Total revenues | $ | 5,744,118 | $ | 292,501 | $ | 5,451,617 | 1,864 | % | |||||||
Operating, maintenance and management | (1,553,149 | ) | (117,584 | ) | (1,435,565 | ) | 1,221 | % | |||||||
Real estate taxes and insurance | (900,704 | ) | (44,258 | ) | (856,446 | ) | 1,935 | % | |||||||
Fees to affiliates | (678,849 | ) | (23,778 | ) | (655,071 | ) | 2,755 | % | |||||||
Depreciation and amortization | (3,254,894 | ) | (161,777 | ) | (3,093,117 | ) | 1,912 | % | |||||||
Interest expense | (1,741,955 | ) | (44,901 | ) | (1,697,054 | ) | 3,780 | % | |||||||
General and administrative expenses | (699,575 | ) | (383,132 | ) | (316,443 | ) | 83 | % | |||||||
Acquisition costs | — | (19,421 | ) | 19,421 | (100 | )% | |||||||||
Net loss | $ | (3,085,008 | ) | $ | (502,350 | ) | $ | (2,582,658 | ) | 514 | % | ||||
NOI(1) | $ | 3,068,934 | $ | 118,167 | $ | 2,950,767 | 2,497 | % | |||||||
FFO(2) | $ | 169,886 | $ | (340,573 | ) | $ | 510,459 | 150 | % | ||||||
MFFO(2) | $ | 330,665 | $ | (321,141 | ) | $ | 651,806 | 203 | % |
(1) | NOI is a non-GAAP financial measure used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings. However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs, certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of our properties and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs, all of which are significant economic costs. For additional information on how we calculate NOI and a reconciliation of NOI to net loss, see “—Net Operating Income.” |
(2) | GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets the Board of Governors of NAREIT established the measurement tool of FFO. Since its introduction, FFO has become a widely used non-GAAP financial measure among REITs. Additionally, we use modified funds from operations (“MFFO”) as defined by the Investment Program Association as a supplemental measure to evaluate our operating performance. MFFO is based on FFO but includes certain adjustments we believe are necessary due to changes in accounting and reporting under GAAP since the establishment of FFO. Neither FFO nor MFFO should be considered as alternatives to net loss or other measurements under GAAP as indicators of our operating performance, nor should they be considered as alternatives to cash flow from operating activities or other measurements under GAAP as indicators of liquidity. For additional information on how we calculate FFO and MFFO and a reconciliation of FFO and MFFO to net loss, see “—Funds From Operations and Modified Funds From Operations.” |
For the Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | Change $ | Change % | ||||||||||||
Total revenues | $ | 12,461,640 | $ | 437,247 | $ | 12,024,393 | 2,750 | % | |||||||
Operating, maintenance and management | (3,166,733 | ) | (161,393 | ) | (3,005,340 | ) | 1,862 | % | |||||||
Real estate taxes and insurance | (1,939,729 | ) | (64,607 | ) | (1,875,122 | ) | 2,902 | % | |||||||
Fees to affiliates | (1,335,360 | ) | (212,457 | ) | (1,122,903 | ) | 529 | % | |||||||
Depreciation and amortization | (8,171,160 | ) | (237,091 | ) | (7,934,069 | ) | 3,346 | % | |||||||
Interest expense | (3,865,967 | ) | (74,575 | ) | (3,791,392 | ) | 5,084 | % | |||||||
General and administrative expenses | (2,037,728 | ) | (854,543 | ) | (1,183,185 | ) | 138 | % | |||||||
Acquisition costs | — | (209,875 | ) | 209,875 | (100 | )% | |||||||||
Net loss | $ | (8,055,037 | ) | $ | (1,377,294 | ) | $ | (6,677,743 | ) | 485 | % | ||||
NOI(1) | $ | 6,855,975 | $ | 191,069 | $ | 6,664,906 | 3,488 | % | |||||||
FFO(2) | $ | 116,123 | $ | (1,140,203 | ) | $ | 1,256,326 | 110 | % | ||||||
MFFO(2) | $ | 782,233 | $ | (745,884 | ) | $ | 1,528,117 | 205 | % |
(1) | See “—Net Operating Income” below for a reconciliation of NOI to net loss. |
(2) | See “—Funds From Operations and Modified Funds From Operations” below for a reconciliation of FFO and MFFO to net loss. |
For the Three Months Ended September 30, | |||||||||||||||
2017 | 2016 | Change $ | Change % | ||||||||||||
Same-store property: | |||||||||||||||
Revenues | $ | 319,482 | $ | 292,500 | $ | 26,982 | 9 | % | |||||||
Operating expenses | 181,557 | 174,333 | 7,224 | 4 | % | ||||||||||
NOI | 137,925 | 118,167 | 19,758 | 17 | % | ||||||||||
Non-same-store properties: | |||||||||||||||
NOI | 2,931,009 | — | 2,931,009 | ||||||||||||
Total NOI(1) | $ | 3,068,934 | $ | 118,167 | $ | 2,950,767 |
(1) | See “—Net Operating Income” below for a reconciliation of NOI to net loss. |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net loss | $ | (3,085,008 | ) | $ | (502,350 | ) | $ | (8,055,037 | ) | $ | (1,377,294 | ) | ||||
Fees to affiliates(1) | 458,470 | 11,286 | 837,109 | 192,279 | ||||||||||||
Depreciation and amortization | 3,254,894 | 161,777 | 8,171,160 | 237,091 | ||||||||||||
Interest expense | 1,741,955 | 44,901 | 3,865,967 | 74,575 | ||||||||||||
General and administrative expenses | 699,575 | 383,132 | 2,037,728 | 854,543 | ||||||||||||
Acquisition costs(2) | — | 19,421 | — | 209,875 | ||||||||||||
Other gains(3) | (952 | ) | — | (952 | ) | — | ||||||||||
Net operating income | $ | 3,068,934 | $ | 118,167 | $ | 6,855,975 | $ | 191,069 |
(1) | Fees to affiliates for the three and nine months ended September 30, 2017, exclude property management fees of $166,986 and $388,178 and other fees of $53,393 and $110,073, respectively, that are included in NOI. Fees to affiliates for the three and nine months ended September 30, 2016, exclude property management fees of $8,927 and $12,798 and other fees of $3,565 and $7,380, respectively, that are included in NOI. |
(2) | There were no acquisition costs for the three and nine months ended September 30, 2017. Acquisition costs for the three and nine months ended September 30, 2016, which includes acquisition expenses of $19,421 and $209,875, respectively, did not meet the criteria for capitalization under ASU 2017-01, and are recorded in acquisition costs in the accompanying consolidated statements of operations. |
(3) | Other gains for the three and nine months ended September 30, 2017 and 2016 include non-recurring insurance claim recoveries that are not included in NOI. |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Reconciliation of net loss to MFFO: | ||||||||||||||||
Net loss | $ | (3,085,008 | ) | $ | (502,350 | ) | $ | (8,055,037 | ) | $ | (1,377,294 | ) | ||||
Depreciation of real estate assets | 2,079,729 | 61,526 | 4,359,966 | 89,409 | ||||||||||||
Amortization of lease-related costs | 1,175,165 | 100,251 | 3,811,194 | 147,682 | ||||||||||||
FFO | 169,886 | (340,573 | ) | 116,123 | (1,140,203 | ) | ||||||||||
Acquisition fees and expenses(1)(2) | 71,208 | 19,421 | 162,175 | 385,539 | ||||||||||||
Unrealized loss on derivative instruments | 89,571 | 11 | 503,935 | 8,780 | ||||||||||||
MFFO | $ | 330,665 | $ | (321,141 | ) | $ | 782,233 | $ | (745,884 | ) |
(1) | By excluding expensed acquisition costs that are not capitalized, management believes 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 fees and expenses include payments to the Advisor or third parties. Acquisition fees and expenses under GAAP are currently considered |
(2) | Acquisition expenses for the three and nine months ended September 30, 2017, of $71,208 and $162,175, respectively, did not meet the criteria for capitalization under ASU 2017-01 and are recorded in general and administrative expenses in the accompanying consolidated statements of operations. All acquisition fees for the three and nine months ended September 30, 2017, were capitalized pursuant to ASU 2017-01 and therefore were not recorded in the statements of operations impacting net loss and MFFO. Acquisition fees and expenses for the three and nine months ended September 30, 2016, include acquisition fees of $0 and $175,664 and acquisition expenses of $19,421 and $209,875, respectively, that did not meet the criteria for capitalization under ASU 2017-01, and are recorded in fees to affiliates and acquisition costs, respectively, in the accompanying consolidated statements of operations. |
Type of Expense Amount | Amount | Estimated/Actual | Percentage of Offering Proceeds | ||||||
Selling commissions and dealer manager fees | $ | 8,833,077 | Actual | 6.67 | % | ||||
Other organization and offering costs | 8,143,978 | Actual | 6.15 | % | |||||
Total expenses | $ | 16,977,055 | Actual | 12.82 | % | ||||
Total public offering proceeds (excluding DRP proceeds) | $ | 132,426,463 | Actual | 100.00 | % | ||||
Percentage of public offering proceeds used to pay for organization and offering costs | 12.82 | % | Actual | 12.82 | % | ||||
Distribution and shareholder servicing fees(1) | $ | 2,886,915 | Actual | ||||||
Total expenses including the distribution and shareholder servicing fees | $ | 19,863,970 | Actual | ||||||
Organization and offering costs incurred since inception as a percentage of public offering proceeds | 15.00 | % | Actual |
(1) | Includes the distribution and shareholder servicing fees incurred from inception through September 30, 2017 for Class R shares of up to 0.67% and Class T shares of up to 1.125% of the purchase price per share sold in our Public Offering. The distribution and shareholder servicing fees are paid from sources other than Public Offering proceeds. |
Total Number of Shares Requested to be Repurchased(1) | Total Number of Shares Repurchased | Average Price Paid per Share(2)(3) | Approximate Dollar Value of Shares Available That May Yet Be Repurchased Under the Program | |||||||||
July 2017 | — | — | $ | — | (4) | |||||||
August 2017 | — | — | — | (4) | ||||||||
September 2017 | — | — | — | (4) | ||||||||
— | — |
(1) | We generally repurchase shares approximately 30 days following the end of the applicable quarter in which requests were received. At September 30, 2017, we had $20,779, representing an outstanding and unfulfilled repurchase request of 874 Class T shares, all of which were fulfilled on October 30, 2017. |
(2) | We currently repurchase shares at prices determined as follows: |
• | 92.5% of the purchase price for stockholders who have held their shares for at least one year; |
• | 95.0% of the purchase price for stockholders who have held their shares for at least two years; |
• | 97.5% of the purchase price for stockholders who have held their shares for at least three years; and |
• | 100% of the purchase price for stockholders who have held their shares for at least four years. |
(3) | From inception through September 30, 2017, we did not repurchase any shares of common stock. We intend to fund repurchases exclusively from the net proceeds we received from the sale of shares under our distribution reinvestment plan. |
(4) | The number of shares that may be repurchased pursuant to the share repurchase program during any calendar year is limited to: (1) 5% of the weighted-average number of shares of our common stock outstanding during the prior calendar year and (2) those that can be funded from the net proceeds we received from the sale of shares under the distribution reinvestment plan during the prior calendar year, plus such additional funds as may be reserved for that purpose by our board of directors. |
Exhibit | Description | ||
3.1 | |||
3.2 | |||
3.3 | |||
4.1 | |||
4.2 | |||
4.3 | |||
4.4 | |||
10.1 | |||
10.2 | |||
10.3 | |||
10.4 | |||
10.5 | |||
10.6 | |||
10.7 |
10.8 | |||
10.9 | |||
10.10 | |||
10.11 | |||
10.12 | |||
10.13 | |||
10.14 | |||
10.15 | |||
10.16 | |||
10.17 | |||
10.18 | |||
10.19 | |||
10.20 | |||
10.21 | |||
10.22 | |||
31.1* |
31.2* | |||
32.1** | |||
32.2** | |||
101.INS* | XBRL Instance Document. | ||
101.SCH* | XBRL Taxonomy Extension Schema Document. | ||
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document. | ||
101.LAB* | XBRL Taxonomy Extension Labels Linkbase Document. | ||
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document. | ||
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document. |
* | Filed herewith. |
** | In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference. |
Steadfast Apartment REIT III, Inc. | |||
Date: | November 9, 2017 | By: | /s/ Rodney F. Emery |
Rodney F. Emery | |||
Chief Executive Officer and Chairman of the Board | |||
(Principal Executive Officer) | |||
Date: | November 9, 2017 | By: | /s/ Kevin J. Keating |
Kevin J. Keating | |||
Chief Financial Officer | |||
(Principal Financial Officer and Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Steadfast Apartment REIT III, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) 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) | Intentionally omitted; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ Rodney F. Emery | |
Rodney F. Emery | ||
Chief Executive Officer and Chairman of the Board (Principal Executive Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Steadfast Apartment REIT III, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) 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) | Intentionally omitted; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ Kevin J. Keating | |
Kevin J. Keating | ||
Chief Financial Officer (Principal Financial and Accounting Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: | /s/ Rodney F. Emery | |
Rodney F. Emery | ||
Chief Executive Officer and Chairman of the Board (Principal Executive Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: | /s/ Kevin J. Keating | |
Kevin J. Keating | ||
Chief Financial Officer (Principal Financial and Accounting Officer) |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Nov. 03, 2017 |
|
Entity Registrant Name | Steadfast Apartment REIT III, Inc. | |
Entity Central Index Key | 0001651286 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q3 | |
Common Class A [Member] | ||
Entity Common Stock, Shares Outstanding, Class A | 2,748,657 | |
Common Class R [Member] | ||
Entity Common Stock, Shares Outstanding, Class A | 275,341 | |
Common Class T [Member] | ||
Entity Common Stock, Shares Outstanding, Class A | 2,952,459 |
Consolidated Statements of Stockholders' Equity - USD ($) |
Total |
Common Class A [Member] |
Common Class R [Member] |
Common Class T [Member] |
Common Stock [Member]
Common Class A [Member]
|
Common Stock [Member]
Common Class R [Member]
|
Common Stock [Member]
Common Class T [Member]
|
Additional Paid-In Capital [Member] |
Cumulative Distributions & Net Losses [Member] |
Total Stockholders' Equity [Member] |
Noncontrolling Interest [Member] |
---|---|---|---|---|---|---|---|---|---|---|---|
BALANCE, beginning of period (in shares) at Dec. 31, 2015 | 8,000 | 0 | 0 | ||||||||
BALANCE, beginning of period at Dec. 31, 2015 | $ 200,000 | $ 80 | $ 0 | $ 0 | $ 199,920 | $ 0 | $ 200,000 | $ 0 | |||
Increase (decrease) in Stockholders' Equity | |||||||||||
Issuance of common stock (in shares) | 1,239,420 | 99,043 | 889,434 | ||||||||
Issuance of common stock | 53,656,153 | $ 12,394 | $ 990 | $ 8,894 | 53,633,875 | 53,656,153 | |||||
Commissions on sales of common stock and related dealer manager fees to affiliates | (4,639,146) | (4,639,146) | (4,639,146) | ||||||||
Transfers to redeemable common stock | (292,818) | (292,818) | (292,818) | ||||||||
Other offering costs to affiliates | (3,329,974) | (3,329,974) | (3,329,974) | ||||||||
Distributions declared | (820,700) | (820,700) | (820,700) | ||||||||
Amortization of stock-based compensation | 61,071 | 61,071 | 61,071 | ||||||||
Contribution from noncontrolling interest | 100 | 100 | |||||||||
Net loss | (4,920,712) | (4,920,612) | (4,920,612) | (100) | |||||||
BALANCE, end of period (in shares) at Dec. 31, 2016 | 1,247,420 | 99,043 | 889,434 | ||||||||
BALANCE, end of period at Dec. 31, 2016 | 39,913,974 | $ 12,474 | $ 990 | $ 8,894 | 45,632,928 | (5,741,312) | 39,913,974 | 0 | |||
Increase (decrease) in Stockholders' Equity | |||||||||||
Issuance of common stock (in shares) | 1,378,044 | 153,944 | 1,832,890 | ||||||||
Issuance of common stock | 80,910,132 | $ 13,781 | $ 1,540 | $ 18,329 | 80,876,482 | 80,910,132 | |||||
Commissions on sales of common stock and related dealer manager fees to affiliates | (7,080,846) | (7,080,846) | (7,080,846) | ||||||||
Transfers to redeemable common stock | (1,770,380) | (1,770,380) | (1,770,380) | ||||||||
Other offering costs to affiliates | (4,787,024) | (4,787,024) | (4,787,024) | ||||||||
Distributions declared | (4,087,236) | (4,087,236) | (4,087,236) | ||||||||
Amortization of stock-based compensation | 49,473 | 49,473 | 49,473 | ||||||||
Net loss | (8,055,037) | $ (4,067,918) | $ (363,178) | $ (3,623,941) | (8,055,037) | (8,055,037) | |||||
BALANCE, end of period (in shares) at Sep. 30, 2017 | 2,625,464 | 252,987 | 2,722,324 | ||||||||
BALANCE, end of period at Sep. 30, 2017 | $ 95,093,056 | $ 26,255 | $ 2,530 | $ 27,223 | $ 112,920,633 | $ (17,883,585) | $ 95,093,056 | $ 0 |
