ck0001466225-10q_20200331.htm

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

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

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

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

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

As of May 6, 2020, there were 70,026,413 shares of common stock of Resource Real Estate Opportunity REIT, Inc., $0.01 par value per share, outstanding.

Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expects,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will” and “would” or the negative of these terms or other comparable terminology. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company’s control and which could materially affect the Company’s results of operations, financial condition, cash flows, performance or future achievements or events. Currently, one of the most significant factors is the potential adverse effect of the current pandemic of the novel coronavirus, or COVID-19, on the financial condition, results of operations, cash flows and performance of the Company, particularly its ability to collect rent, the personal financial condition of its tenants and their ability to pay rent, and the real estate market and the global economy and financial markets. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The extent to which COVID-19 impacts the Company and its tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, you should interpret many of the risks identified in our Annual Report on Form 10-K for the year ended December 31, 2019 as being heightened as a result of the ongoing and numerous adverse impacts COVID-19. Actual results may differ materially from those contemplated by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances after the date of this report, except as may be required under applicable law.

	March 31, 2020			December 31, 2019
	(unaudited)
ASSETS
Investments:
Rental properties, net	$	927,762		$	938,144
Loan held for investment, net		811			809
Identified intangible assets, net		11			14
Total investments		928,584			938,967
Cash		43,854			49,534
Restricted cash		6,887			12,304
Subtotal- cash and restricted cash		50,741			61,838
Due from related parties		16			236
Tenant receivables, net		212			189
Deposits		219			220
Prepaid expenses and other assets		6,662			2,853
Goodwill		404			404
Operating lease right-of-use assets		169			381
Total assets	$	987,007		$	1,005,088
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable, net	$	797,601		$	799,865
Accounts payable		859			235
Accrued expenses and other liabilities		8,791			8,430
Accrued real estate taxes		5,658			9,086
Due to related parties		1,014			683
Tenant prepayments		946			1,087
Security deposits		2,542			2,506
Operating lease liabilities		169			381
Total liabilities	$	817,580		$	822,273
Stockholders' Equity:
Preferred stock (par value $.01; 10,000,000 shares authorized, none issued)		—			—
Common stock (par value $.01; 1,000,000,000 shares authorized; 70,026,413 and 69,467,689 shares issued and outstanding, respectively)		700			695
Convertible stock (“promote shares”; par value $.01; 50,000 shares authorized; 49,935 shares issued and outstanding)		1			1
Additional paid-in capital		622,244			616,465
Accumulated other comprehensive loss		(120	)		(218	)
Accumulated deficit		(453,398	)		(434,128	)
Total stockholders’ equity		169,427			182,815
Total liabilities and stockholders' equity	$	987,007		$	1,005,088

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

	Three Months Ended
	March 31,
	2020			2019
Revenues:
Rental income	$	33,376		$	34,878
Interest and dividend income		58			94
Total revenues		33,434			34,972
Expenses:
Rental operating - expenses		6,360			6,611
Rental operating - payroll		2,975			3,556
Rental operating - real estate taxes		4,388			4,384
Subtotal - Rental operating expenses		13,723			14,551
Acquisition fees		113			—
Management fees		4,583			4,756
General and administrative		2,686			2,772
Loss on disposal of assets		109			151
Depreciation and amortization expense		13,161			13,597
Total expenses		34,375			35,827
Loss before net gains on dispositions		(941	)		(855	)
Net gain on disposition of property		—			34,575
(Loss) Income before other income (expense)		(941	)		33,720
Other income (expense):
Interest expense		(7,880	)		(11,075	)
Insurance proceeds in excess of cost basis		—			536
Total other (expense) income		(7,880	)		(10,539	)
Net (loss) income	$	(8,821	)	$	23,181
Other comprehensive income (loss):
Reclassification adjustment for realized loss on designated derivatives		44			172
Designated derivatives, fair value adjustments		54			(28	)
Total other comprehensive (loss) income		98			144
Comprehensive (loss) income	$	(8,723	)	$	23,325

Weighted average common shares outstanding		69,670			70,557
Basic and diluted loss (income) per common share:
Net (loss) income per common share	$	(0.13	)	$	0.33

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

	Common Stock						Convertible Stock				Additional Paid- in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount
Balance at January 1, 2020		69,468		$	695			50	$	1	$	616,465		$	(218	)	$	(434,128	)	$	182,815
Common stock issued through the distribution reinvestment plan		586			6			—		—		6,079			—			—			6,085
Distributions declared		—			—			—		—		—			—			(10,449	)		(10,449	)
Common stock redemptions		(28	)		(1	)		—		—		(300	)		—			—			(301	)
Other comprehensive income		—			—			—		—		—			98			—			98
Net loss		—			—			—		—		—			—			(8,821	)		(8,821	)
Balance at March 31, 2020		70,026		$	700			50	$	1	$	622,244		$	(120	)	$	(453,398	)	$	169,427

	Common Stock						Convertible Stock				Additional Paid- in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount
Balance at January 1, 2019		70,428		$	704			50	$	1	$	626,436		$	(474	)	$	(390,361	)	$	236,306
Common stock issued through the distribution reinvestment plan		613			6			—		—		6,292			—			—			6,298
Distributions declared		—			—			—		—		—			—			(10,556	)		(10,556	)
Common stock redemptions		(789	)		(8	)		—		—		(8,094	)		—			—			(8,102	)
Other comprehensive income		—			—			—		—		—			144			—			144
Net income		—			—			—		—		—			—			23,181			23,181
Balance at March 31, 2019		70,252		$	702			50	$	1	$	624,634		$	(330	)	$	(377,736	)	$	247,271

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

	Three Months Ended
	March 31,
	2020			2019
Cash flows from operating activities:
Net (loss) income	$	(8,821	)	$	23,181
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Loss on disposal of assets		109			151
Casualty losses (gains)		12			(609	)
Net gain on disposition of property		—			(34,575	)
Depreciation and amortization		13,161			13,597
Amortization of deferred financing costs		396			995
Amortization of debt premium (discount)		(82	)		(83	)
Realized loss on change in fair value of interest rate cap		44			172
Accretion of discount and direct loan fees and costs		(6	)		(13	)
Changes in operating assets and liabilities, net of acquisitions:
Tenant receivables, net		(23	)		90
Deposits		1			—
Prepaid expenses and other assets		(3,740	)		(1,762	)
Due to/from related parties, net		551			(99	)
Accounts payable and accrued expenses		(3,679	)		(4,597	)
Tenant prepayments		(141	)		103
Security deposits		36			36
Net cash used in operating activities		(2,182	)		(3,413	)
Cash flows from investing activities:
Proceeds from disposal of property, net of closing costs		—			12,897
Insurance proceeds received for casualty losses		131			609
Capital expenditures		(1,792	)		(2,905	)
Principal payments received on loans held for investment		4			8
Net cash (used in) provided by investing activities		(1,657	)		10,609
Cash flows from financing activities:
Redemptions of common stock		(301	)		(8,102	)
Principal repayments on mortgages		(2,578	)		(2,100	)
Purchase of interest rate caps		(15	)		(23	)
Distributions paid on common stock		(4,364	)		(4,258	)
Net cash used in financing activities		(7,258	)		(14,483	)
Net decrease in cash and restricted cash		(11,097	)		(7,287	)
Cash and restricted cash at beginning of period		61,838			78,621
Cash and restricted cash at end of period	$	50,741		$	71,334
Reconciliation to consolidated balance sheets
Cash	$	43,854		$	63,382
Restricted cash		6,887			7,952
Cash and restricted cash at end of period	$	50,741		$	71,334

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

Resource Real Estate Opportunity REIT, Inc. (the “Company”) was organized in Maryland on June 3, 2009 for the purpose of owning a diversified portfolio of discounted U.S. commercial real estate and real estate-related assets in order to generate gains to stockholders from the potential appreciation in the value of the assets and to generate current income for stockholders by distributing cash flow from the Company’s investments. Resource Real Estate Opportunity Advisor, LLC (the “Advisor”), an indirect wholly-owned subsidiary of Resource America, Inc. (“RAI”) has been engaged to manage the day-to-day operations of the Company.

RAI is a wholly-owned subsidiary of C-III Capital Partners LLC, ("C-III"), a leading commercial real estate investment management and services company engaged in a broad range of activities. C-III controls both our Advisor and Resource Real Estate Opportunity Manager, LLC (the "Manager"), the Company's property manager; C-III also controls all of the shares of common stock held by the Advisor.