Organization and Business |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Business | Organization and Business Steadfast Apartment REIT III, Inc. (the “Company”) was formed on July 29, 2015, as a Maryland corporation that elected to qualify as a real estate investment trust (“REIT”) commencing with the taxable year ended December 31, 2016. On August 24, 2015, the Company was initially capitalized with the sale of 8,000 shares of Class A common stock to Steadfast Apartment Advisor III, LLC (the “Advisor”), a Delaware limited liability company, at a purchase price of $25.00 per share for an aggregate purchase price of $200,000. The Company intends to use substantially all of the net proceeds from the Public Offering (defined below) to invest in and manage a diverse portfolio of multifamily and independent senior-living properties located in targeted markets throughout the United States. In addition to the Company’s focus on multifamily and independent senior-living properties, the Company may also make selective strategic acquisitions of other types of commercial properties. The Company may also selectively acquire debt collateralized by multifamily and independent senior-living properties and securities of other companies owning multifamily and senior-living properties. As of September 30, 2017, the Company owned seven multifamily properties comprising a total of 1,836 apartment homes. For more information on the Company’s real estate portfolio, see Note 3. Public Offering On February 5, 2016, the Company commenced its initial public offering to offer a maximum of $1,000,000,000 in shares of common stock for sale to the public in the primary offering (“Primary Offering”). The Company initially offered Class A shares and Class T shares in the Public Offering at an initial price of $25.00 for each Class A share ($500,000,000 in Class A shares) and $23.81 for each Class T share ($500,000,000 in Class T shares), with discounts available for certain categories of purchasers. The Company also registered up to $300,000,000 in shares pursuant to the Company’s distribution reinvestment plan (the “DRP,” and together with the Primary Offering, the “Public Offering”) at an initial price of $23.75 for each Class A share and $22.62 for each Class T share. Commencing on July 25, 2016, the Company revised the terms of its Public Offering to include Class R shares. The Company is offering a maximum of $1,000,000,000 in shares of common stock for sale to the public at an initial price of $25.00 for each Class A share ($400,000,000 in Class A shares), $22.50 for each Class R share ($200,000,000 in Class R shares) and $23.81 for each Class T share ($400,000,000 in Class T shares), with discounts available for certain categories of purchasers. The Company has also registered up to $300,000,000 in shares pursuant to the Company’s DRP at an initial price of $23.75 for each Class A share, $22.50 for each Class R share and $22.62 for each Class T share. The Company’s board of directors may, from time to time, in its sole discretion, change the price at which the Company offers shares to the public in the Primary Offering or pursuant to the DRP to reflect changes in the Company’s estimated value per share and other factors that the Company’s board of directors deems relevant. The Company may reallocate shares of common stock registered in the Public Offering among classes of shares and between the Primary Offering and the DRP. Pursuant to the terms of the Public Offering, offering proceeds were held in an escrow account until the Company raised the minimum offering amount of $2,000,000. On May 16, 2016, the Company raised the minimum offering amount and the offering proceeds held in escrow were released to the Company. As of September 30, 2017, the Company had sold 2,605,399 shares of Class A common stock, 252,987 shares of Class R common stock and 2,722,324 shares of Class T common stock in the Public Offering for gross proceeds of $64,030,872, $5,691,714 and $64,767,074, respectively, and $134,489,660 in the aggregate, including 43,570 shares of Class A common stock, 2,225 shares of Class R common stock and 43,251 shares of Class T common stock issued pursuant to the DRP for gross offering proceeds of $1,034,795, $50,065 and $978,337, respectively. The Company will continue to offer shares of the Company’s common stock on a continuous basis until the Public Offering terminates on or before February 5, 2018, unless extended. However, in certain states the Public Offering may continue for only one year unless the Company renews the offering period for an additional year. The Company reserves the right to terminate the Public Offering at any time. The business of the Company is externally managed by the Advisor pursuant to the Amended and Restated Advisory Agreement dated July 25, 2016, by and among the Company, Steadfast Apartment REIT III Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”), and the Advisor (as amended, the “Advisory Agreement”). The Advisory Agreement is subject to annual renewal by the Company’s board of directors. The current term of the Advisory Agreement expires on February 5, 2018. Subject to certain restrictions and limitations, the Advisor manages the Company’s day-to-day operations, manages the Company’s portfolio of properties and real estate-related assets, sources and presents investment opportunities to the Company’s board of directors and provides investment management services on the Company’s behalf. The Advisor has also entered into an Advisory Services Agreement with Crossroads Capital Advisors, LLC (“Crossroads Capital Advisors”), whereby Crossroads Capital Advisors provides advisory services to the Company on behalf of the Advisor. The Company has retained Steadfast Capital Markets Group, LLC (the “Dealer Manager”), an affiliate of the Advisor, to serve as the dealer manager for the Public Offering. The Dealer Manager is responsible for marketing the Company’s shares of common stock being offered pursuant to the Public Offering. The Advisor, along with the Dealer Manager, also provides offering services, marketing, investor relations and other administrative services on the Company’s behalf. Substantially all of the Company’s business is conducted through the Operating Partnership. The Company is the sole general partner of the Operating Partnership and owns a 99.99% partnership interest in the Operating Partnership. The Advisor is the sole limited partner of and owns the remaining 0.01% partnership interest in the Operating Partnership. The Company and the Advisor entered into an amended and Restated Agreement of Limited Partnership on July 25, 2016 (as amended, the “Partnership Agreement”). As the Company accepts subscriptions for shares of its common stock, the Company transfers substantially all of the net offering proceeds from its Public Offering to the Operating Partnership as a contribution in exchange for partnership interests and the Company’s percentage ownership in the Operating Partnership increases proportionately. The Partnership Agreement provides that the Operating Partnership is operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), which classification could result in the Operating Partnership being taxed as a corporation. In addition to the administrative and operating costs and expenses incurred by the Operating Partnership in acquiring and operating real properties, the Operating Partnership pays all of the Company’s administrative costs and expenses, and such expenses are treated as expenses of the Operating Partnership. The Company commenced its real estate operations on May 19, 2016, upon acquiring a fee simple interest in Carriage House Apartment Homes, a multifamily property located in Gurnee, Illinois. |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2016, other than Accounting Standards Update (“ASU”) 2017-01, as further described below. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 16, 2017. Principles of Consolidation and Basis of Presentation The consolidated financial statements include the accounts of the Company, the consolidated variable interest entity (“VIE”) that the Company controls and of which the Company is the primary beneficiary, and the Operating Partnership’s subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. The financial statements of the Company’s subsidiaries are prepared using accounting policies consistent with those of the Company. The Operating Partnership is a VIE as the Advisor, as the limited partner, lacks substantive kick-out rights and substantive participating rights. The Company is the primary beneficiary of, and consolidates, the Operating Partnership. The accompanying unaudited consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary for a fair and consistent presentation of the results of such periods. Operating results for the three and nine months ended September 30, 2017, are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The unaudited consolidated financial statements in this Quarterly Report on Form 10-Q (the “Quarterly Report”) should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates. Fair Value Measurements Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other assets and liabilities at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:
When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and will establish a fair value by assigning weights to the various valuation sources. The following describes the valuation methodologies used by the Company to measure fair value, including an indication of the level in the fair value hierarchy in which each asset or liability is generally classified. Interest rate cap agreements - The Company has entered into certain interest rate cap agreements. These derivatives are recorded at fair value. Fair value was based on a model-driven valuation using the associated variable rate curve and an implied market volatility, both of which were observable at commonly quoted intervals for the full term of the interest rate cap agreements. Therefore, the Company’s interest rate cap agreements were classified within Level 2 of the fair value hierarchy and are included in other assets in the accompanying consolidated balance sheets. Changes in the fair value of the interest rate cap agreements are recorded as interest expense in the accompanying consolidated statements of operations. The following tables reflect the Company’s assets required to be measured at fair value on a recurring basis on the consolidated balance sheets:
Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument. Fair Value of Financial Instruments The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities, due to affiliates, distributions payable and mortgage notes payable, net. The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities and distributions payable to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. The fair value of amounts due to affiliates is not determinable due to the related party nature of such amounts. The Company has determined that its mortgage notes payable, net are classified as Level 3 within the fair value hierarchy. The fair value of the mortgage notes payable, net is estimated using a discounted cash flow analysis using borrowing rates available to the Company for debt instruments with similar terms and maturities. As of September 30, 2017 and December 31, 2016, the fair value of the mortgage notes payable, net was $206,043,283 and $72,128,601, respectively, compared to the carrying value of $202,794,204 and $72,016,933, respectively. Distribution Policy The Company elected to be taxed as a REIT commencing with the Company’s taxable year ended December 31, 2016. To maintain its qualification as a REIT, the Company intends to make distributions each taxable year equal to at least 90% of its REIT taxable income (which is determined without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). The Company’s board of directors declared a dividend to the holders of Class A shares and Class T shares which began to accrue on May 19, 2016. The Company’s board of directors also declared a dividend to the holders of Class R shares which began to accrue on August 2, 2016. Distributions declared during the year ended December 31, 2016, were based on daily record dates and calculated at a rate of $0.004098 per Class A share per day, $0.00393443 per Class R share per day and $0.003366 per Class T share per day. Distributions declared during the period from January 1, 2017 to March 31, 2017, were based on daily record dates and calculated at a rate of $0.004110 per Class A share per day, $0.00394521 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.27%, $0.00369863 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.67% and $0.003376 per Class T share per day. Distributions declared during the period from April 1, 2017 to June 30, 2017, were based on daily record dates and calculated at a rate of $0.004110 per Class A share per day, $0.00394521 per Class R share per day and $0.003376 per Class T share per day. Distributions declared during the period from July 1, 2017 to September 30, 2017, were based on daily record dates and calculated at a rate of $0.004110 per Class A share per day, $0.00394521 per Class R share per day and $0.003457 per Class T share per day. Each day during the period from May 19, 2016 to September 30, 2017, was a distribution record date with respect to Class A shares and Class T shares. Each day during the period from August 2, 2016 to September 30, 2017, was a distribution record date with respect to Class R shares. Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to qualify as a REIT under the Internal Revenue Code. During the three and nine months ended September 30, 2017, the Company declared distributions totaling $0.378 and $1.122 per Class A share of common stock, $0.363 and $1.073 per Class R share of common stock and $0.320 and $0.931 per Class T share of common stock, respectively. Per Share Data Basic loss per share attributable to common stockholders for all periods presented are computed by dividing net loss by the weighted average number of shares of the Company’s common stock outstanding for each class of shares outstanding during the period. Diluted loss per share is computed based on the weighted average number of shares of the Company’s common stock and all potentially dilutive securities, if any. Distributions declared per common share assume each share was issued and outstanding each day during the period. Nonvested shares of the Company’s restricted common stock give rise to potentially dilutive shares of the Company’s common stock but such shares were excluded from the computation of diluted earnings per share because such shares were anti-dilutive during the period. In accordance with FASB ASC Topic 260-10-45, Earnings Per Share, the Company uses the two-class method to calculate earnings per share. Basic earnings per share is calculated based on dividends declared and the rights of common shares and participating securities in any undistributed earnings, which represents net income remaining after deduction of dividends declared during the period. The undistributed earnings are allocated to all outstanding common shares based on the relative percentage of each class of shares to the total number of outstanding shares. The Company does not have any participating securities outstanding but does have multiple classes of common stock with different dividend rates and an unvested portion of restricted Class A common stock. Earnings attributable to the unvested restricted Class A common stock are deducted from earnings in the computation of per share amounts where applicable. Segment Disclosure The Company has determined that it has one reportable segment with activities related to investing in multifamily properties. The Company’s investments in real estate are in different geographic regions, and management evaluates operating performance on an individual asset level. However, as each of the Company’s assets has similar economic characteristics, tenants and products and services, its assets have been aggregated into one reportable segment. Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The new guidance requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new guidance supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification. The new guidance does not apply to lease contracts within the scope of Leases (Topic 840). In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), which delayed the effective date of the new guidance by one year, which will result in the new guidance being effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and is to be applied retrospectively. Early adoption is permitted, but can be no earlier than the original public entity effective date of fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company anticipates selecting the modified retrospective transition method with a cumulative effect recognized as of the date of adoption and will adopt the new standard effective January 1, 2018. The Company is continuing to evaluate the standard’s impact on its revenue recognition with regard to revenue from tenant reimbursements and other. Based on its preliminary assessment, the Company identified the following types of revenues from non-lease components: application and credit card checks fees, electronic payment convenience fee and participation revenue from cable providers, laundry service providers and vending machines. The company is currently in the process of reviewing its revenue contracts and will then aggregate and quantify the results of its assessment by the end of its fiscal year. Based on its ongoing assessment, the Company does not expect a material impact on its revenue recognition in the consolidated financial statements because revenue from these sources is immaterial to the consolidated financial statements. The Company is also not expecting to experience a material impact from adopting this new guidance in connection with its rental revenue, as rental revenue from leasing arrangements is specifically excluded from the standard. In February 2016, the FASB issued ASU 2016-02, Leases, amending the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The new standard requires a modified retrospective transition approach. The guidance will be effective in the first quarter of 2019 and allows for early adoption. The Company is in the preliminary stages of evaluating the impact of this ASU on its leases both as it relates to the Company acting as a lessor and as a lessee. Based on the preliminary results of its evaluation, as it relates to the former, the Company does not expect any material impact on the recognition of leases in the consolidated financial statements because under this guidance, lessors will continue to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases, and operating leases. As it relates to the latter, the Company does not expect a material impact on the recognition of leases in the consolidated financial statements because the quantity of leased equipment by the Company is limited. The Company plans to complete its assessment process by the end of the fourth quarter of 2017 and plans to adopt this ASU on January 1, 2019. In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting, that simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The guidance is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those years. The Company adopted this guidance as of January 1, 2017. The Company did not experience a material impact from adopting this new guidance. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force), that clarifies how certain cash receipts and cash payments should be classified on the statement of cash flows. This ASU addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. The Company adopted this guidance as of July 1, 2016. The Company did not experience a material impact from adopting this new guidance. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash, that requires that a statement of cash flows explains the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the definition of business (“ASU 2017-01”), that clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. This ASU provides a screen to determine when a set is not a business. If the screen is not met, it (1) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) removes the evaluation of whether a market participant could replace the missing elements. The guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. The Company adopted this guidance as of January 1, 2017. The Company capitalized $4,808,726 of acquisition fees and expenses on the consolidated balance sheet as of September 30, 2017 related to the acquisitions of Reflections on Sweetwater Apartments, The Pointe at Vista Ridge Apartments, Belmar Villas and Ansley at Princeton Lakes on January 12, 2017, May 25, 2017, July 21, 2017 and August 31, 2017, respectively. Acquisition fees and acquisition expenses were included in fees to affiliates and acquisition costs, respectively, on the consolidated statements of operations prior to the adoption of this guidance. Upon adoption of this guidance, all such costs are included in the purchase price that is allocated between land, buildings and improvements and tenant origination and absorption costs on the consolidated balance sheets. In February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“Subtopic 610-20”): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”), that clarifies that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset and defines the term in substance nonfinancial asset. ASU 2017-05 also clarifies that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. Subtopic 610-20, which was issued in May 2014 as part of ASU 2014-09 (discussed above), provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. An entity is required to apply amendments in ASU 2017-05 at the same time it applies the amendments in ASU 2014-09 (discussed above). ASU 2017-05 requires retrospective application and is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures. In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). The FASB issued ASU 2017-09 to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation - Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU No. 2017-09 requires prospective application and is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures. |
Real Estate |
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Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate | Real Estate As of September 30, 2017, the Company owned seven multifamily properties comprised of a total of 1,836 apartment homes. The total acquisition price of the Company’s real estate portfolio was $286,998,902. As of September 30, 2017 and December 31, 2016, the Company’s portfolio was approximately 93.4% and 95.9% occupied and the average monthly rent was $1,193 and $1,163, respectively. Current Year Acquisitions During the nine months ended September 30, 2017, the Company acquired the following properties:
As of September 30, 2017 and December 31, 2016, accumulated depreciation and amortization related to the Company’s consolidated real estate properties and related intangibles were as follows:
Depreciation and amortization expense was $3,254,894 and $8,171,160 for the three and nine months ended September 30, 2017, and $161,777 and $237,091 for the three and nine months ended September 30, 2016, respectively. Depreciation of the Company’s buildings and improvements was $2,079,729 and $4,359,966 for the three and nine months ended September 30, 2017, and $61,526 and $89,409 for the three and nine months ended September 30, 2016, respectively. Amortization of the Company’s tenant origination and absorption costs was $1,175,165 and $3,811,194 for the three and nine months ended September 30, 2017, and $100,251 and $147,682 for the three and nine months ended September 30, 2016, respectively. Tenant origination and absorption costs had a weighted-average amortization period as of the date of acquisition of less than one year. Operating Leases As of September 30, 2017, the Company’s real estate portfolio comprised 1,836 apartment homes and was approximately 95.9% leased by a diverse group of residents. The residential lease terms consist of lease durations equal to twelve months or less. Some residential leases contain provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in accounts payables and accrued liabilities in the accompanying consolidated balance sheets and totaled $532,923 and $252,387 as of September 30, 2017 and December 31, 2016, respectively. As of September 30, 2017 and December 31, 2016, no tenant represented over 10% of the Company’s annualized base rent. |
Other Assets |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Assets | Other Assets As of September 30, 2017 and December 31, 2016, other assets consisted of:
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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Mortgage Notes Payable The following is a summary of mortgage notes payable, net secured by real property as of September 30, 2017 and December 31, 2016.
_________
Maturity and Interest The following is a summary of the Company’s aggregate maturities as of September 30, 2017:
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The Company’s mortgage notes payable contain customary financial and non-financial debt covenants. As of September 30, 2017, the Company was in compliance with all debt covenants. For the three and nine months ended September 30, 2017, the Company incurred interest expense of $1,741,955 and $3,865,967, respectively. Interest expense for the three and nine months ended September 30, 2017, includes amortization of deferred financing costs of $35,396 and $74,595 and net unrealized losses from the change in fair value of interest rate cap agreements of $89,571 and $503,935, respectively. For the three and nine months ended September 30, 2016, the Company incurred interest expense of $44,901 and $74,575, respectively. Interest expense for the three and nine months ended September 30, 2016, includes amortization of deferred financing costs of $1,699 and $2,833 and net unrealized losses from the change in fair value of interest rate cap agreement of $11 and $8,780, respectively. Interest expense of $620,661 and $107,393 was payable as of September 30, 2017 and December 31, 2016, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets. |
Stockholders' Equity |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity General Under the Company’s Second Articles of Amendment and Restatement (as amended, the “Charter”), the total number of shares of capital stock authorized for issuance is 1,300,000,000, consisting of 1,200,000,000 shares of common stock, $0.01 par value per share, of which 480,000,000 shares are classified as Class A common stock, 240,000,000 shares are classified as Class R common stock and 480,000,000 shares are classified as Class T common stock, and 100,000,000 shares of preferred stock, $0.01 par value per share. The Company’s board of directors may amend the Charter from time to time to increase or decrease the aggregate number of shares of capital stock or the number of shares of capital stock of any class or series that it has authority to issue. Common Stock The shares of the Company’s common stock entitle the holders to one vote per share on all matters upon which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law. The common stock has no preferences or preemptive, conversion or exchange rights. On August 24, 2015, the Company issued 8,000 shares of Class A common stock for $200,000 to the Advisor. The following table reflects information regarding shares of common stock sold in the Public Offering from inception through September 30, 2017:
Offering proceeds include $141,793 and $98,443 of amounts due from the Company’s transfer agent as of September 30, 2017 and December 31, 2016, respectively, which are included in rents and other receivables in the accompanying consolidated balance sheets. On September 29, 2017 and September 30, 2016, the Company issued 275 shares and 435 shares, respectively, of Class A common stock to its independent directors pursuant to the Company’s independent directors’ compensation plan at a value of $25.00 per share as base annual compensation and compensation for attending meetings of the Company’s board of directors. See Note 8 for additional information. The shares of common stock vest and become non-forfeitable immediately upon the date of grant. Included in general and administrative expenses is $6,875 and $20,625 for the three and nine months ended September 30, 2017, and $10,875 and $41,625 for the three and nine months ended September 30, 2016, respectively, for compensation expense related to the issuance of common stock to the Company’s independent directors. On May 16, 2016, the Company granted 2,000 shares of restricted Class A common stock to each of its three independent directors pursuant to the Company’s independent directors’ compensation plan at a fair value of $25.00 per share in connection with the Company raising $2,000,000 in the Public Offering. Pursuant to the Company’s independent directors’ compensation plan, which is a sub-plan of the Incentive Award Plan (defined below), the Company will grant 2,000 shares of restricted Class A common stock to each subsequent independent director that joins the Company’s board of directors. On August 9, 2017, the Company granted 1,000 shares of restricted Class A common stock to each of its three independent directors pursuant to the Company’s independent directors’ compensation plan at a fair value of $25.00 per share in connection with their re-election to the board of directors at the Company’s 2017 annual meeting of stockholders. The shares of restricted common stock vest and become non-forfeitable in four equal annual installments, beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the shares of restricted stock will become fully vested on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company. The issuance and vesting activity for the nine months ended September 30, 2017 and year ended December 31, 2016 for the restricted stock issued to the Company’s independent directors as compensation for services in connection with the Company raising $2,000,000 in the Public Offering and the independent directors’ re-election to the board of directors at the Company’s 2017 annual meeting is as follows:
Included in general and administrative expenses is $30,924 and $49,473 for the three and nine months ended September 30, 2017, and $9,429 and $51,642 for the three and nine months ended September 30, 2016, respectively, for compensation expense related to the issuance of restricted common stock. As of September 30, 2017, the compensation expense related to the issuance of the restricted common stock not yet recognized was $114,457. The weighted average remaining term of the restricted common stock was 1.43 years as of September 30, 2017. As of September 30, 2017, no shares of restricted common stock issued to the independent directors have been forfeited. Preferred Stock The Charter also provides the Company’s board of directors with the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such shares of preferred stock, the board of directors shall have the power from time to time to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares of preferred stock. The Company’s board of directors is authorized to amend the Charter without the approval of the stockholders to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue. As of September 30, 2017 and December 31, 2016, no shares of Company preferred stock were issued and outstanding. Distribution Reinvestment Plan The Company’s board of directors has approved the DRP through which common stockholders may elect to reinvest an amount equal to the distributions declared on their shares of common stock in additional shares of the Company’s common stock in lieu of receiving cash distributions. The purchase price per Class A, Class R and Class T share of common stock under the DRP is $23.75, $22.50 and $22.62, respectively. The Company’s board of directors may, in its sole discretion, from time to time, change these prices based upon changes in the Company’s estimated value per share, the then current price of shares of the Company’s common stock offered in the Public Offering and other factors that the Company’s board of directors deems relevant. No sales commissions or dealer manager fees are payable on shares sold through the DRP. The Company’s board of directors may amend, suspend or terminate the DRP at its discretion at any time upon ten days’ notice to the Company’s stockholders. Following any termination of the DRP, subsequent distributions to stockholders will be made in cash. Share Repurchase Program and Redeemable Common Stock The Company’s share repurchase program may provide an opportunity for stockholders to have their shares of common stock repurchased by the Company, subject to certain restrictions and limitations. No shares can be repurchased under the Company’s share repurchase program until after the first anniversary of the date of purchase of such shares; provided, however, that this holding period shall not apply to repurchases requested within 270 days after the death or disability of a stockholder. Prior to the date the Company publishes an estimated value per share of its common stock, the purchase price for shares repurchased under the Company’s share repurchase program is as follows:
Following the date the Company publishes an estimated value per share of its common stock, the purchase price for shares repurchased under the Company’s share repurchase program will be as follows:
(1) As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock. Repurchase price includes the full amount paid for each share, including all sales commissions and dealer manager fees. (2) The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares. The required one-year holding period does not apply to repurchases requested within 270 days after the death or disability of a stockholder. (3) For purposes of the share repurchase program, until the day the Company publicly discloses a new estimated value per share, the purchase price for shares purchased under the share repurchase program will equal, exclusively, the purchase price paid for the shares. Thereafter, the repurchase price will be a graduated percentage of the lesser of the purchase price or the estimated value per share in effect at the time of repurchase. The estimated value per share will be determined by the Company’s board of directors, based on periodic valuations by independent third-party appraisers or qualified independent valuation experts selected by the Advisor. (4) The Company’s board of directors will determine an estimated value per share of its common stock based on valuations by independent third-party appraisers or qualified valuation experts no later than 150 days following the second anniversary of breaking escrow in its Public Offering, or October 13, 2018, or such earlier time as required by any regulatory requirement regarding the timing of a valuation. The purchase price per share for shares repurchased pursuant to the Company’s share repurchase program will be further reduced by the aggregate amount of net proceeds per share, if any, distributed to the Company’s stockholders prior to the repurchase date as a result of the sale of one or more of the Company’s assets that constitutes a return of capital distribution as a result of such sales. Repurchases of shares of the Company’s common stock will be made quarterly upon written request to the Company at least 15 days prior to the end of the applicable quarter. Repurchase requests will be honored approximately 30 days following the end of the applicable quarter (the “Repurchase Date”). Stockholders may withdraw their repurchase request at any time up to three business days prior to the Repurchase Date. During the nine months ended September 30, 2017, the Company did not repurchase any shares. During the nine months ended September 30, 2017, the Company received a request for the repurchase of 874 shares of Class T common stock with a total repurchase value of $20,779. During the three months ended September 30, 2017, the Company did not repurchase any shares or receive requests for the repurchase of any shares. During the three and nine months ended September 30, 2016, the Company did not repurchase any shares or receive requests for the repurchase of any shares. As of September 30, 2017, the Company had an outstanding and unfulfilled repurchase request of 874 Class T shares and recorded $20,779 in accounts payable and accrued liabilities on the accompanying consolidated balance sheets related to this unfulfilled repurchase request. The Company repurchased the outstanding repurchase request as of September 30, 2017 of $20,779 on the October 30, 2017 Repurchase Date. The Company cannot guarantee that the funds set aside for the share repurchase program will be sufficient to accommodate all repurchase requests made in any quarter. In the event that the Company does not have sufficient funds available to repurchase all of the shares of the Company’s common stock for which repurchase requests have been submitted in any quarter, such outstanding repurchase requests will automatically roll over to the subsequent quarter and priority will be given to redemption requests in the case of the death or disability of a stockholder. If the Company repurchases less than all of the shares subject to a repurchase request in any quarter, with respect to any shares which have not been repurchased, a stockholder can (1) withdraw the stockholder’s request for repurchase or (2) ask that the Company honor the stockholder’s request in a future quarter, if any, when such repurchases can be made pursuant to the limitations of the share repurchase program and when sufficient funds are available. Such pending requests will be honored among all requests for redemptions in any given repurchase period as follows: first, pro rata as to repurchases sought upon a stockholder’s death or disability; and, next, pro rata as to other repurchase requests. Shares repurchased under the share repurchase program to satisfy the pro rata required minimum distribution of shares held in a qualified retirement account will be repurchased on or after the first anniversary of the date of purchase of such shares at 100% of the purchase price or at 100% of the estimated value per share, as applicable. The Company is not obligated to repurchase shares of its common stock under the share repurchase program. The share repurchase program limits the number of shares to be repurchased in any calendar year to (1) 5% of the weighted average number of shares of common stock outstanding during the prior calendar year and (2) those that could be funded from the net proceeds from the sale of shares under the DRP in the prior calendar year, plus such additional funds as may be reserved for that purpose by the Company’s board of directors. Such sources of funds could include cash on hand, cash available from borrowings and cash from liquidations of securities investments as of the end of the applicable month, to the extent that such funds are not otherwise dedicated to a particular use, such as working capital, cash distributions to stockholders or purchases of real estate assets. There is no fee in connection with a repurchase of shares of the Company’s common stock pursuant to the Company’s share repurchase program. The Company’s board of directors may, in its sole discretion, amend, suspend or terminate the share repurchase program at any time upon 30 days’ notice to its stockholders if it determines that the funds available to fund the share repurchase program are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase program is in the best interest of the Company’s stockholders. Therefore, a stockholder may not have the opportunity to make a repurchase request prior to any potential termination of the Company’s share repurchase program. The share repurchase program will terminate in the event that a secondary market develops for the Company’s shares of common stock. Distributions The Company’s long-term policy is to pay distributions solely from cash flow from operations. However, the Company expects to have insufficient cash flow from operations available for distribution until it makes substantial investments. Further, because the Company may receive income from interest or rents at various times during the Company’s fiscal year and because the Company may need cash flow from operations during a particular period to fund capital expenditures and other expenses, the Company expects that at least during the early stages of the Company’s development and from time to time during the Company’s operational stage, the Company will declare distributions in anticipation of cash flow that the Company expects to receive during a later period, and the Company expects to pay these distributions in advance of its actual receipt of these funds. In these instances, the Company’s board of directors has the authority under its organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or advances and the deferral of fees and expense reimbursements by the Advisor, in its sole discretion. The Company has not established a limit on the amount of proceeds it may use from the Public Offering to fund distributions. If the Company pays distributions from sources other than cash flow from operations, the Company will have fewer funds available for investments and stockholders’ overall return on their investment in the Company may be reduced. The Company elected to be taxed as a REIT for federal income tax purposes commencing with the taxable year ended December 31, 2016. To qualify as a REIT, the Company must make aggregate annual distributions to its stockholders of at least 90% of the Company’s REIT taxable income (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If the Company meets the REIT qualification requirements, the Company generally will not be subject to federal income tax on the income that the Company distributes to its stockholders each year. Distributions Declared and Paid The following table reflects per share daily distribution rates and annualized distribution rates for the first, second and third fiscal quarters of 2017 and 2016:
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The following table reflects distributions declared and paid to Class A common stockholders, Class R common stockholders and Class T common stockholders for the three and nine months ended September 30, 2017 and 2016:
As of September 30, 2017, $617,741 of distributions declared were payable and are included in distributions payable in the accompanying consolidated balance sheets, which included $315,147, $29,034 and $273,560 of Class A common stock, Class R common stock and Class T common stock, respectively, of which, $129,055, $8,171 and $161,172, or 5,434, 363 and 7,126 shares of Class A common stock, Class R common stock and Class T common stock, are attributable to the DRP, respectively. As of December 31, 2016, $241,258 of distributions declared were payable and included in distributions payable in the accompanying consolidated balance sheets, which included $148,374, $10,812 and $82,072 of Class A common stock, Class R common stock and Class T common stock, respectively, of which $64,484, $2,942 and $50,252, or 2,715, 131 and 2,222 shares of Class A common stock, Class R common stock and Class T common stock, are attributable to the DRP, respectively. As reflected in the table above, for the three and nine months ended September 30, 2017, the Company paid total distributions of $1,651,856 and $3,710,753, which related to distributions declared for each day in the period from June 1, 2017 through August 31, 2017 and December 1, 2016 through August 31, 2017, respectively. For the three and nine months ended September 30, 2016, the Company paid total distributions of $135,410 and $141,316, which related to distributions declared for each day in the period from June 1, 2016 through August 31, 2016 and May 19, 2016 through August 31, 2016, respectively. |
Related Party Arrangements |
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Arrangements | Related Party Arrangements The Company has entered into the Advisory Agreement with the Advisor and a Dealer Manager Agreement with the Dealer Manager. Pursuant to the Advisory Agreement and Dealer Manager Agreement, the Company is obligated to pay the Advisor and the Dealer Manager specified fees upon the provision of certain services related to the Public Offering, the investment of funds in real estate and real estate-related investments and the management of the Company’s investments and for other services (including, but not limited to, the disposition of investments), as well as make certain distributions in connection with the Company’s liquidation or listing on a national stock exchange. Subject to the limitations described below, the Company is also obligated to reimburse the Advisor and its affiliates for organization and offering costs incurred by the Advisor and its affiliates on behalf of the Company, as well as acquisition and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company. Amounts attributable to the Advisor and its affiliates incurred for the three and nine months ended September 30, 2017 and 2016 and amounts outstanding to the Advisor and its affiliates as of September 30, 2017 and December 31, 2016 are as follows:
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Organization and Offering Costs Organization and offering expenses include all expenses (other than underwriting compensation such as sales commissions, the dealer manager fee and the distribution and shareholder servicing fee) to be paid by the Company in connection with the Public Offering, including legal, accounting, tax, printing, mailing and filing fees, charges of the Company’s escrow holder and transfer agent, expenses of organizing the Company, data processing fees, advertising and sales literature costs, transfer agent costs, information technology costs, bona fide out-of-pocket due diligence costs and amounts to reimburse the Advisor or its affiliates for the salaries of its employees and other costs in connection with preparing sales materials and providing other administrative services in connection with the Public Offering. Any such reimbursement will not exceed actual expenses incurred by the Advisor. After the termination of the Public Offering, the Advisor will reimburse the Company to the extent total organization and offering expenses (including sales commissions, dealer manager fees and the distribution and shareholder servicing fees) borne by the Company exceed 15% of the gross proceeds raised in the Primary Offering. To the extent the Company does not pay the full sales commissions, dealer manager fee or distribution and shareholder servicing fee for shares sold in the Public Offering, the Company may also reimburse costs of bona fide training and education meetings held by the Company (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees and cost reimbursement of employees of the Company’s affiliates to attend seminars conducted by broker-dealers and, in certain cases, reimbursement to participating broker-dealers for technology costs associated with the offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of the Company’s shares and the ownership of the Company’s shares by such broker-dealers’ customers; provided, however, that the Company will not pay any of the foregoing costs to the extent that such payment would cause total underwriting compensation to exceed 10% of the gross offering proceeds of the Primary Offering, as required by the rules of Financial Industry Regulatory Authority, Inc. (“FINRA”). Organization and offering costs include payments made to Crossroads Capital Advisors, whose parent company indirectly owns 25% of Steadfast REIT Investments, LLC (the “Sponsor”), for certain specified services provided to the Company on behalf of the Advisor, including, without limitation, establishing operational and administrative processes; engaging and negotiating with vendors; providing recommendations and advice for the development of marketing materials and ongoing communications with investors; and assisting in public relations activities and the administration of the DRP and share repurchase program. From the commencement of the Public Offering through September 30, 2017 and December 31, 2016, the Advisor had incurred on the Company’s behalf $1,566,154 and $776,544, respectively, of costs attributable to Crossroads Capital Advisors for the services described above, all of which was recorded by the Company as offering costs during the applicable periods. The amount of reimbursable organization and offering (“O&O”) costs that have been paid or recognized from inception through September 30, 2017, is as follows:
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When recognized, organization costs are expensed as incurred. From inception through September 30, 2017, the Advisor incurred $26,980 of organizational costs on the Company’s behalf, all of which was reimbursed to the Advisor. Offering costs, including selling commissions and dealer manager fees and the distribution and shareholder servicing fees, are deferred and charged to stockholders’ equity. All such amounts are reimbursed to the Advisor, the Dealer Manager or their affiliates from gross offering proceeds, except for the distribution and shareholder servicing fees, which are paid from sources other than Public Offering proceeds. For the three and nine months ended September 30, 2017, the Advisor incurred $2,533,501 and $7,811,040 of offering costs related to the Public Offering, respectively. For the three and nine months ended September 30, 2016, the Advisor incurred $3,029,554 and $8,144,494 of offering costs related to the Public Offering, respectively. The Advisor has incurred total offering costs related to the Public Offering of $18,925,574 from inception through September 30, 2017, of which $8,235,216 is deferred and may be reimbursable, subject to the limitations described above and the approval of the independent directors. The Company accrued $474,754 and $1,616,487 for the reimbursement of offering costs in the accompanying consolidated balance sheets as of September 30, 2017 and December 31, 2016, respectively. The deferred offering costs of $8,235,216 are not included in the consolidated financial statements of the Company because these costs were not a Company liability as they exceeded the 15% limitation described above. Investment Management Fee The Company paid the Advisor a monthly investment management fee equal to one-twelfth of 0.50% of the value of the Company’s investments in properties and real estate-related assets until the aggregate value of the Company’s investments in properties and real estate-related assets equals $300,000,000, which occurred on August 31, 2017. Thereafter, the Company pays the Advisor a monthly investment management fee equal to one-twelfth of 1.0% of the value of the Company’s investments in properties and real estate-related assets. For the purposes of the investment management fee, the value of the Company’s investments in properties will equal their costs, until the investments are valued by an independent third-party appraiser or qualified independent valuation expert. “Costs” are calculated by including acquisition fees, acquisition expenses, renovations and upgrades, and any debt attributable to such investments, or the Company’s proportionate share thereof in the case of investments made through joint ventures. Acquisition