Through its private offering and primary public offering, which concluded on December 13, 2013, the Company raised aggregate gross offering proceeds of $645.8 million, which resulted in the issuance of 64.9 million shares of common stock, including approximately 276,000 shares purchased by the Advisor and 1.2 million shares sold in the Company's distribution reinvestment plan. During the years ended December 31, 2019 and 2018, the Company issued approximately 4.9 million additional shares for $50.4 million pursuant to its distribution reinvestment plan. During the three months ended March 31, 2020, the Company issued approximately 586,500 additional shares for $6.1 million pursuant to its distribution reinvestment plan. The Company's distribution reinvestment plan offering is ongoing.

The Company has acquired real estate and real estate-related debt. The Company has a focus on owning and operating multifamily assets; it has targeted this asset class consistent with its investment objectives. The Company’s portfolio predominantly consists of multifamily rental properties to which the Company has added or will add value with a capital infusion (referred to as “value add properties”). However, the Company is not limited in the types of real estate assets in which it may invest and, accordingly, it may invest in other real estate-related assets either directly or together with a co-investor or joint venture partner.

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

The consolidated financial statements and the information and tables contained in the notes to the consolidated financial statements are unaudited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). However, in the opinion of management, these interim financial statements include all the necessary adjustments to fairly present the results of the interim periods presented. The consolidated balance sheet as of December 31, 2019 was derived from the audited consolidated financial statements as of and for the year ended December 31, 2019. The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The results of operations for the three months ended March 31, 2020 may not necessarily be indicative of the results of operations for the full year ending December 31, 2020.

Currently, one of the most significant risks and uncertainties facing the Company and the real estate industry generally is the potential adverse effect of the ongoing public health crisis of the novel coronavirus disease (COVID-19) pandemic. The extent to which the COVID-19 pandemic impacts the Company’s operations and those of its tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. See Note 17, “Subsequent Events” for a further discussion on the COVID-19 pandemic.

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

The accompanying consolidated financial statements have been prepared in conformity with GAAP. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries as follows:

Subsidiary	Apartment Complex	Number of Units		Property Location
RRE Opportunity Holdings, LLC	N/A	N/A		N/A
Resource Real Estate Opportunity OP, LP	N/A	N/A		N/A
RRE Charlemagne Holdings, LLC	N/A	N/A		N/A
RRE Iroquois, LP (“Vista”)	Vista Apartment Homes		133	Philadelphia, PA
RRE Iroquois Holdings, LLC	N/A	N/A		N/A
RRE Cannery Holdings, LLC (“Cannery”)	Cannery Lofts		156	Dayton, OH
RRE Autumn Wood Holdings, LLC ("Autumn Wood")	Retreat at Rocky Ridge		206	Hoover, AL
RRE Village Square Holdings, LLC ("Village Square")	Trailpoint at the Woodlands		271	Houston, TX
RRE Brentdale Holdings, LLC ("Brentdale")	The Westside Apartments		412	Plano, TX
RRE Jefferson Point Holdings, LLC ("Jefferson Point")	Tech Center Square		208	Newport News,VA
RRE Centennial Holdings, LLC ("Centennial")	Verona Apartment Homes		276	Littleton, CO
RRE Pinnacle Holdings, LLC ("Pinnacle")	Skyview Apartment Homes		224	Westminster, CO
RRE River Oaks Holdings, LLC ("River Oaks")	Maxwell Townhomes		316	San Antonio, TX
RRE Nicollet Ridge Holdings, LLC ("Nicollet Ridge")	Meridian Pointe		339	Burnsville, MN
PRIP Coursey, LLC ("Evergreen at Coursey Place") (a)	Evergreen at Coursey Place		352	Baton Rouge, LA
PRIP Pines, LLC ("Pines of York") (a)	Pines of York		248	Yorktown, VA
RRE Addison Place Holdings, LLC ("Addison Place")	The Estates at Johns Creek		403	Alpharetta, GA
RRE Berkeley Run Holdings, LLC ("Berkley Run")	Perimeter Circle		194	Atlanta, GA
RRE Berkeley Trace Holdings LLC ("Berkley Trace")	Perimeter 5550		165	Atlanta, GA
RRE Merrywood Holdings, LLC ("Merrywood")	Aston at Cinco Ranch		228	Katy, TX
RRE Sunset Ridge Holdings, LLC ("Sunset Ridge")	Sunset Ridge		324	San Antonio, TX
RRE Parkridge Place Holdings, LLC ("Parkridge Place")	Calloway at Las Colinas		536	Irving, TX
RRE Woodmoor Holdings, LLC ("Woodmoor")	South Lamar Village		208	Austin, TX
RRE Gilbert Holdings, LLC ("Springs at Gilbert")	Heritage Pointe		458	Gilbert, AZ
RRE Bonita Glen Holdings, LLC ("Bonita")	Point Bonita Apartment Homes		294	Chula Vista, CA
RRE Yorba Linda Holdings, LLC ("Yorba Linda")	The Bryant at Yorba Linda		400	Yorba Linda, CA
RRE Providence Holdings, LLC ("Providence in the Park")	Providence in the Park		524	Arlington, TX
RRE Green Trails Holdings, LLC ("Green Trails")	Green Trails Apartment Homes		440	Lisle, IL
RRE Terraces at Lake Mary Holdings, LLC ("Lake Mary")	Terraces at Lake Mary		284	Lake Mary, FL
RRE Courtney Meadows Holdings, LLC ("Courtney Meadows")	Courtney Meadows Apartments		276	Jacksonville, FL
RRE Sandy Springs Holdings, LLC ("Sandy Springs")	Addison at Sandy Springs		236	Sandy Springs,GA
RRE Grapevine Holdings, LLC ("Bristol Grapevine")	Bristol Grapevine		376	Grapevine, TX
			8,487

All intercompany accounts and transactions have been eliminated in consolidation.

The Company does not evaluate performance on a relationship-specific or transactional basis and does not distinguish its principal business or group its operations on a geographical basis for purposes of measuring performance. Accordingly, the Company believes it has a single operating segment for reporting purposes in accordance with GAAP.

At March 31, 2020, the Company's real estate investments in Texas, California, and Georgia represented 31%, 17%, and 15%, respectively, of the net book value of its rental property assets. Any adverse economic or real estate developments

in these markets, such as the impact of the COVID-19 pandemic, business layoffs or downsizing, industry slowdowns, relocations of businesses, adverse weather events, changing demographics and other factors, or any decrease in demand for multifamily rentals resulting from the local business climate, could adversely affect the Company's operating results and its ability to make distributions to stockholders.

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

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

In January 2017, FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment", which alters the current goodwill impairment testing procedures to eliminate Step 2. Step 2 required that, if the carrying amount of a reporting unit exceeded its fair value, the implied fair value of the goodwill must be compared to the carrying amount in order to determine impairment. The Company adopted the standard on January 1, 2020, and the adoption did not have a significant impact on its consolidated financial statements.

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

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

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

The Company presents rental property assets that qualify as held for sale separately in the consolidated balance sheets. Real estate assets held for sale are measured at the lower of carrying amount or fair value less cost to sell. Subsequent to classification of an asset as held for sale, no further depreciation is recorded. As of March 31, 2020 and December 31, 2019, the Company had no rental properties included in assets held for sale.

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

Improvements and replacements in excess of $1,000 are capitalized when they have a useful life greater than or equal to one year. Construction management fees (further discussed in Note 12) are capitalized along with the related asset. Costs of repairs and maintenance are expensed as incurred.

When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for permanent impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. The review also considers factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors.

If an impairment exists, due to the Company's inability to recover the carrying value of a property, an impairment loss will be recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income. As of March 31, 2020, the Company evaluated whether the global economic disruption caused by the COVID-19 pandemic was an impairment indicator. The Company examined a number of factors and concluded that there was no indication that the carrying value of the Company’s investments in real estate might not recoverable as of March 31, 2020. There were no impairment losses recorded on long-lived assets during the three months ended March 31, 2020 and 2019.

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

The amount of impairment, if any, is measured by comparing the recorded amount of the loan to the present value of the expected cash flows or, as a practical expedient, the fair value of the collateral. If a loan is deemed to be impaired, the Company records a reserve for loan losses through a charge to income for any shortfall.

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

The Company may acquire real estate loans at a discount due to the credit quality of such loans and the respective borrowers under such loans. Revenues from these loans are recorded under the effective interest method. Under this method, an effective interest rate (“EIR”) is applied to the cost basis of the real estate loan held for investment. The EIR that is calculated when the loan held for investment is acquired remains constant and is the basis for subsequent impairment testing and income recognition. However, if the amount and timing of future cash collections are not reasonably estimable, the

Company accounts for the real estate receivable on the cost recovery method. Under the cost recovery method of accounting, no income is recognized until the basis of the loan held for investment has been fully recovered.

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

Upon the acquisition of real properties, the Company allocates the purchase price of properties to acquired tangible assets consisting of land, buildings, fixtures and improvements, identified intangible lease assets, consisting of the value of above-market and below-market leases, as applicable, the value of in-place leases, the value of tenant relationships, and liabilities, based in each case on their fair values.

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

The Company measures the aggregate value of other intangible assets acquired based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued as if it were vacant. Management’s estimates of value are determined by independent appraisers (e.g., discounted cash flow analysis). Factors to be considered in the analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions and costs to execute similar leases.

In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods. Management also estimates costs to execute similar leases including leasing commissions and legal and other related expenses to the extent that such costs have not already been incurred in connection with a new lease origination as part of the transaction.

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

The Company amortizes the value of in-place leases to expense over the average remaining term of the underlying leases. The value of customer relationship intangibles are amortized to expense over the initial term and any renewal periods in the respective leases, but in no event will the amortization periods for the intangible assets exceed the remaining depreciable life of the building.

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

The Company records the excess of the cost of an acquired entity over the difference between the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed as goodwill. Goodwill is not amortized but is tested for impairment at a level of reporting referred to as a reporting unit during the fourth quarter of each calendar year, or more frequently if events or changes in circumstances indicate that the asset might be impaired. There have been no such events or changes in circumstances during the three months ended March 31, 2020.

The Company recognizes minimum rent, including rental abatements and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related lease.

The future minimum rental payments to be received from noncancelable operating leases for residential rental properties are $56.2 million and $679,000 for the 12 month periods ending March 31, 2021 and 2022, respectively, and none thereafter. The future minimum rental payments to be received from noncancelable operating leases for commercial rental properties and antenna rentals are $484,500, $457,600, $275,800, $166,800, and $150,400 for the 12 month periods ending March 31, 2021 through March 31, 2025, respectively, and $1.4 million thereafter.

Revenue is primarily derived from the rental of residential housing units for which the Company receives minimum rents and utility reimbursements pursuant to underlying tenant lease agreements. The Company also receives other ancillary fees for administration of leases, late payments and amenities, which are charged to residents and recognized monthly as earned. The Company also has revenue sharing arrangements for cable income from contracts with cable providers at the Company’s properties. Included in Accrued expenses and other liabilities on the consolidated balance sheet at March 31, 2020 and December 31, 2019, is deferred revenue for contracts with cable providers in the amounts of $833,000 and $596,000, respectively. The Company recognizes income on a straight line basis over the contract period of 10 years to 12 years. In the three months ended March 31, 2020, approximately $34,000 of revenue from the contract liability was recognized as income.

The Company evaluates its portfolio of operating leases for collectability at both the onset of the underlying leases and on an ongoing basis. Tenant receivables include amounts for which collectability was assessed as probable in accordance with the guidance in ASC 842-30. For tenant receivables, which include base rents, straight-line rentals, expense reimbursements and other revenue or income, the Company also estimates a general allowance for uncollectible accounts under ASC 450-20. The allowance is based on the Company’s historical collection experience, tenant creditworthiness, and current economic trends. The Company writes off tenant receivables when they are determined uncollectible. As of March 31, 2020 and December 31, 2019, there were allowances for uncollectible receivables of approximately $23,400 and $49,000, respectively.

For operating leases where the Company is the lessor, the underlying leased asset is recognized as real estate on the balance sheet. The Company, as a lessor of multifamily apartment units, has nonlease components associated with these leases (i.e. CAM, utilities, etc.). The Company combines nonlease component revenue streams and accounts for them as a combined component with leasing revenue.

For leases in which the Company is the lessee, primarily consisting of a parking space lease, a laundry equipment lease, and office equipment leases, the Company recognizes a right-of-use asset and a lease liability equal to the present value of the minimum lease payments. Operating leases are included in operating lease ROU assets and operating lease liabilities in the Company’s consolidated balance sheets. The Company uses a market rate for equipment leases, when readily determinable, in calculating the present value of lease payments. Otherwise, the incremental borrowing rate is used. The operating lease ROU asset includes any lease payments and excludes lease incentives. Operating lease terms may include options to extend the lease when it is reasonably certain the lease will be extended. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company elected to be taxed as a REIT commencing with its taxable year ended December 31, 2010. To maintain its REIT qualification under the Code, the Company is generally required to distribute at least 90% of its taxable net income (excluding net capital gains) to its stockholders as well as comply with other requirements, including certain asset, income and stock ownership tests. As a REIT, the Company is not subject to federal corporate income tax to the extent that it distributes 100% of its REIT taxable income each year. If the Company fails to qualify as a REIT, and does not qualify for certain statutory relief provisions, it is subject to U.S. federal, state and local income taxes and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year in which it fails its REIT qualification. Accordingly, the Company’s failure to qualify as a REIT could have a material adverse impact on its results of operations and amounts available for distribution to its stockholders.

The dividends-paid deduction of a REIT for qualifying dividends to its stockholders is computed using the Company’s taxable income as opposed to net income reported on the financial statements. Generally, taxable income differs from GAAP net income because the determination of taxable income is based on tax provisions and not financial accounting principles.

The Company may elect to treat any of its subsidiaries as a taxable REIT subsidiary (“TRS”). In general, a TRS may hold assets and engage in activities that the Company cannot hold or engage in directly and generally may engage in any real estate or non-real estate-related business. A TRS is subject to U.S. federal, state and local corporate income taxes. While a TRS may generate net income, a TRS can declare dividends to the Company which will be included in the Company's taxable income and necessitate a distribution to its stockholders. Conversely, if the Company retains earnings at a TRS level, no distribution is required and the Company can increase book equity of the consolidated entity. As of March 31, 2020 and December 31, 2019, the Company did not treat any of its subsidiaries as a TRS.

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

The Company is subject to examination by the U.S. Internal Revenue Service and by the taxing authorities in other states in which the Company has significant business operations. The Company is not currently undergoing any examinations by taxing authorities. The Company is not subject to IRS examination for tax return years 2015 and prior.

Basic earnings per share is calculated on the basis of the weighted-average number of common shares outstanding during the year. Basic earnings per share is computed by dividing income available to common stockholders by the weighted-average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted to common stock. None of the shares of convertible stock (see Note 13) are included in the diluted earnings per share calculations because the necessary conditions for conversion have not been satisfied as of March 31, 2020 (were such date to represent the end of the contingency period).

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

The following table presents the Company's supplemental cash flow information (in thousands):

Restricted cash represents escrow deposits with lenders to be used to pay real estate taxes, insurance, and capital improvements. The following table presents a summary of the components of the Company's restricted cash (in thousands):

In addition, the Company had unrestricted cash designated for capital expenditures of $17.9 million and $12.1 million as of March 31, 2020 and, December 31, 2019 respectively.

The following table presents the Company’s investments in rental properties (in thousands):

Depreciation expense for the three months ended March 31, 2020 and 2019 was $13.2 million and $13.6 million, respectively.

In 2011, the Company purchased, at a discount, one performing promissory note (the "Trail Ridge Note”), which is secured by a first priority mortgage on a multifamily rental apartment community. The contract purchase price for the Trail Ridge Note was $700,000, excluding closing costs. As of both March 31, 2020 and December 31, 2019, the Trail Ridge Note was both current and performing.

The following table presents details of the balance and terms of the Trail Ridge Note as of March 31, 2020 and December 31, 2019 (in thousands):

The Company has evaluated the loan for impairment and determined that, as of March 31, 2020, it was not impaired. There were no allowances for credit losses as of both March 31, 2020 and December 31, 2019. There were no charge-offs for both the three months ended March 31, 2020 and 2019.