Fees and Expenses The Company pays the Advisor an acquisition fee equal to 2.0% of the cost of the investment which includes the amount actually paid or budgeted to fund the acquisition, origination, development, construction or improvement (i.e. value-enhancement) of any real property or real estate-related asset acquired. In addition to acquisition fees, the Company reimburses the Advisor for amounts directly incurred by the Advisor and amounts the Advisor pays to third parties in connection with the selection, evaluation, acquisition and development of a property or acquisition of real estate-related assets, whether or not the Company ultimately acquires the property or the real estate-related assets. The Charter limits the Company’s ability to pay acquisition fees if the total of all acquisition fees and expenses relating to the purchase would exceed 6.0% of the contract purchase price. Under the Charter, a majority of the Company’s board of directors, including a majority of the independent directors, is required to approve any acquisition fees (or portion thereof) that would cause the total of all acquisition fees and expenses relating to an acquisition to exceed 6.0% of the contract purchase price. In connection with the purchase of securities, the acquisition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the acquisition fee to a firm that is not a registered broker-dealer. Loan Coordination Fee Subject to the Advisor providing substantial amount of services in connection with the origination or refinancing of any debt financing obtained by the Company that is used to refinance properties or other permitted investments or financing in connection with a recapitalization of the company and, subject to a determination by the Company’s independent directors, the Company pays the Advisor a loan coordination fee equal to 0.75% of the amount available under such financing. Property Management Fees and Expenses The Company has entered into Property Management Agreements (each a “Property Management Agreement”) with Steadfast Management Company, Inc., an affiliate of the Sponsor (the “Property Manager”), in connection with the management of each of the Company’s properties. The property management fee payable with respect to each property under the Property Management Agreements at September 30, 2017 ranges from 2.75% to 3.0% of the gross revenue of the property (as defined in the Property Management Agreement). In addition, the Property Manager may also earn an incentive management fee equal to 1.0% of total collections based on performance metrics of the property. The Property Manager may subcontract with third-party property managers and will be responsible for supervising and compensating those third-party property managers and will be paid an oversight fee equal to 1.0% of the gross revenues of the property managed for providing such supervisory services. In no event will the Company pay its Property Manager or any affiliate both a property management fee and an oversight fee with respect to any particular property. Each Property Management Agreement has an initial one-year term and will continue thereafter on a month-to-month basis unless either party gives a 60-day prior notice of its desire to terminate the Property Management Agreement, provided that the Company may terminate the Property Management Agreement at any time upon a determination of gross negligence, willful misconduct or bad acts of the Property Manager or its employees or upon an uncured breach of the Property Management Agreement upon 30 days’ prior written notice to the Property Manager. In the event of a termination of the Property Management Agreement by the Company without cause, the Company will pay a termination fee to the Property Manager equal to three months of the monthly management fee based on the average gross collections for the three months preceding the date of termination. In addition to the property management fee, the Property Management Agreements also specify certain other fees payable to the Property Manager or its affiliates, including fees for benefit administration, information technology infrastructure, licenses, and support and training services. The Company also reimburses the Property Manager for the salaries and related benefits of on-site property management employees. Construction Management Fees The Company has entered into Construction Management Agreements (each a “Construction Management Agreement”) with Pacific Coast Land & Construction, Inc., an affiliate of the Sponsor (the “Construction Manager”), in connection with capital improvements and renovation or value-enhancement projects for certain properties the Company acquires. The construction management fee payable with respect to each property under the Construction Management Agreements is equal to 6.0% of the costs of the improvements for which the Construction Manager has planning and oversight authority. Generally, each Construction Management Agreement can be terminated by either party with 30 days’ prior written notice to the other party. Construction management fees are capitalized to the respective real estate properties in the period in which they are incurred, as such costs relate to capital improvements and renovations for apartment homes taken out of service while they undergo the planned renovation. The Company may also reimburse the Construction Manager for the salaries and related benefits of certain of its employees for time spent working on capital improvements and renovations. Property Insurance The Company deposits amounts with an affiliate of the Sponsor to fund a prepaid insurance deductible account to cover the cost of required insurance deductibles across all properties of the Company and other affiliated entities. Upon filing a major claim, proceeds from the insurance deductible account may be used by the Company or another affiliate of the Sponsor. In addition, the Company deposits amounts with an affiliate of the Sponsor to cover the cost of property and property related insurance across certain properties of the Company. Other Operating Expense Reimbursement In addition to the various fees paid to the Advisor, the Company is obligated to pay directly or reimburse all expenses incurred by the Advisor in providing services to the Company, including the Company’s allocable share of the Advisor’s overhead, such as rent, employee costs, benefit administration costs, utilities and information technology costs. The Company will not reimburse the Advisor for employee costs in connection with services for which the Advisor or its affiliates receive acquisition fees, investment management fees, loan coordination fees and disposition fees or for the employee costs the Advisor pays to the Company’s executive officers. The Charter limits the Company’s total operating expenses during any four fiscal quarters to the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income for the same period (the “2%/25% Limitation”). The Company may reimburse the Advisor, at the end of each fiscal quarter, for operating expenses incurred by the Advisor; provided, however, that the Company shall not reimburse the Advisor at the end of any fiscal quarter for operating expenses that exceed the 2%/25% Limitation unless the independent directors have determined that such excess expenses were justified based on unusual and non-recurring factors. The Advisor must reimburse the Company for the amount by which the Company’s operating expenses for the preceding four fiscal quarters then ended exceed the 2%/25% Limitation, unless approved by the independent directors. For purposes of determining the 2%/25% Limitation amount, “average invested assets” means the average monthly book value of the Company’s assets invested directly or indirectly in equity interests and loans secured by real estate during the 12-month period before deducting depreciation, reserves for bad debts or other non-cash reserves. “Total operating expenses” means all expenses paid or incurred by the Company, as determined by GAAP, that are in any way related to the Company’s operation, including investment management 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, listing and registration of shares of the Company’s common 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 the Company’s assets; (f) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that the Company does not close); (g) real estate commissions on the resale of investments; and (h) other expenses connected with the acquisition, disposition, management and ownership of investments (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property). As of September 30, 2017, the Company’s total operating expenses, as defined above, did not exceed the 2%/25% Limitation. Disposition Fee If the Advisor or its affiliates provide a substantial amount of services in connection with the sale of a property or real estate-related asset, including pursuant to a sale of the entire Company, as determined by a majority of the Company’s independent directors, the Advisor or its affiliates will earn a disposition fee equal to (1) 1.5% of the sales price of each property or real estate-related asset sold or (2) 1.0%, which may be increased to 1.5% in the sole discretion of the Company’s independent directors, of the total consideration paid in connection with the sale of the Company. In the event of a final liquidity event, this fee will be reduced by the amount of any previous disposition fee paid on properties previously exchanged under Section 1031 of the Internal Revenue Code. To the extent the disposition fee is paid upon the sale of any assets other than real property, it will be included as an operating expense for purposes of the 2%/25% Limitation. In connection with the sale of securities, the disposition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the disposition fee to a firm that is not a registered broker-dealer. As of September 30, 2017 the Company had not sold or otherwise disposed of property or any real estate-related assets. Accordingly, the Company had not incurred any disposition fees as of September 30, 2017. Sales Commissions The Company pays the Dealer Manager up to 7.0% of gross offering proceeds from the sale of Class A shares in the Primary Offering and up to 3.0% of gross offering proceeds from the sale of Class T shares in the Primary Offering (all of which will be reallowed to participating broker-dealers), subject to reductions based on volume and for certain categories of purchasers. No sales commissions are paid for sales of Class R shares or for sales pursuant to the Company’s DRP. The total amount of all items of compensation from any source payable to the Dealer Manager and the participating broker-dealers may not exceed 10.0% of the gross proceeds from the Company’s Primary Offering on a per class basis. Dealer Manager Fees The Company pays the Dealer Manager up to 3.0% of gross offering proceeds from the sale of Class A shares and up to 2.5% of gross offering proceeds from the sale of Class T shares (a portion of which will be reallowed to participating broker-dealers). No dealer manager fee will be paid for sales of Class R shares or for sales pursuant to the Company’s DRP. Distribution and Shareholder Servicing Fees The Company pays the Dealer Manager up to (1) 0.27%, annualized, of the purchase price per Class R share (or, once reported, the amount of the Company’s estimated value per share) for each Class R share purchased in the Primary Offering from a registered investment advisor that does not participate on an alternative investment platform; (2) 0.67%, annualized, of the purchase price per Class R share (or, once reported, the amount of the Company’s estimated value per share) for each Class R share purchased in the Primary Offering from a registered investment advisor that participates on an alternative investment platform; and (3) 1.125%, annualized, of the purchase price per Class T share (or, once reported, the amount of the Company’s estimated value per share) for each Class T share purchased in the Primary Offering. The distribution and shareholder servicing fee accrues daily and is paid monthly in arrears. The Company amended its Charter on August 8, 2017, to authorize and pay different distributions to different holders of Class T and/or Class R shares. Prior to amending the Charter to allow for distributions at different rates on the same class of shares, of the up to 0.67% distribution and shareholder servicing fee payable with respect to sales of Class R shares by registered investment advisors that participate on an alternative investment platform, 0.27% was paid from the current distribution and shareholder servicing fee on Class R shares, which was payable out of amounts that otherwise would have been distributed to holders of Class R shares, and 0.40% was an additional expense of the Company. The Company will cease paying the distribution and shareholder servicing fee (and cease deducting this fee from amounts otherwise available for distribution to a Class R stockholder) with respect to a Class R share sold in the Primary Offering at the earlier of: (1) the date at which the aggregate underwriting compensation from all sources equals 10% of the gross proceeds from the sale of shares in the Primary Offering (i.e., excluding proceeds from sales pursuant to the DRP); (2) the end of the month in which the Company’s transfer agent, on behalf of the Company, determines that total underwriting compensation, including selling commissions, dealer manager fees, the distribution and shareholder servicing fee and other elements of underwriting compensation with respect to such Class R share would be in excess of 10% of the total gross investment amount at the time of purchase of such Class R share in the Primary Offering; (3) the date on which such Class R share is repurchased by the Company; and (4) the listing of the Company’s shares of common stock on a national securities exchange, the sale of the Company or the sale of all or substantially all of the Company’s assets. The Company will cease paying the distribution and shareholder servicing fee (and cease deducting this fee from amounts otherwise available for distribution to a Class T stockholder) with respect to a Class T share sold in the Primary Offering at the earlier of: (1) the date at which the aggregate underwriting compensation from all sources equals 10% of the gross proceeds from the sale of shares in the Primary Offering (i.e., excluding proceeds from sales pursuant to the DRP); (2) the sixth anniversary of the last day of the fiscal quarter in which the Public Offering (excluding the DRP) terminates; (3) the end of the month in which the Company’s transfer agent, on behalf of the Company, determines that total underwriting compensation, including selling commissions, dealer manager fees, the distribution and shareholder servicing fee and other elements of underwriting compensation with respect to such Class T share, would be in excess of 10% of the total gross investment amount at the time of purchase of such Class T share in the Primary Offering; (4) the end of the month in which the Company’s transfer agent, on behalf of the Company, determines that the distribution and shareholder servicing fee with respect to such Class T share would be in excess of 4.5% (or a lower limit that is set forth in the applicable selling agreement) of the total gross investment amount at the time of purchase of such Class T share in the Primary Offering; (5) the date on which such Class T share is repurchased by the Company; (6) the date on which the holder of such Class T share or its agent notifies the Company or the Company’s agent that he or she is represented by a new participating broker-dealer; provided that the Company will continue paying the distribution and shareholder servicing fee, which shall be reallowed to the new participating broker-dealer, if the new participating broker-dealer enters into a participating dealer agreement or otherwise agrees to provide the ongoing services set forth in the dealer manager agreement; and (7) the listing of the Company’s shares of common stock on a national securities exchange, the sale of the Company or the sale of all or substantially all of the Company’s assets. The Company cannot predict if or when this will occur. The dealer manager may reallow all or a portion of the ongoing distribution and shareholder servicing fee to the participating dealer who provides the ongoing services with respect to the Class T share. Subordinated Participation in Net Sale Proceeds (payable only if the Company’s shares are not listed on an exchange) The Advisor (in its capacity as special limited partner of the Operating Partnership) will receive 15.0% of the remaining net sale proceeds after return of the total investment amount, which is the amount equal to the original issue price paid by the stockholders in the Public Offering multiplied by the number of shares issued in the Public Offering, reduced by the weighted average original issue price of the shares sold in the Primary Offering multiplied by the total number of shares