The Company had no property dispositions during the three months ended March 31, 2020 and one property disposition during the three months ended March 31, 2019. The following table presents details of the Company's disposition activity during the three months ended March 31, 2019 (in thousands):

The following table presents the Company's revenues and net income attributable to the property sold, excluding gain on sale, for the three months ended March 31, 2019 (in thousands):

Identified intangible assets, net, relate to in-place apartment unit rental and antennae leases. The net carrying value of the acquired in-place leases totaled $11,000 and $14,000 as of March 31, 2020 and December 31, 2019, respectively, net of accumulated amortization of $27.1 million for both periods. The weighted-average remaining life of the acquired apartment unit rental leases was zero months for both March 31, 2020 and December 31, 2019. Amortization of the apartment unit rental and antennae leases for the three months ended March 31, 2020 and 2019 was approximately $3,100 and $3,000, respectively. Expected amortization for the antennae leases at the Vista Apartment Homes for the years ended March 31, 2021 and 2022 are $7,000 and $4,000, respectively, and none thereafter.

The following table presents the Company's expected amortization for the rental and antennae leases for the next five 12-month periods ending March 31, and thereafter (in thousands):

As of both March 31, 2020 and December 31, 2019, the Company had $404,000 of goodwill included on the consolidated balance sheets.

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

	March 31, 2020										December 31, 2019
Collateral	Outstanding Borrowings		Premium (Discount)			Deferred finance costs, net			Carrying Value		Outstanding Borrowings		Premium (Discount)			Deferred finance costs, net			Carrying Value
Vista Apartment Homes	$	14,234	$	—		$	(59	)	$	14,175	$	14,315	$	—		$	(68	)	$	14,247
Cannery Lofts		13,100		—			(100	)		13,000		13,100		—			(108	)		12,992
Trailpoint at the Woodlands		17,643		—			(113	)		17,530		17,723		—			(121	)		17,602
Verona Apartment Homes		32,970		—			(348	)		32,622		32,970		—			(362	)		32,608
Skyview Apartment Homes		28,400		—			(302	)		28,098		28,400		—			(315	)		28,085
Maxwell Townhomes		12,711		—			(46	)		12,665		12,785		—			(53	)		12,732
Evergreen at Coursey Place		25,492		28			(27	)		25,493		25,627		34			(32	)		25,629
Pines of York		14,034		(98	)		(18	)		13,918		14,114		(112	)		(21	)		13,981
The Estates at Johns Creek		65,000		—			(567	)		64,433		65,000		—			(589	)		64,411
Perimeter Circle		26,115		—			(291	)		25,824		26,115		—			(304	)		25,811
Perimeter 5550		20,630		—			(267	)		20,363		20,630		—			(279	)		20,351
Aston at Cinco Ranch		21,912		—			(82	)		21,830		22,032		—			(96	)		21,936
Sunset Ridge 1		18,174		38			(30	)		18,182		18,300		54			(43	)		18,311
Sunset Ridge 2		2,751		5			(4	)		2,752		2,768		7			(6	)		2,769
Calloway at Las Colinas		32,747		—			(100	)		32,647		32,938		—			(115	)		32,823
South Lamar Village		21,000		—			(287	)		20,713		21,000		—			(298	)		20,702
Heritage Pointe		24,671		—			(191	)		24,480		24,808		—			(201	)		24,607
The Bryant at Yorba Linda		66,016		—			(36	)		65,980		66,238		—			(87	)		66,151
Point Bonita Apartment Homes		25,585		991			(170	)		26,406		25,696		1,063			(183	)		26,576
The Westside Apartments		35,641		—			(282	)		35,359		35,838		—			(293	)		35,545
Tech Center Square		11,672		—			(93	)		11,579		11,730		—			(101	)		11,629
Retreat at Rocky Ridge		11,172		—			(136	)		11,036		11,221		—			(145	)		11,076
Providence in the Park		46,192		—			(323	)		45,869		46,398		—			(345	)		46,053
Green Trails Apartment Homes		60,718		—			(425	)		60,293		60,998		—			(451	)		60,547
Meridian Pointe		39,095		—			(379	)		38,716		39,277		—			(402	)		38,875
Terraces at Lake Mary		31,963		—			(245	)		31,718		32,110		—			(259	)		31,851
Courtney Meadows Apartments		27,015		—			(244	)		26,771		27,100		—			(257	)		26,843
Addison at Sandy Springs		22,750		—			(232	)		22,518		22,750		—			(244	)		22,506
Bristol at Grapevine		32,922		—			(291	)		32,631		32,922		—			(306	)		32,616
	$	802,325	$	964		$	(5,688	)	$	797,601	$	804,903	$	1,046		$	(6,084	)	$	799,865

The following table presents additional information about the Company's mortgage notes payable, net (in thousands, except percentages) as of March 31, 2020:

Collateral	Maturity Date		Annual Interest Rate		Average Monthly Debt Service		Average Monthly Escrow
Vista Apartment Homes	1/1/2022		3.28%	₍₁₎₍₅₎	$	80	$	32
Cannery Lofts	11/1/2023		3.53%	₍₁₎₍₃₎		60		23
Trailpoint at the Woodlands	11/1/2023		3.40%	₍₁₎₍₄₎		95		46
Verona Apartment Homes	10/1/2026		3.35%	₍₁₎₍₃₎		150		43
Skyview Apartment Homes	10/1/2026		3.35%	₍₁₎₍₃₎		129		31
Maxwell Townhomes	1/1/2022		4.32%	₍₂₎₍₅₎		71		80
Evergreen at Coursey Place	8/1/2021		5.07%	₍₂₎₍₅₎		154		51
Pines of York	12/1/2021		4.46%	₍₂₎₍₅₎		80		29
The Estates at Johns Creek	11/25/2026		2.24%	₍₁₎₍₅₎		162		—
Perimeter Circle	1/1/2026		2.49%	₍₁₎₍₃₎		82		46
Perimeter 5550	1/1/2026		2.49%	₍₁₎₍₃₎		65		34
Aston at Cinco Ranch	10/1/2021		4.34%	₍₂₎₍₅₎		120		55
Sunset Ridge 1	11/1/2020		4.58%	₍₂₎₍₅₎		113		79
Sunset Ridge 2	11/1/2020		4.54%	₍₂₎₍₅₎		16		—
Calloway at Las Colinas	12/1/2021		3.87%	₍₂₎₍₅₎		171		133
South Lamar Village	7/22/2026		2.29%	₍₁₎₍₃₎		61		—
Heritage Pointe	4/1/2025		2.87%	₍₁₎₍₄₎		131		56
The Bryant at Yorba Linda	6/1/2020	₍₆₎	2.74%	₍₁₎₍₃₎		289		—
Point Bonita Apartment Homes	10/1/2023		5.33%	₍₂₎₍₅₎		152		68
The Westside Apartments	9/1/2026		3.11%	₍₁₎₍₃₎		195		82
Tech Center Square	6/1/2023		3.57%	₍₁₎₍₅₎		66		25
Retreat at Rocky Ridge	1/1/2024		3.45%	₍₁₎₍₃₎		59		24
Providence in the Park	2/1/2024		3.29%	₍₁₎₍₃₎		240		149
Green Trails Apartment Homes	6/1/2024		2.98%	₍₁₎₍₃₎		303		81
Meridian Pointe	8/1/2024		2.89%	₍₁₎₍₃₎		193		81
Terraces at Lake Mary	9/1/2024		2.90%	₍₁₎₍₃₎		158		63
Courtney Meadows Apartments	1/1/2025		2.83%	₍₁₎₍₃₎		131		71
Addison at Sandy Springs	5/1/2025		2.75%	₍₁₎₍₃₎		104		42
Bristol at Grapevine	5/1/2025		2.70%	₍₁₎₍₃₎		109		104

(1)Variable rate based on one-month LIBOR of 0.99288% (as of March 31, 2020) plus a fixed margin.

(6)The Bryant at Yorba Linda mortgage was refinanced for $76.0 million on April 15, 2020 with a new maturity date of April 15, 2027.

Loans assumed as part of the Point Bonita Apartment Homes, Paladin (Evergreen at Coursey Place and Pines of York), Sunset Ridge and Maxwell Townhomes acquisitions were recorded at their fair values. The premium or discount is amortized over the remaining term of the loans and included in interest expense. For the three months ended March 31, 2020 and 2019, interest expense was reduced by $82,000 and $83,000, respectively, for the amortization of the premium or discount.

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

The following table presents the Company's annual principal payments on outstanding borrowings for each of the next five 12-month periods ending March 31, and thereafter (in thousands):

The mortgage notes payable are recourse only with respect to the properties that secure the notes, subject to certain limited standard exceptions, as defined in each mortgage note. These exceptions are referred to as “carveouts.” The Company has guaranteed the carveouts under mortgage notes by executing a guarantee with respect to the properties. In general, carveouts relate to damages suffered by the lender for a borrower’s failure to pay rents, insurance or condemnation proceeds to lender, failure to pay water, sewer and other public assessments or charges, failure to pay environmental compliance costs or to deliver books and records, in each case as required in the loan documents. The exceptions also require the Company to guarantee payment of audit costs, lender’s enforcement of its rights under the loan documents and payment of the loan if the borrower voluntarily files for bankruptcy or seeks reorganization, or if a related party of the borrower does so with respect to the subsidiary.

The Company may borrow an additional $7.5 million on the mortgage secured by The Bryant at Yorba Linda when certain debt service coverage and loan to value criteria are met. The Bryant at Yorba Linda mortgage loan includes net worth, liquidity, and debt service coverage ratio covenants. The Company was in compliance with all covenants related to this loan as of March 31, 2020. The Bryant at Yorba Linda mortgage was refinanced on April 15, 2020. See Note 17, “Subsequent Events” for further details.

The Company refinanced the loans on South Lamar and Estates at Johns Creek during the year ended December 31, 2019. Both refinanced mortgage loans include net worth, liquidity, and debt service coverage ratio covenants; the Company was in compliance with all covenants related to these loans as of March 31, 2020.

Deferred financing costs incurred to obtain financing are amortized over the term of the related debt. During the three months ended March 31, 2020 and March 31, 2019, $396,000 and $1.0 million, respectively, of amortization of deferred financing costs was included in interest expense. Accumulated amortization as of March 31, 2020 and December 31, 2019 was $6.0 million and $5.6 million, respectively.

The following table presents the Company's estimated amortization of the existing deferred financing costs for the next five 12-month periods ending March 31, and thereafter (in thousands):

As the lessee, the Company’s operating leases primarily consist of a parking lot lease, a laundry equipment lease, and office equipment leases. These operating leases have remaining terms ranging from less than one year to four years. Some of the leases include options to extend the lease for up to an additional five years. Only those rental periods reasonably certain to be extended beyond the initial term expiration are included within the calculation of the operating lease liability. As of March 31, 2020, the payments due under the contractually-obligated portion of these leases totaled $177,000. The market rate is used for equipment leases, when readily determinable, in calculating the present value of lease payments. Otherwise, the incremental borrowing rate based on the information available at commencement date is used. As of March 31, 2020, the weighted average remaining lease term was 2.4 years and the weighted average discount rate was 4.20% for the Company’s operating leases. As of March 31, 2020, the Company included approximately $169,000 in its

consolidated balance sheet for both operating lease right-of-use assets and operating lease liabilities. The Company’s lease expense for the three months ended March 31, 2020 and 2019 was approximately $36,200 and $41,000, respectively, which is included in rental operating expenses in the consolidated statements of operations.

The following table presents the Company’s annual payments for the operating lease liabilities (including reasonably assured extension periods) for each of the next five 12–month periods ending March 31, and thereafter (in thousands):

The following table presents the changes in each component of the Company's accumulated other comprehensive loss for the three months ended March 31, 2020 and 2019 (in thousands):

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

Property loss pool. Until February 28, 2019, the Company's properties participated in a property loss self-insurance pool with other properties directly and indirectly managed by RAI and C-III, which was backed by a catastrophic insurance policy. The pool covered losses up to $2.5 million, in aggregate, after a $25,000 deductible per incident. Claims beyond the insurance pool limits were covered by the catastrophic insurance policy, which covered claims up to $250 million, after either a $25,000 or a $100,000 deductible per incident, depending on the location and/or type of loss. Therefore, unforeseen or catastrophic losses in excess of the Company's insured limits could have a material adverse effect on the Company's financial condition and operating results.

Beginning March 1, 2019, the Company now participates (with other properties directly or indirectly managed by RAI and C-III) only in the catastrophic insurance policy, which covers claims up to $250.0 million, after either a $25,000 or a $100,000 deductible per incident, depending on location and/or type of loss. Therefore, unforeseen or catastrophic losses in excess of the Company's insured limited could have a material adverse effect on the Company's financial condition and operating results.

General liability loss policy. The Company also participates (with other properties directly or indirectly managed by RAI and C-III) in a general liability policy. The insured limit for the general liability policy is $76 million in total claims, after a $25,000 deductible per incident.

Directors and officers liability insurance. The Company participates in a liability insurance program for directors and officers coverage with other C-III managed entities and subsidiaries for coverage up to $100.0 million. The Company paid premiums of $269,911 during the year ended December 31, 2019 in connection with this insurance program for an annual policy through September 2020.

Other expenses. The Company utilizes the services of The Planning and Zoning Resource Company, an affiliate of C-III, for zoning reports for acquisitions.

In September 2009, the Company entered into an advisory agreement (the “Advisory Agreement”) pursuant to which the Advisor provides the Company with investment management, administrative and related services. The Advisory Agreement was amended in January 2010 and further amended in January 2011, March 2015, and September 2019. The Advisory Agreement has a one year term and renews for an unlimited number of successive one year terms upon the approval of the conflicts committee of the Company's Board of Directors. The Company amended and renewed the Advisory Agreement for another year on September 11, 2019. Under the Advisory Agreement, the Advisor receives fees and is reimbursed for its expenses as set forth below:

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

Asset management fees. The Company pays the Advisor a monthly asset management fee equal to one-twelfth of 1.0% of the higher of the cost or the independently appraised value of each asset, without deduction for depreciation, bad debts or other non-cash reserves. The asset management fee is based only on the portion of the costs or value attributable to the Company’s investment in an asset if the Company does not own all or a majority of an asset and does not manage or control the asset.

Disposition fees. The Advisor earns a disposition fee in connection with the sale of a property equal to the lesser of one-half of the aggregate brokerage commission paid, or if none is paid, 2.75% of the contract sales price.

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

Expense reimbursements. The Company also pays directly or reimburses the Advisor for all of the expenses paid or incurred by the Advisor or its affiliates on behalf of the Company or in connection with the services provided to the Company in relation to its public offering, including its ongoing distribution reinvestment plan offering.

Reimbursements also include expenses the Advisor incurs in connection with providing services to the Company, including the Company’s allocable share of costs for Advisor personnel and overhead, out of pocket expenses incurred in connection with the selection and acquisition of properties or other real estate related debt investments, whether or not the Company ultimately acquires the investment. However, the Company will not reimburse the Advisor or its affiliates for employee costs in connection with services for which the Advisor earns acquisition or disposition fees.

The Manager manages the Company's real estate properties and real estate-related debt investments and coordinates the leasing of, and manages construction activities related to, some of the Company’s real estate properties pursuant to the terms of the management agreement with the Manager.

Property management fees. The Manager earns 4.5% of the gross receipts from the Company's properties, provided that for properties that are less than 75% occupied, the manager receives a minimum fee for the first 12 months of ownership for performing certain property management and leasing activities. The Manager subcontracts certain services to an unaffiliated third-party and pays for those services from its property management fee.

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

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

Information technology fees and operating expense reimbursement. During the ordinary course of business, the Manager or other affiliates of RAI may pay certain shared information technology fees and operating expenses on behalf of the Company for which they are reimbursed.

The following table presents the Company's amounts payable to, and amounts receivable from, such related parties (in thousands):

The following table presents the Company's fees earned by, and expenses paid to, such related parties (in thousands):

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

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

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

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

(6)Included in Rental operating expenses on the consolidated statements of operations and comprehensive income (loss).

The Company’s charter authorizes the Company to issue 10.0 million shares of its $0.01 par value preferred stock. As of March 31, 2020 and December 31, 2019, no shares of preferred stock were issued and outstanding.