repurchased by the Company, plus payment to investors of an amount equal to a 6.0% annual cumulative, non-compounded return of the total investment amount, less amounts previously distributed to stockholders, including distributions that may constitute a return of capital for federal income tax purposes. “Net sale proceeds” means the net cash proceeds realized from the sale of the Company or all of the Company’s assets after deduction of all expenses incurred in connection with a sale or disposition of the Company or of the Company’s assets, including disposition fees paid to the Advisor, or from the prepayment, maturity, workout or other settlement of any loan or other investment. For purposes of calculating the 6.0% annual cumulative, non-compounded return of the total investment amount, the aggregate of all investors’ capital shall be deemed to have been invested collectively on one date—the aggregate average investment date, being a day of a month determined by the average weighted month of all shares sold on a monthly basis. In addition, the Advisor (in its capacity as special limited partner of the Operating Partnership) will receive a distribution similar to the subordinated participation in net sale proceeds in the event the Company undertakes an issuer tender offer that results in the tendering stockholders receiving a return of the total investment amount of the tendering stockholders plus payment to those investors of an amount equal to a 6.0% annual cumulative, non-compounded return of the total investment amount of the tendering stockholders, less amounts previously distributed to stockholders, including distributions that may constitute a return of capital for federal income tax purposes. Subordinated Incentive Listing Distribution (payable only if the Company’s shares are listed on an exchange) Upon the listing of the Company’s shares on a national securities exchange, the Advisor (in its capacity as special limited partner of the Operating Partnership) will receive 15.0% of the amount by which the sum of the Company’s adjusted market value plus distributions paid by the Company to stockholders from inception until the date the adjusted market value is determined, including distributions that may constitute a return of capital for federal income tax purposes, exceeds the sum of the total investment amount plus an amount equal to a 6.0% annual cumulative, non-compounded return to investors of the total investment amount. For purposes of calculating the 6.0% annual cumulative, non-compounded return of the total investment amount, the aggregate of all investors’ capital shall be deemed to have been invested collectively on one date, the aggregate average investment date, being a day of a month determined by the average weighted month of all shares sold on a monthly basis. The adjusted market value of the Company’s common stock will be calculated based on the average market value of the shares of common stock issued and outstanding at listing over the 30 trading days beginning 180 days after the shares are first listed or included for quotation. The Company has the option to pay the subordinated incentive listing distribution in the form of stock, cash, a promissory note or any combination thereof. Any previous payments of the subordinated participation in net sales proceeds will offset the amounts due pursuant to the subordinated listing distribution. Subordinated Distribution Upon Termination of the Advisory Agreement Upon termination or non-renewal of the Advisory Agreement with or without cause, the Advisor (in its capacity as special limited partner of the Operating Partnership), will be entitled to receive distributions from the Operating Partnership equal to 15.0% of the amount by which the sum of the Company’s appraised market value plus distributions exceeds the sum of the total investment amount plus an amount equal to a 6.0% annual cumulative, non-compounded return of the total investment amount to investors. For purposes of calculating the 6.0% annual cumulative, non-compounded return of the total investment amount, the aggregate of all investors’ capital shall be deemed to have been invested collectively on one date, the aggregate average investment date, being a day of a month determined by the average weighted month of all shares sold on a monthly basis. If the Company does not provide this return, the Advisor will not receive this distribution. In addition, the Advisor may elect to defer its right to receive a subordinated distribution upon termination until either shares of the Company’s common stock are listed and traded on a national securities exchange or another liquidity event occurs. |
Long Term Incentive Award Plan and Independent Director Compensation |
9 Months Ended |
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Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Long Term Incentive Award Plan and Independent Director Compensation | Long Term Incentive Award Plan and Independent Director Compensation The Company has adopted a long-term incentive plan (the “Incentive Award Plan”), which the Company uses to attract and retain qualified directors, officers, employees and consultants. The Incentive Award Plan authorizes the granting of restricted stock, stock options, restricted or deferred stock units, performance awards and other stock-based awards to the Company’s directors, officers, employees and consultants selected by its board of directors for participation in the Incentive Award Plan. Stock options granted under the Incentive Award Plan will not exceed an amount equal to 10% of the outstanding shares of the Company’s common stock allocated to the Incentive Award Plan on the date of grant of any such stock options. Any stock options granted under the Incentive Award Plan will have an exercise price or base price that is not less than fair market value of the Company’s common stock on the date of grant. Under the Company’s independent directors’ compensation plan, which is a sub-plan of the Incentive Award Plan, each of the Company’s independent directors was entitled to receive 2,000 shares of restricted Class A common stock once the Company raised $2,000,000 in gross offering proceeds in the Public Offering. Each subsequent independent director that joins the Company’s board of directors will receive 2,000 shares of restricted Class A common stock upon election to the Company’s board of directors. In addition, on the date following an independent director’s re-election to the Company’s board of directors, he or she receives 1,000 shares of restricted Class A common stock. The shares of restricted Class A common stock generally vest in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted stock will become fully vested and become non-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability or (2) a change in control of the Company. These awards entitle the holders to participate in distributions. On May 16, 2016, the Company raised over $2,000,000 in gross offering proceeds in the Public Offering and granted each of the three independent directors 2,000 shares of restricted Class A common stock. On August 9, 2017, the Company granted 1,000 shares of restricted Class A common stock to each of its three independent directors upon their re-election to the Company’s board of directors at the 2017 annual meetings of stockholders. The Company recorded stock-based compensation expense of $30,924 and $49,473 for the three and nine months ended September 30, 2017, and $9,429 and $51,642 for the three and nine months ended September 30, 2016, related to the independent directors’ restricted common stock, respectively. In addition to the stock awards, the Company pays each of its independent directors annual compensation of $55,000, prorated for any partial term (the audit committee chairperson receives an additional $10,000 annually, prorated for any partial term). In addition, the independent directors are paid for attending meetings as follows: (1) $2,500 for each board meeting attended in person, (2) $1,500 for each committee meeting attended in person in such director’s capacity as a committee member and (3) $1,000 for each board meeting attended via teleconference (not to exceed $4,000 for any one set of meetings attended within a 48-hour period). The Company’s independent directors may elect to receive the meeting fees and annual compensation to which they are entitled in shares of the Company’s common stock with an equivalent value. Such election shall be made by delivering a valid election form as prescribed in the independent directors’ compensation plan. Such election shall be irrevocable for the plan year. All directors also receive reimbursement of reasonable out of pocket expenses incurred in connection with attendance at meetings of the board of directors. Director compensation is an operating expense of the Company that is subject to the operating expense reimbursement obligation of the Advisor discussed in Note 7. The Company recorded an operating expense of $58,750 and $171,250 for the three and nine months ended September 30, 2017, and $55,750 and $174,750 for the three and nine months ended September 30, 2016, respectively, related to the independent directors’ annual compensation and the value of shares issued for annual compensation and attending board meetings, which is included in general and administrative expenses in the accompanying consolidated statements of operations. As of September 30, 2017 and December 31, 2016, $51,875 and $51,875 is included in accounts payable and accrued liabilities, respectively, and $76,625 and $56,000 is included in additional paid-in capital on the consolidated balance sheets, respectively. |
Commitments and Contingencies |
9 Months Ended |
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Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Economic Dependency The Company is dependent on the Advisor and the Dealer Manager for certain services that are essential to the Company, including the sale of the Company’s shares of common and preferred stock available for issue; the identification, evaluation, negotiation, purchase, and disposition of real estate and real estate-related investments; management of the daily operations of the Company’s real estate and real estate-related investment portfolio; and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other sources. Concentration of Credit Risk The geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the Atlanta, Georgia, Austin, Texas, Dallas, Texas and Denver, Colorado apartment markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition from other apartment communities, decrease in demand for apartments or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders. Environmental As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities. Legal Matters From time to time, the Company is subject, or party, to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on the Company’s results of operations or financial condition nor is the Company aware of any such legal proceedings contemplated by government agencies. |
Derivative Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | Derivative Financial Instruments The Company uses interest rate derivatives with the objective of managing exposure to interest rate movements thereby minimizing the effect of interest rate changes and the effect they could have on future cash flows. Interest rate cap agreements are used to accomplish this objective. The following tables provide the terms of the Company’s interest rate derivative instruments that were in effect at September 30, 2017 and December 31, 2016:
The interest rate cap agreements are not designated as effective cash flow hedges. Accordingly, the Company records any changes in the fair value of the interest rate cap agreements as interest expense. The change in the fair value of the interest rate cap agreements for the three and nine months ended September 30, 2017, resulted in an unrealized loss of $89,571 and $503,935, respectively, and for the three and nine months ended September 30, 2016, resulted in an unrealized loss of $11 and $8,780, respectively, which is included in interest expense in the accompanying consolidated statements of operations. During the nine months ended September 30, 2017 and 2016, the Company acquired interest rate cap agreements of $288,740 and $8,800, respectively. The fair value of the interest rate cap agreements of $197,936 and $413,131 as of September 30, 2017 and December 31, 2016, respectively, is included in other assets on the accompanying consolidated balance sheets. |
Subsequent Events |
9 Months Ended |
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Sep. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events Status of Our Offering As of November 3, 2017, the Company had sold 2,728,592, 275,341 and 2,953,346 shares of Class A common stock, Class R common stock and Class T common stock in the Public Offering, respectively, for gross proceeds of $67,077,028, $6,194,244 and $70,250,194, or an aggregate amount of $143,521,466, including 54,853, 3,018 and 57,963 shares of Class A common stock, Class R common stock and Class T common stock issued pursuant to the DRP for gross offering proceeds of $1,302,764, $67,895 and $1,311,129, respectively. Distributions Paid Class A On October 2, 2017, the Company paid distributions of $315,147, which related to distributions declared for each day in the period from September 1, 2017 through September 30, 2017 and consisted of cash distributions paid in the amount of $186,092 and $129,055 in Class A shares issued pursuant to the DRP, respectively. On November 1, 2017, the Company paid distributions of $340,650, which related to distributions declared for each day in the period from October 1, 2017 through October 31, 2017 and consisted of cash distributions paid in the amount of $201,739 and $138,911 in Class A shares issued pursuant to the DRP. Class R On October 2, 2017, the Company paid distributions of $29,034, which related to distributions declared for each day in the period from September 1, 2017 through September 30, 2017 and consisted of cash distributions paid in the amount of $20,863 and $8,171 in Class R shares issued pursuant to the DRP, respectively. On November 1, 2017, the Company paid distributions of $31,834, which related to distributions declared for each day in the period from October 1, 2017 through October 31, 2017 and consisted of cash distributions paid in the amount of $22,174 and $9,660 in Class R shares issued pursuant to the DRP. Class T On October 2, 2017, the Company paid distributions of $273,560, which related to distributions declared for each day in the period from September 1, 2017 through September 30, 2017 and consisted of cash distributions paid in the amount of $112,388 and $161,172 in Class T shares issued pursuant to the DRP. On November 1, 2017, the Company paid distributions of $296,355, which related to distributions declared for each day in the period from October 1, 2017 through October 31, 2017 and consisted of cash distributions paid in the amount of $124,285 and $172,070 in Class T shares issued pursuant to the DRP. Declaration of Distributions On November 7, 2017, the board of directors of the Company declared cash distributions to the holders of Class A, Class R and Class T shares of common stock, such distributions to (1) accrue daily to the stockholders of record as of the close of business on each day during the period commencing on January 1, 2018 and ending on March 31, 2018; (2) be payable in cumulative amounts on or before the 3rd day of each calendar month with respect to the prior month; and (3) be calculated at a rate of $0.004110 per Class A share per day, $0.00369863 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.67%, $0.00394521 per Class R share of common stock per day subject to an annual distribution and shareholder servicing fee of 0.27%, $0.003376 per Class T share per day subject to an annual distribution and shareholder servicing fee of 1.125% and $0.003457 per Class T share per day subject to an annual distribution and shareholder servicing fee of 1.0%. Extension of Public Offering On November 7, 2017, the board of directors of the Company determined to extend the Company’s Public Offering for an additional year. The Company will continue to offer shares of its common stock to the public through February 5, 2019. |
Summary of Significant Accounting Policies (Policies) |
9 Months Ended | ||||||||||||
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Sep. 30, 2017 | |||||||||||||
Accounting Policies [Abstract] | |||||||||||||
Principles of Consolidation | Principles of Consolidation and Basis of Presentation The consolidated financial statements include the accounts of the Company, the consolidated variable interest entity (“VIE”) that the Company controls and of which the Company is the primary beneficiary, and the Operating Partnership’s subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. The financial statements of the Company’s subsidiaries are prepared using accounting policies consistent with those of the Company. The Operating Partnership is a VIE as the Advisor, as the limited partner, lacks substantive kick-out rights and substantive participating rights. The Company is the primary beneficiary of, and consolidates, the Operating Partnership. |