As of March 31, 2020, the Company had an aggregate of 70,026,413 shares of its $0.01 par value common stock outstanding as follows (dollars in thousands):

As of March 31, 2020 and December 31, 2019, the Company had 49,935 shares for both periods, of $0.01 par value convertible stock outstanding. As of March 31, 2020, the Advisor and affiliated persons owned 49,063 shares and outside investors owned 872 shares. The convertible stock will convert into shares of the Company’s common stock upon the occurrence of (a) the Company having paid distributions to common stockholders that in the aggregate equal 100% of the price at which the Company originally sold the shares plus an amount sufficient to produce a 10% cumulative, non-compounded annual return on the shares at that price; or (b) if the Company lists its common stock on a national securities exchange and, on the 31st trading day after listing, the Company’s value based on the average trading price of its common stock since the listing, plus prior distributions, combine to meet the same 10% return threshold.

Each of these two events is a “Triggering Event.” Upon a Triggering Event, the Company's convertible stock will, unless its advisory agreement has been terminated or not renewed on account of a material breach by its Advisor, generally be converted into a number of shares of common stock equal to 1 / 50,000 of the quotient of:

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

As of March 31, 2020, no Triggering Event has occurred or was probable to occur.

During the three months ended March 31, 2020, the Company redeemed shares of its outstanding common stock as follows:

(1)All redemptions of equity securities by the Company during the three months ended March 31, 2020 were made pursuant to the Company's share redemption program.

Effective March 20, 2020, the share redemption program is only available for redemptions submitted in connection with a stockholder’s death, qualifying disability, or confinement to a long-term care facility. In addition, pursuant to the terms of the share redemption program, the Company will not redeem in excess of 5% of the weighted-average number of shares outstanding during the 12-month period immediately prior to the effective date of redemption. The Company's Board of Directors will determine at least quarterly whether it has sufficient excess cash to repurchase shares. Generally, the cash available for redemptions will be limited to proceeds from the Company's distribution reinvestment plan plus, if the Company has positive operating cash flow from the previous fiscal year, 1% of all operating cash flow from the previous year.

The Company currently redeems shares submitted in connection with a stockholder’s death, qualifying disability, or confinement to a long-term care facility at a purchase price of $11.10 per share, which is equal to the current net asset value per share redeemed.

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

For the three months ended March 31, 2020, the Company paid aggregate distributions of $10.4 million, including $4.3 million of distributions paid in cash and $6.1 million of distributions reinvested in shares of common stock through the Company's distribution reinvestment plan, as follows (in thousands, except per share data):

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

In analyzing the fair value of its investments accounted for on a fair value basis, the Company follows the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company determines fair value based on quoted prices when available or, if quoted prices are not available, through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. The fair value of cash, tenant receivables and accounts payable, approximate their carrying value due to their short nature. The hierarchy followed defines three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

Level 3 - Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The determination of where an asset or liability falls in the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter; depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare.

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

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

The following table presents the carrying amount and estimated fair value of the Company’s loan held for investment, net, and mortgage notes payable-outstanding borrowings (in thousands):

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

The carrying amount of the mortgage notes payable presented is the outstanding borrowings excluding premium or discount and deferred finance costs, net. The fair value of the mortgage notes payable was estimated using rates available to the Company for debt with similar terms and remaining maturities. (Level 3)

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

As a condition to certain of the Company’s financing facilities, from time to time the Company may be required to enter into certain derivative transactions as may be required by the lender. These transactions would generally be in line with the Company’s own risk management objectives and also serve to protect the lender.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company entered into a total of 19 interest rate caps that were designated as cash flow hedges. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three months ended March 31, 2020, such derivatives were used to hedge the variable cash flows, indexed to USD-LIBOR, associated with existing variable-rate loan agreements. During the three months ended March 31, 2020 and 2019, the Company recorded expenses of $44,000 and $172,410 respectively, due to amortization of premiums paid for interest rate caps.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next 12 months, the Company estimates that an additional $95,736 will be reclassified as an increase to interest expense.

The following table presents the Company's outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk as of March 31, 2020 (dollars in thousands):

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

The following table presents the fair value of the Company’s derivative financial instruments on the consolidated balance sheets as of March 31, 2020 and December 31, 2019 (in thousands):

Under its charter, the Company must limit its total operating expenses to the greater of 2% of its average invested assets or 25% of its net income for the four most recently completed fiscal quarters, unless the conflicts committee of the Company’s Board of Directors has determined that such excess expenses were justified based on unusual and non-recurring factors. Operating expenses for the four quarters ended March 31, 2020 were in compliance with the charter-imposed limitation.

On April 15, 2020 the Company refinanced the $66 million mortgage loan secured by The Bryant at Yorba Linda. The new loan for $76 million matures on April 15, 2027.

The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business, including how the pandemic will impact its tenants. While the Company did not incur significant disruptions from the COVID-19 pandemic during the three months ended March 31, 2020, during April 2020, a small percentage of tenants have requested rent deferral as a result of the pandemic. The Company is evaluating each tenant rent relief request on an individual basis, considering a number of factors. Not all tenant requests will ultimately result in modified agreements, nor is the Company forgoing its contractual rights under its lease agreements.

On April 10, 2020, the FASB issued a Staff Q&A to respond to some frequently asked questions about accounting for lease concessions related to the effects of the COVID-19 pandemic. Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each lease to determine whether enforceable rights and obligations for concessions exist in the lease and can elect to apply or not apply the lease modification guidance to those leases. Entities may make the elections for any lessor-provided concessions related to the effects of the COVID-19 pandemic (e.g., deferrals of lease payments) as long as the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee.

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

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

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

The following discussion and analysis should be read in conjunction with the accompanying financial statements of Resource Real Estate Opportunity REIT, Inc. and the notes thereto. See also “Cautionary Note Regarding Forward-Looking Statements” preceding Part I, as well as the notes to our financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations provided in our Annual Report on Form 10-K for the year ended December 31, 2019. As used herein, the terms “we,” “our” and “us” refer to Resource Real Estate Opportunity REIT, Inc., a Maryland corporation, and, as required by context, Resource Real Estate Opportunity OP, LP, a Delaware limited partnership, and to their subsidiaries.

We were formed on June 3, 2009. Resource Real Estate Opportunity Advisor, LLC (the “Advisor”), an indirect wholly-owned subsidiary of Resource America, Inc. (“RAI”) has been engaged to manage our day-to-day operations.

RAI is a wholly-owned subsidiary of C-III Capital Partners LLC ("C-III"), a leading commercial real estate investment management and services company engaged in a broad range of activities. C-III controls our Advisor and Resource Real Estate Opportunity Manager, LLC (the "Manager"), our property manager. C-III also controls all of the shares of common stock held by the Advisor.

We have acquired a diversified portfolio of U.S. commercial real estate and real estate-related debt. Our portfolio consists of commercial real estate assets, principally (i) multifamily rental properties purchased as non-performing or distressed loans or as real estate owned by financial institutions and (ii) multifamily rental properties to which we have added value with a capital infusion (referred to as “value add properties”). However, we are not limited in the types of real estate and real estate-related assets in which we may invest or whether we may invest in equity or debt secured by real estate and, accordingly, we may invest in other real estate assets or debt secured by real estate assets.

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

Our charter requires that, by December 2019, our board consider listing our common stock or liquidating. Our board has begun the process of considering various liquidity options, including, but not limited to, listing our common stock or liquidating. Pursuant to our charter requirement, the board, including all of the independent directors, unanimously determined in September 2019 to continue to evaluate various possible alternatives with the objective of making a recommendation by the end of the first half of 2020.

Since initially being reported in December 2019, COVID-19 has spread around the world, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The COVID-19 pandemic has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the pandemic is rapidly evolving and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. As a result, the COVID-19 pandemic is negatively impacting almost every industry, including the real estate industry, directly or indirectly. The rapid development and fluidity of the COVID-19 pandemic precludes any prediction as to the ultimate adverse impact the pandemic may have on our business, financial condition, results of operations and cash flows.

In the near term many of our tenants may suffer difficulties with their personal financial situations as a result of job loss or reduced income and, depending upon the duration of quarantines and the corresponding economic slowdown, some of our tenants have or will seek rent deferrals or become unable to pay their rent. As of April 30, 2020, we had received April rent payments equal to approximately 97.5% of the monthly rent for April, which is a reduction in the rate of collections of 1.3% from March 2020. In addition, we have received and approved short-term rent relief requests from approximately 1.2% of our tenants, equal to approximately 1.1% of our monthly rent for April. Not all tenant requests will ultimately result in modified agreements, nor are we forgoing our contractual rights under our lease agreements. April collections and rent relief requests to-date may not be indicative of collections or requests in any future period. The impact of the COVID-19

pandemic on our rental revenue for the second quarter of 2020 and thereafter cannot, however, be determined at present. In addition, we expect the economic disruptions caused by the COVID-19 pandemic will cause elevated credit losses and impede our ability to increase rental rates. We are temporarily waiving late fees, halting evictions, and offering a payment deferral plan to residents who have been adversely financially impacted by COVID-19. To help mitigate the impact on our operating results of the COVID-19 pandemic, we have initiated various operational cost saving initiatives across our portfolio. In addition, we have taken measures to preserve cash, which will help to offset any impact to our liquidity that may occur as a result of the COVID-19 pandemic. These measures included the suspension of distributions as of April 1, 2020 as well as the partial suspension of our share redemption program effective March 20, 2020. Additionally, most of our value-add rehabilitation projects will be deferred temporarily.

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

The extent to which the COVID-19 pandemic or any other pandemic, epidemic or disease impacts our operations and those of our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. However, notwithstanding the challenging economic circumstances created by the COVID-19 pandemic, we believe our focus on multifamily assets makes us better positioned relative to other classes of real estate to withstand many of the adverse impacts of the COVID-19 pandemic as housing is a basic need, rather than a discretionary expense. In addition, we have taken several steps to offset any disruptions in rent that may occur as a result of the COVID-19 pandemic. Further, we have no debt maturing until November 2020 and are conservatively leveraged with an aggregate portfolio leverage of 64%. Nevertheless, the COVID-19 pandemic (or a future pandemic, epidemic or disease) presents material uncertainty and risk with respect to our business, financial condition, results of operations and cash flows.

As of March 31, 2020, we owned interests in a total of 28 multifamily properties. We also owned one performing loan. Since our inception, we have acquired interests in 54 multifamily properties. As of March 31, 2020, we had sold our interests in 26 of these properties.

Although the COVID-19 pandemic did not significantly impact our operating results for the quarter ending March 31, 2020, we expect that the COVID-19 outbreak will adversely affect our business, financial condition, results of operations and cash flows going forward, including but not limited to, rental revenues and leasing activity, in ways that may vary widely depending on the duration and magnitude of the COVID-19 pandemic and ensuing economic turmoil, as well as numerous factors, many of which are outside of our control, as discussed above.

Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019:

	Three Months Ended
	March 31,
	2020			2019
Revenues:
Rental income	$	33,376		$	34,878
Interest and dividend income		58			94
Total revenues		33,434			34,972
Expenses:
Rental operating - expenses		6,360			6,611
Rental operating - payroll		2,975			3,556
Rental operating - real estate taxes		4,388			4,384
Subtotal - Rental operating expenses		13,723			14,551
Acquisition fees		113			—
Management fees		4,583			4,756
General and administrative		2,686			2,772
Loss on disposal of assets		109			151
Depreciation and amortization expense		13,161			13,597
Total expenses		34,375			35,827
Loss before net gains on dispositions		(941	)		(855	)
Net gain on disposition of property		—			34,575
Income (loss) before other income (expense)		(941	)		33,720
Other income (expense):
Interest expense		(7,880	)		(11,075	)
Insurance proceeds in excess of cost basis		—			536
Total other income (expense)		(7,880	)		(10,539	)
Net income (loss) attributable to common stockholders	$	(8,821	)	$	23,181

The following table presents the results of operations separated into three categories: the results of operations of the 28 properties and one performing loan that we owned for the entirety of both periods presented, properties purchased or sold during either of the periods presented, and company level revenues and expenses for the three months ended March 31, 2020 and 2019 (in thousands):


	For the Three Months Ended March 31, 2020											For the Three Months Ended March 31, 2019
	Properties owned both periods			Properties purchased/sold during either period		Company level			Total			Properties owned both periods			Properties purchased/sold during either period			Company level			Total
Revenues:
Rental income	$	31,004		$	10	$	—		$	31,014		$	29,992		$	2,002		$	—		$	31,994
Utility income		1,898			—		—			1,898			1,878			421			—			2,299
Other ancillary fees		464			—		—			464			520			65			—			585
Interest and dividend income		43			—		15			58			56			1			37			94
Total revenues		33,409			10		15			33,434			32,446			2,489			37			34,972
Expenses:
Rental operating - expenses		6,358			2		—			6,360			5,767			844			—			6,611
Rental operating - payroll		2,973			2		—			2,975			3,154			402			—			3,556
Rental operating- real estate taxes		4,388			—		—			4,388			4,198			186			—			4,384
Subtotal - Rental operating expenses		13,719			4		—			13,723			13,119			1,432			—			14,551
Acquisition fees		113			—		—			113			—			—			—			—
Management fees		1,491			—		3,092			4,583			1,459			99			3,198			4,756
General and administrative		858			—		1,828			2,686			844			123			1,805			2,772
Loss on disposal of assets		109			—		—			109			142			9			—			151
Depreciation and amortization expense		13,161			—		—			13,161			13,257			340			—			13,597
Total expenses		29,451			4		4,920			34,375			28,821			2,003			5,003			35,827
Income (loss) before net gains on dispositions		3,958			6		(4,905	)		(941	)		3,625			486			(4,966	)		(855	)
Net gain on disposition of property		—			—		—			—			—			34,575			—			34,575
Income (loss) before other (expense) income		3,958			6		(4,905	)		(941	)		3,625			35,061			(4,966	)		33,720
Other (expense) income:
Interest expense		(7,880	)		—		—			(7,880	)		(9,071	)		(2,004	)		—			(11,075	)
Insurance proceeds in excess of cost basis		—			—		—			—			523			13			—			536
Total other (expense) income		(7,880	)		—		—			(7,880	)		(8,548	)		(1,991	)		—			(10,539	)
Net (loss) income attributable to common stockholders	$	(3,922	)	$	6	$	(4,905	)	$	(8,821	)	$	(4,923	)	$	33,070		$	(4,966	)	$	23,181

Revenues: The $1.0 million increase in rental income for the 28 properties we owned during both the three months ended March 31, 2020 and March 31, 2019 reflects the implementation of our investment strategy to increase monthly rental income after renovating and stabilizing operations and was primarily comprised of:

Expenses: Our total rental operating expenses for the 28 properties we owned during both three month periods presented increased by approximately $600,000 during the three months ended March 31, 2020, as compared to the three months ended March 31, 2019, primarily driven by higher insurance premiums and an increase in repair costs. Additionally, there was a $190,000 increase in real estate taxes, offset by a $181,000 decrease in payroll expense.

Total depreciation and amortization expense is comprised of the depreciation on our rental properties and amortization of intangible assets related to in-place leases, which are amortized over a period of approximately six to eight months after acquisition. The increases (decreases) in the components of depreciation and amortization during the three months ended March 31, 2020, as compared to the three months ended March 31, 2019, were as follows (in thousands):

The overall decrease in depreciation was driven by the sales of Williamsburg in March 2019 and Pinehurst in December 2019.

Interest expense decreased by $3.2 million for the three months ended March 31, 2020 as compared to the three months ended March 31, 2019. Approximately $1.9 million of this decrease is driven by the loan-related costs and decrease in outstanding borrowings resulting from the sale of Williamsburg in the first quarter of 2019. The overall decrease is also due to a lesser extent to lower interest rates on variable rate debt.

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

We initially allocated a portion of the funds we raised in our initial public offering to preserve capital for our investors by supporting the maintenance and viability of the properties we have acquired and those properties that we may acquire in the future. If these allocated amounts and any other available income become insufficient to cover our operating expenses and liabilities, it may be necessary to obtain additional funds by borrowing, refinancing properties or liquidating our

investment in one or more properties, debt investments or other assets we may hold. We cannot assure you that we will be able to access additional funds upon acceptable terms when we need them.