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Basis of Presentation | The accompanying unaudited consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary for a fair and consistent presentation of the results of such periods. Operating results for the three and nine months ended September 30, 2017, are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The unaudited consolidated financial statements in this Quarterly Report on Form 10-Q (the “Quarterly Report”) should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. |
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Use of Estimates | Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates. |
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Fair Value Measurements | Fair Value Measurements Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other assets and liabilities at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:
When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and will establish a fair value by assigning weights to the various valuation sources. The following describes the valuation methodologies used by the Company to measure fair value, including an indication of the level in the fair value hierarchy in which each asset or liability is generally classified. Interest rate cap agreements - The Company has entered into certain interest rate cap agreements. These derivatives are recorded at fair value. Fair value was based on a model-driven valuation using the associated variable rate curve and an implied market volatility, both of which were observable at commonly quoted intervals for the full term of the interest rate cap agreements. Therefore, the Company’s interest rate cap agreements were classified within Level 2 of the fair value hierarchy and are included in other assets in the accompanying consolidated balance sheets. Changes in the fair value of the interest rate cap agreements are recorded as interest expense in the accompanying consolidated statements of operations. |
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Fair Value of Financial Instruments | Fair Value of Financial Instruments The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities, due to affiliates, distributions payable and mortgage notes payable, net. The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities and distributions payable to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. The fair value of amounts due to affiliates is not determinable due to the related party nature of such amounts. The Company has determined that its mortgage notes payable, net are classified as Level 3 within the fair value hierarchy. |
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Distribution Policy | Distribution Policy The Company elected to be taxed as a REIT commencing with the Company’s taxable year ended December 31, 2016. To maintain its qualification as a REIT, the Company intends to make distributions each taxable year equal to at least 90% of its REIT taxable income (which is determined without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). The Company’s board of directors declared a dividend to the holders of Class A shares and Class T shares which began to accrue on May 19, 2016. The Company’s board of directors also declared a dividend to the holders of Class R shares which began to accrue on August 2, 2016. Distributions declared during the year ended December 31, 2016, were based on daily record dates and calculated at a rate of $0.004098 per Class A share per day, $0.00393443 per Class R share per day and $0.003366 per Class T share per day. Distributions declared during the period from January 1, 2017 to March 31, 2017, were based on daily record dates and calculated at a rate of $0.004110 per Class A share per day, $0.00394521 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.27%, $0.00369863 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.67% and $0.003376 per Class T share per day. Distributions declared during the period from April 1, 2017 to June 30, 2017, were based on daily record dates and calculated at a rate of $0.004110 per Class A share per day, $0.00394521 per Class R share per day and $0.003376 per Class T share per day. Distributions declared during the period from July 1, 2017 to September 30, 2017, were based on daily record dates and calculated at a rate of $0.004110 per Class A share per day, $0.00394521 per Class R share per day and $0.003457 per Class T share per day. Each day during the period from May 19, 2016 to September 30, 2017, was a distribution record date with respect to Class A shares and Class T shares. Each day during the period from August 2, 2016 to September 30, 2017, was a distribution record date with respect to Class R shares. Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to qualify as a REIT under the Internal Revenue Code |
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Per Share Data | Per Share Data Basic loss per share attributable to common stockholders for all periods presented are computed by dividing net loss by the weighted average number of shares of the Company’s common stock outstanding for each class of shares outstanding during the period. Diluted loss per share is computed based on the weighted average number of shares of the Company’s common stock and all potentially dilutive securities, if any. Distributions declared per common share assume each share was issued and outstanding each day during the period. Nonvested shares of the Company’s restricted common stock give rise to potentially dilutive shares of the Company’s common stock but such shares were excluded from the computation of diluted earnings per share because such shares were anti-dilutive during the period. In accordance with FASB ASC Topic 260-10-45, Earnings Per Share, the Company uses the two-class method to calculate earnings per share. Basic earnings per share is calculated based on dividends declared and the rights of common shares and participating securities in any undistributed earnings, which represents net income remaining after deduction of dividends declared during the period. The undistributed earnings are allocated to all outstanding common shares based on the relative percentage of each class of shares to the total number of outstanding shares. The Company does not have any participating securities outstanding but does have multiple classes of common stock with different dividend rates and an unvested portion of restricted Class A common stock. Earnings attributable to the unvested restricted Class A common stock are deducted from earnings in the computation of per share amounts where applicable. |
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Segment Disclosure | Segment Disclosure The Company has determined that it has one reportable segment with activities related to investing in multifamily properties. The Company’s investments in real estate are in different geographic regions, and management evaluates operating performance on an individual asset level. However, as each of the Company’s assets has similar economic characteristics, tenants and products and services, its assets have been aggregated into one reportable segment. |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The new guidance requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new guidance supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification. The new guidance does not apply to lease contracts within the scope of Leases (Topic 840). In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), which delayed the effective date of the new guidance by one year, which will result in the new guidance being effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and is to be applied retrospectively. Early adoption is permitted, but can be no earlier than the original public entity effective date of fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company anticipates selecting the modified retrospective transition method with a cumulative effect recognized as of the date of adoption and will adopt the new standard effective January 1, 2018. The Company is continuing to evaluate the standard’s impact on its revenue recognition with regard to revenue from tenant reimbursements and other. Based on its preliminary assessment, the Company identified the following types of revenues from non-lease components: application and credit card checks fees, electronic payment convenience fee and participation revenue from cable providers, laundry service providers and vending machines. The company is currently in the process of reviewing its revenue contracts and will then aggregate and quantify the results of its assessment by the end of its fiscal year. Based on its ongoing assessment, the Company does not expect a material impact on its revenue recognition in the consolidated financial statements because revenue from these sources is immaterial to the consolidated financial statements. The Company is also not expecting to experience a material impact from adopting this new guidance in connection with its rental revenue, as rental revenue from leasing arrangements is specifically excluded from the standard. In February 2016, the FASB issued ASU 2016-02, Leases, amending the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The new standard requires a modified retrospective transition approach. The guidance will be effective in the first quarter of 2019 and allows for early adoption. The Company is in the preliminary stages of evaluating the impact of this ASU on its leases both as it relates to the Company acting as a lessor and as a lessee. Based on the preliminary results of its evaluation, as it relates to the former, the Company does not expect any material impact on the recognition of leases in the consolidated financial statements because under this guidance, lessors will continue to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases, and operating leases. As it relates to the latter, the Company does not expect a material impact on the recognition of leases in the consolidated financial statements because the quantity of leased equipment by the Company is limited. The Company plans to complete its assessment process by the end of the fourth quarter of 2017 and plans to adopt this ASU on January 1, 2019. In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting, that simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The guidance is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those years. The Company adopted this guidance as of January 1, 2017. The Company did not experience a material impact from adopting this new guidance. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force), that clarifies how certain cash receipts and cash payments should be classified on the statement of cash flows. This ASU addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. The Company adopted this guidance as of July 1, 2016. The Company did not experience a material impact from adopting this new guidance. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash, that requires that a statement of cash flows explains the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the definition of business (“ASU 2017-01”), that clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. This ASU provides a screen to determine when a set is not a business. If the screen is not met, it (1) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) removes the evaluation of whether a market participant could replace the missing elements. The guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. The Company adopted this guidance as of January 1, 2017. The Company capitalized $4,808,726 of acquisition fees and expenses on the consolidated balance sheet as of September 30, 2017 related to the acquisitions of Reflections on Sweetwater Apartments, The Pointe at Vista Ridge Apartments, Belmar Villas and Ansley at Princeton Lakes on January 12, 2017, May 25, 2017, July 21, 2017 and August 31, 2017, respectively. Acquisition fees and acquisition expenses were included in fees to affiliates and acquisition costs, respectively, on the consolidated statements of operations prior to the adoption of this guidance. Upon adoption of this guidance, all such costs are included in the purchase price that is allocated between land, buildings and improvements and tenant origination and absorption costs on the consolidated balance sheets. In February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“Subtopic 610-20”): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”), that clarifies that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset and defines the term in substance nonfinancial asset. ASU 2017-05 also clarifies that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. Subtopic 610-20, which was issued in May 2014 as part of ASU 2014-09 (discussed above), provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. An entity is required to apply amendments in ASU 2017-05 at the same time it applies the amendments in ASU 2014-09 (discussed above). ASU 2017-05 requires retrospective application and is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures. In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). The FASB issued ASU 2017-09 to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation - Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU No. 2017-09 requires prospective application and is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures. |
Summary of Significant Accounting Policies (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assets Required to be Measured at Fair Value on a Recurring Basis | The following tables reflect the Company’s assets required to be measured at fair value on a recurring basis on the consolidated balance sheets:
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Real Estate (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Purchase Price Allocation | During the nine months ended September 30, 2017, the Company acquired the following properties:
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Schedule of Accumulated Depreciation and Amortization Related to Consolidated Real Estate Properties and Related Intangibles | As of September 30, 2017 and December 31, 2016, accumulated depreciation and amortization related to the Company’s consolidated real estate properties and related intangibles were as follows:
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Other Assets (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Assets | As of September 30, 2017 and December 31, 2016, other assets consisted of:
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Debt (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Mortgage Notes Payable Secured by Real Property | The following is a summary of mortgage notes payable, net secured by real property as of September 30, 2017 and December 31, 2016.
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Summary of Aggregate Maturities | The following is a summary of the Company’s aggregate maturities as of September 30, 2017:
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Stockholders' Equity (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock by Class | The following table reflects information regarding shares of common stock sold in the Public Offering from inception through September 30, 2017:
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Schedule of Restricted Stock Issued to Independent Directors as Compensation for Services | The issuance and vesting activity for the nine months ended September 30, 2017 and year ended December 31, 2016 for the restricted stock issued to the Company’s independent directors as compensation for services in connection with the Company raising $2,000,000 in the Public Offering and the independent directors’ re-election to the board of directors at the Company’s 2017 annual meeting is as follows:
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Schedule of Share Repurchase Plan Prior to Estimated Value Per Share of Common Stock is Published | Prior to the date the Company publishes an estimated value per share of its common stock, the purchase price for shares repurchased under the Company’s share repurchase program is as follows:
Following the date the Company publishes an estimated value per share of its common stock, the purchase price for shares repurchased under the Company’s share repurchase program will be as follows:
(1) As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock. Repurchase price includes the full amount paid for each share, including all sales commissions and dealer manager fees. (2) The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares. The required one-year holding period does not apply to repurchases requested within 270 days after the death or disability of a stockholder. (3) For purposes of the share repurchase program, until the day the Company publicly discloses a new estimated value per share, the purchase price for shares purchased under the share repurchase program will equal, exclusively, the purchase price paid for the shares. Thereafter, the repurchase price will be a graduated percentage of the lesser of the purchase price or the estimated value per share in effect at the time of repurchase. The estimated value per share will be determined by the Company’s board of directors, based on periodic valuations by independent third-party appraisers or qualified independent valuation experts selected by the Advisor. (4) The Company’s board of directors will determine an estimated value per share of its common stock based on valuations by independent third-party appraisers or qualified valuation experts no later than 150 days following the second anniversary of breaking escrow in its Public Offering, or October 13, 2018, or such earlier time as required by any regulatory requirement regarding the timing of a valuation. |
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Schedule of Share Repurchase Plan Following Estimated Value Per Share of Common Stock is Published | Following the date the Company publishes an estimated value per share of its common stock, the purchase price for shares repurchased under the Company’s share repurchase program will be as follows:
(1) As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock. Repurchase price includes the full amount paid for each share, including all sales commissions and dealer manager fees. (2) The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares. The required one-year holding period does not apply to repurchases requested within 270 days after the death or disability of a stockholder. (3) For purposes of the share repurchase program, until the day the Company publicly discloses a new estimated value per share, the purchase price for shares purchased under the share repurchase program will equal, exclusively, the purchase price paid for the shares. Thereafter, the repurchase price will be a graduated percentage of the lesser of the purchase price or the estimated value per share in effect at the time of repurchase. The estimated value per share will be determined by the Company’s board of directors, based on periodic valuations by independent third-party appraisers or qualified independent valuation experts selected by the Advisor. (4) The Company’s board of directors will determine an estimated value per share of its common stock based on valuations by independent third-party appraisers or qualified valuation experts no later than 150 days following the second anniversary of breaking escrow in its Public Offering, or October 13, 2018, or such earlier time as required by any regulatory requirement regarding the timing of a valuation. |
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Schedule of Per Share Daily and Annualized Distribution Rates | The following table reflects per share daily distribution rates and annualized distribution rates for the first, second and third fiscal quarters of 2017 and 2016:
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Dividends Declared | The following table reflects distributions declared and paid to Class A common stockholders, Class R common stockholders and Class T common stockholders for the three and nine months ended September 30, 2017 and 2016:
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Related Party Arrangements (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Amounts Attributable to the Advisor and its Affiliates | Amounts attributable to the Advisor and its affiliates incurred for the three and nine months ended September 30, 2017 and 2016 and amounts outstanding to the Advisor and its affiliates as of September 30, 2017 and December 31, 2016 are as follows:
_____________________
|
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Schedule of Reimbursable Organization and Offering Costs | The amount of reimbursable organization and offering (“O&O”) costs that have been paid or recognized from inception through September 30, 2017, is as follows:
_____________________
|
Derivative Financial Instruments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Interest Rate Derivatives | The following tables provide the terms of the Company’s interest rate derivative instruments that were in effect at September 30, 2017 and December 31, 2016:
|
Organization and Business - Narrative (Details) |
Aug. 24, 2015
USD ($)
$ / shares
shares
|
Sep. 30, 2017
$ / shares
|
Sep. 30, 2017
multifamily_property
|
Sep. 30, 2017
residential_unit
|
Sep. 30, 2017
apartment
|
---|---|---|---|---|---|
Initial capitalization | |||||
Number of multifamily properties | multifamily_property | 7 | ||||
Number of apartment homes | 1,204 | 1,836 | |||
Common Class A [Member] | |||||
Initial capitalization | |||||
Share price (in dollars per share) | $ 25.00 | ||||
Common Class A [Member] | Advisor [Member] | |||||
Initial capitalization | |||||
Issuance of common stock (in shares) | shares | 8,000 | ||||
Share price (in dollars per share) | $ 25.00 | ||||
Issuance of common stock | $ | $ 200,000 |
Summary of Significant Accounting Policies - Schedule of Assets Required to be Measured at Fair Value on a Recurring Basis (Details) - Interest Rate Cap [Member] - Fair Value, Measurements, Recurring [Member] - USD ($) |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Level 1 [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Interest rate cap agreements | $ 0 | $ 0 |
Level 2 [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Interest rate cap agreements | 197,936 | 413,131 |
Level 3 [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Interest rate cap agreements | $ 0 | $ 0 |
Summary of Significant Accounting Policies - Fair Value of Financial Instruments (Details) - USD ($) |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage notes payable, net | $ 202,794,204 | $ 72,016,933 |
Level 3 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage notes payable, fair value | 206,043,283 | 72,128,601 |
Reported Value Measurement [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage notes payable, net | $ 202,794,204 | $ 72,016,933 |
Summary of Significant Accounting Policies - Segment Disclosure (Details) |
9 Months Ended |
---|---|
Sep. 30, 2017
segment
| |
Accounting Policies [Abstract] | |
Number of reportable segments | 1 |
Summary of Significant Accounting Policies - Recent Accounting Pronouncements (Details) |
Sep. 30, 2017
USD ($)
|
---|---|
Accounting Standards Update 2017-01 [Member] | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Capitalized transaction costs | $ 4,808,726 |
Real Estate - Operating Leases (Details) |
9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017
residential_unit
tenant
|
Dec. 31, 2016
USD ($)
tenant
|
Sep. 30, 2017
apartment
|
Sep. 30, 2017
USD ($)
|
|
Real Estate Properties [Line Items] | ||||
Units | 1,204 | 1,836 | ||
Average percentage of real estate portfolio occupied | 93.40% | 95.90% | ||
Operating lease term | 12 months | |||
Tenant [Member] | Customer Concentration Risk [Member] | ||||
Real Estate Properties [Line Items] | ||||
Number of tenants | tenant | 0 | 0 | ||
Accounts Payable and Accrued Liabilities [Member] | ||||
Real Estate Properties [Line Items] | ||||
Security deposit liability | $ | $ 252,387 | $ 532,923 | ||
Residential Real Estate [Member] | ||||
Real Estate Properties [Line Items] | ||||
Units | apartment | 1,836 | |||
Average percentage of real estate portfolio occupied | 95.90% |
Other Assets (Details) - USD ($) |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid expenses | $ 251,165 | $ 113,150 |
Interest rate cap agreements | 197,936 | 413,131 |
Escrow deposits for pending real estate acquisitions | 0 | 650,100 |
Other deposits | 108,433 | 54,385 |
Other assets | $ 557,534 | $ 1,230,766 |
Debt - Summary of Aggregate Maturities (Details) |
Sep. 30, 2017
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
Total | $ 204,004,000 |
Remainder of 2017 | 0 |
2018 | 0 |
2019 | 53,989 |
2020 | 374,945 |
2021 | 935,679 |
Thereafter | $ 202,639,387 |
Debt - Narrative (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Debt Instrument [Line Items] | |||||
Amortization of deferred financing costs | $ 74,595 | $ 2,833 | |||
Unrealized loss | $ 89,571 | 503,935 | 8,780 | ||
Accounts Payable and Accrued Liabilities [Member] | |||||
Debt Instrument [Line Items] | |||||
Interest payable | 620,661 | 620,661 | $ 107,393 | ||
Interest Rate Cap [Member] | |||||
Debt Instrument [Line Items] | |||||
Unrealized loss | $ 11 | 8,780 | |||
Notes Payable to Banks [Member] | |||||
Debt Instrument [Line Items] | |||||
Mortgage note payable, net | 202,794,204 | 202,794,204 | $ 72,016,933 | ||
Interest expense | 1,741,955 | 44,901 | 3,865,967 | 74,575 | |
Amortization of deferred financing costs | $ 35,396 | $ 1,699 | $ 74,595 | $ 2,833 |
Stockholders' Equity - Schedule of Restricted Stock Issued to Independent Directors as Compensation for Services (Details) - Restricted Stock [Member] - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | ||
Nonvested shares at the beginning of the period (in shares) | 4,500 | 0 |
Granted shares (in shares) | 3,000 | 6,000 |
Vested shares (in shares) | (2,250) | (1,500) |
Nonvested shares at the end of the period (in shares) | 5,250 |
Stockholders' Equity - Preferred Stock (Details) |
9 Months Ended | |
---|---|---|
Sep. 30, 2017
class
shares
|
Dec. 31, 2016
shares
|
|
Equity [Abstract] | ||
Number of share series | class | 1 | |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Stockholders' Equity - Schedule of Share Repurchase Plan Prior to Estimated Value Per Share of Common Stock is Published (Details) - Share Repurchase Plan Pre Published Valuation [Member] - Common Class A [Member] |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Class of Stock [Line Items] | |
Less than 1 year | 0.00% |
1 year | 92.50% |
2 years | 95.00% |
3 years | 97.50% |
4 years | 100.00% |
Stockholders' Equity - Schedule of Share Repurchase Plan Following Estimated Value Per Share of Common Stock is Published (Details) - Share Repurchase Plan Post Published Valuation [Member] - Common Class A [Member] |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Class of Stock [Line Items] | |
Less than 1 year | 0.00% |
1 year | 92.50% |
2 years | 95.00% |
3 years | 97.50% |
4 years | 100.00% |
Stockholders' Equity - Schedule of Distributions Declared and Paid (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Class of Stock [Line Items] | ||||
DRP distributions declared (in shares) | 36,728 | 4,596 | 84,366 | 5,192 |
DRP distributions declared (value) | $ 848,481 | $ 107,613 | $ 1,951,100 | $ 121,750 |
Cash distributions declared | 923,989 | 109,988 | 2,136,136 | 121,225 |
Total distributions declared | $ 1,772,470 | $ 217,601 | $ 4,087,236 | $ 242,975 |
DRP distributions paid (in shares) | 33,969 | 2,838 | 76,510 | 2,986 |
DRP distributions paid (value) | $ 785,136 | $ 66,717 | $ 1,770,380 | $ 70,228 |
Cash distributions paid | 866,720 | 68,693 | 1,940,373 | 71,088 |
Total distributions paid | $ 1,651,856 | $ 135,410 | $ 3,710,753 | $ 141,316 |
Common Class A [Member] | ||||
Class of Stock [Line Items] | ||||
DRP distributions declared (in shares) | 15,779 | 3,232 | 38,075 | 3,812 |
DRP distributions declared (value) | $ 374,749 | $ 76,757 | $ 904,284 | $ 90,536 |
Cash distributions declared | 546,925 | 87,932 | 1,334,483 | 99,029 |
Total distributions declared | $ 921,674 | $ 164,689 | $ 2,238,767 | $ 189,565 |
DRP distributions paid (in shares) | 14,900 | 2,236 | 35,356 | 2,384 |
DRP distributions paid (value) | $ 353,878 | $ 53,105 | $ 839,713 | $ 56,616 |
Cash distributions paid | 526,004 | 58,713 | 1,232,281 | 61,108 |
Total distributions paid | $ 879,882 | $ 111,818 | $ 2,071,994 | $ 117,724 |
Common Class R [Member] | ||||
Class of Stock [Line Items] | ||||
DRP distributions declared (in shares) | 937 | 48 | 2,219 | 48 |
DRP distributions declared (value) | $ 21,071 | $ 1,084 | $ 49,918 | $ 1,084 |
Cash distributions declared | 62,302 | 1,109 | 143,616 | 1,109 |
Total distributions declared | $ 83,373 | $ 2,193 | $ 193,534 | $ 2,193 |
DRP distributions paid (in shares) | 826 | 2 | 1,986 | 2 |
DRP distributions paid (value) | $ 18,596 | $ 35 | $ 44,690 | $ 35 |
Cash distributions paid | 58,612 | 16 | 130,622 | 16 |
Total distributions paid | $ 77,208 | $ 51 | $ 175,312 | $ 51 |
Common Class T [Member] | ||||
Class of Stock [Line Items] | ||||
DRP distributions declared (in shares) | 20,012 | 1,316 | 44,072 | 1,332 |
DRP distributions declared (value) | $ 452,661 | $ 29,772 | $ 996,898 | $ 30,130 |
Cash distributions declared | 314,762 | 20,947 | 658,037 | 21,087 |
Total distributions declared | $ 767,423 | $ 50,719 | $ 1,654,935 | $ 51,217 |
DRP distributions paid (in shares) | 18,243 | 600 | 39,168 | 600 |
DRP distributions paid (value) | $ 412,662 | $ 13,577 | $ 885,977 | $ 13,577 |
Cash distributions paid | 282,104 | 9,964 | 577,470 | 9,964 |
Total distributions paid | $ 694,766 | $ 23,541 | $ 1,463,447 | $ 23,541 |
Related Party Arrangements - Investment Management Fee (Details) - Advisor [Member] |
9 Months Ended |
---|---|
Sep. 30, 2017
USD ($)
| |
Investment Management Fee [Member] | |
Related Party Transaction [Line Items] | |
Aggregate cost of investments in properties and real estate related assets, threshold | $ 300,000,000 |
One twelfth of 1.0% [Member] | |
Related Party Transaction [Line Items] | |
Monthly investment management fee, percentage | 0.0417% |
One twelfth of .50% [Member] | |
Related Party Transaction [Line Items] | |
Monthly investment management fee, percentage | 0.0833% |
Related Party Arrangements - Acquisition Fees and Expenses (Details) - Advisor [Member] - Acquisition Fees and Expenses [Member] |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Related Party Transaction [Line Items] | |
Acquisition fee, percent | 2.00% |
Acquisition fee payable without board approval as a percent of total contract price | 6.00% |
Related Party Arrangements - Loan Coordination Fee (Details) |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Advisor [Member] | Loan Coordination Fee [Member] | |
Related Party Transaction [Line Items] | |
Loan coordination fee, other than acquisitions | 0.75% |
Related Party Arrangements - Other Operating Expense Reimbursements (Details) - Advisor [Member] |
9 Months Ended |
---|---|
Sep. 30, 2017
quarter
| |
Other Operating Expense Reimbursement [Member] | |
Related Party Transaction [Line Items] | |
Operating expense limitation, number of rolling quarters | 4 |
Operating expenses limitation as a percentage of average invested assets | 2.00% |
Operating expenses limitation as a percentage of net income | 25.00% |
Average invested assets, calculation period | 12 months |
Disposition Fee [Member] | |
Related Party Transaction [Line Items] | |
Operating expenses limitation as a percentage of average invested assets | 2.00% |
Operating expenses limitation as a percentage of net income | 25.00% |
Related Party Arrangements - Disposition Fee (Details) - Advisor [Member] - Disposition Fee [Member] |
9 Months Ended |
---|---|
Sep. 30, 2017
USD ($)
| |
Related Party Transaction [Line Items] | |
Property sale disposition fee, maximum percentage of total sale price | 1.50% |
Disposition fee percentage | 1.00% |
Operating expenses limitation as a percentage of average invested assets | 2.00% |
Operating expenses limitation as a percentage of net income | 25.00% |
Disposition fees incurred | $ 0 |
Related Party Arrangements - Subordinated Distribution (Details) - Advisor [Member] |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Related Party Transaction [Line Items] | |
Subordinated participation in net sales proceeds, percent of net sale proceeds receivable | 15.00% |
Non-compounded return rate | 6.00% |
Consecutive trading days | 30 days |
Days after shares are first on market | 180 days |
Derivative Financial Instruments - Schedule of Interest Rate Derivatives (Details) - Interest Rate Cap [Member] |
Sep. 30, 2017
USD ($)
instrument
|
Dec. 31, 2016
USD ($)
instrument
|
---|---|---|
Derivative [Line Items] | ||
Number of Instruments | instrument | 6 | 3 |
Notional Amount | $ 156,892,000 | $ 72,426,000 |
Weighted Average Rate Cap | 2.59% | 2.70% |
Fair Value | $ 197,936 | $ 413,131 |
LIBOR [Member] | ||
Derivative [Line Items] | ||
Variable Rate | 1.23% | 0.77% |
Derivative Financial Instruments - Narrative (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Derivative [Line Items] | |||||
Unrealized loss | $ 89,571 | $ 503,935 | $ 8,780 | ||
Interest Rate Cap [Member] | |||||
Derivative [Line Items] | |||||
Unrealized loss | $ 11 | 8,780 | |||
Fair value of interest rate cap agreement | 197,936 | 197,936 | $ 413,131 | ||
Interest Rate Cap [Member] | Deferred Financing Costs and Other Assets, Net [Member] | |||||
Derivative [Line Items] | |||||
Fair value of interest rate cap agreement | 197,936 | 197,936 | $ 413,131 | ||
Interest Expense [Member] | Interest Rate Cap [Member] | |||||
Derivative [Line Items] | |||||
Unrealized loss | 89,571 | $ 11 | $ 503,935 | 8,780 | |
Acquired interest rate cap agreements | $ 288,740 | $ 8,800 |
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