We deployed a total of $1.8 million during the three months ended March 31, 2020 for capital expenditures. We expect capital expenditures to be reduced in future periods as we have temporarily suspended certain capital improvement projects at our properties in order to both preserve cash and offset any impact to our liquidity that may occur as a result of the COVID-19 pandemic. The properties in which we deployed the most capital during the three months ended March 31, 2020 are listed separately and the capital expenditures made on all other properties are aggregated in "All other properties" below (in thousands):

The primary portion of our initial public offering closed on December 13, 2013. On December 26, 2013, the unsold primary offering shares were deregistered and, on December 30, 2013, the registration of the shares issuable pursuant to the distribution reinvestment plan was continued pursuant to a Registration Statement on Form S-3. A new Registration Statement on Form S-3 was filed in May 2016 to continue the distribution reinvestment plan offering. We continue to offer up to $120.0 million of shares of common stock pursuant to our distribution reinvestment plan under which our stockholders may elect to have distributions reinvested in additional shares at 95% of our current estimated value per share.

As of March 31, 2020, shares of our $0.01 par value common stock have been issued as follows (dollars in thousands):

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

	March 31, 2020										December 31, 2019
Collateral	Outstanding Borrowings		Premium (Discount)			Deferred finance costs, net			Carrying Value		Outstanding Borrowings		Premium (Discount)			Deferred finance costs, net			Carrying Value
Vista Apartment Homes	$	14,234	$	—		$	(59	)	$	14,175	$	14,315	$	—		$	(68	)	$	14,247
Cannery Lofts		13,100		—			(100	)		13,000		13,100		—			(108	)		12,992
Trailpoint at the Woodlands		17,643		—			(113	)		17,530		17,723		—			(121	)		17,602
Verona Apartment Homes		32,970		—			(348	)		32,622		32,970		—			(362	)		32,608
Skyview Apartment Homes		28,400		—			(302	)		28,098		28,400		—			(315	)		28,085
Maxwell Townhomes		12,711		—			(46	)		12,665		12,785		—			(53	)		12,732
Evergreen at Coursey Place		25,492		28			(27	)		25,493		25,627		34			(32	)		25,629
Pines of York		14,034		(98	)		(18	)		13,918		14,114		(112	)		(21	)		13,981
The Estates at Johns Creek		65,000		—			(567	)		64,433		65,000		—			(589	)		64,411
Perimeter Circle		26,115		—			(291	)		25,824		26,115		—			(304	)		25,811
Perimeter 5550		20,630		—			(267	)		20,363		20,630		—			(279	)		20,351
Aston at Cinco Ranch		21,912		—			(82	)		21,830		22,032		—			(96	)		21,936
Sunset Ridge 1		18,174		38			(30	)		18,182		18,300		54			(43	)		18,311
Sunset Ridge 2		2,751		5			(4	)		2,752		2,768		7			(6	)		2,769
Calloway at Las Colinas		32,747		—			(100	)		32,647		32,938		—			(115	)		32,823
South Lamar Village		21,000		—			(287	)		20,713		21,000		—			(298	)		20,702
Heritage Pointe		24,671		—			(191	)		24,480		24,808		—			(201	)		24,607
The Bryant at Yorba Linda		66,016		—			(36	)		65,980		66,238		—			(87	)		66,151
Point Bonita Apartment Homes		25,585		991			(170	)		26,406		25,696		1,063			(183	)		26,576
The Westside Apartments		35,641		—			(282	)		35,359		35,838		—			(293	)		35,545
Tech Center Square		11,672		—			(93	)		11,579		11,730		—			(101	)		11,629
Retreat at Rocky Ridge		11,172		—			(136	)		11,036		11,221		—			(145	)		11,076
Providence in the Park		46,192		—			(323	)		45,869		46,398		—			(345	)		46,053
Green Trails Apartment Homes		60,718		—			(425	)		60,293		60,998		—			(451	)		60,547
Meridian Pointe		39,095		—			(379	)		38,716		39,277		—			(402	)		38,875
Terraces at Lake Mary		31,963		—			(245	)		31,718		32,110		—			(259	)		31,851
Courtney Meadows Apartments		27,015		—			(244	)		26,771		27,100		—			(257	)		26,843
Addison at Sandy Springs		22,750		—			(232	)		22,518		22,750		—			(244	)		22,506
Bristol at Grapevine		32,922		—			(291	)		32,631		32,922		—			(306	)		32,616
	$	802,325	$	964		$	(5,688	)	$	797,601	$	804,903	$	1,046		$	(6,084	)	$	799,865

For maturity dates, related interest rates, monthly debt service, and monthly escrow payments, see Note 9 of the notes to our consolidated financial statements.

As of March 31, 2020, the weighted average interest rate of all our outstanding indebtedness was 3.22%.

Based on current lending market conditions, we expect that the debt financing we incur, on a total portfolio basis, will not exceed 55% to 65% of the cost of our real estate investments (before deducting depreciation or other non-cash reserves) plus the value of our other assets (64% as of March 31, 2020). We may also increase the amount of debt financing we use with respect to an investment over the amount originally incurred if the value of the investment increases subsequent to our acquisition and if credit market conditions permit us to do so. Our charter limits us from incurring debt such that our total liabilities may not exceed 75% of the cost (before deducting depreciation or other non-cash reserves) of our tangible assets, although we may exceed this limit under certain circumstances. We expect that our primary liquidity source for acquisitions and long-term funding will include proceeds from dispositions and, to the extent we co-invest with other entities, capital from any future joint venture partners. We may also pursue a number of potential other funding sources, including mortgage loans, portfolio level credit lines and government financing.

Central banks and regulators in a number of major jurisdictions (including both the U.S. and the U.K.) have convened working groups to find, and implement the transition to, suitable replacements for Interbank Offered Rates (IBORs), including LIBOR. The Financial Conduct Authority of the U.K., which regulates LIBOR, has announced that it will not compel panel banks to contribute to LIBOR after 2021.

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

We expect to use our capital resources to make payments to our Advisor. We make payments to our Advisor in connection with the acquisition of real estate investments and for the management of our assets and costs incurred by our Advisor in providing services to us. We describe these payments in more detail in Note 12 of the notes to our consolidated financial statements.

Under our charter, we are required to limit our total operating expenses to the greater of 2% of our average invested assets or 25% of our net income for the four most recently completed fiscal quarters, as these terms are defined in our charter, unless the conflicts committee of our Board of Directors has determined that such excess expenses were justified based on unusual and non-recurring factors. Operating expense reimbursements for the four fiscal quarters ended March 31, 2020 did not exceed the charter-imposed limitation.

For the three months ended March 31, 2020, we paid aggregate distributions of $10.4 million, including $4.3 million of distributions paid in cash and $6.1 million of distributions reinvested in shares of common stock through our distribution reinvestment plan, as follows (in thousands, except per share data):

We announced on March 30, 2020 that we were suspending distributions as of April 1, 2020 in order to preserve cash and offset any impact to our liquidity that may occur as a result of the COVID-19 pandemic on our operations.

Distributions paid, distributions declared and sources of distributions paid were as follows for the three months ended March 31, 2020 (dollars in thousands):

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

Our net loss attributable to common stockholders' for the three months ended March 31, 2020 was $8.8 million and net cash used in operating activities was $2.2 million. Our cumulative cash distributions and net loss attributable to common shareholders from inception through March 31, 2020 were $272.7 million and $159.6 million, respectively. We have funded our cumulative distributions, which includes net cash distributions and distributions reinvested by stockholders, with cash flows from operating activities, proceeds from dispositions of real estate and proceeds from debt financing. To the extent that we pay distributions from sources other than our cash flow from operating activities or gains from asset sales, we will have fewer funds available for investment in commercial real estate and real estate-related debt and the overall return to our stockholders may be reduced.

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

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

Since FFO was promulgated, GAAP has adopted several new accounting pronouncements, such that management and many investors and analysts have considered the presentation of FFO alone to be insufficient. Accordingly, in addition to FFO, we use modified funds from operations attributable to common stockholders, or MFFO, as defined by the Investment Program Association, or IPA. MFFO excludes from FFO the following items:

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

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

By providing MFFO, we believe we are presenting useful information that also assists investors and analysts in the assessment of the sustainability of our operating performance. We also believe that MFFO is a recognized measure of sustainable operating performance by the real estate industry. MFFO is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies that are not as affected by other MFFO adjustments.

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

Neither FFO, MFFO nor AFFO should be considered as an alternative to net income (loss) attributable to common stockholders, nor as an indication of our liquidity, nor are any of these measures indicative of funds available to fund our cash needs, including our ability to fund distributions. Accordingly, FFO, MFFO and AFFO should be reviewed in connection with other GAAP measurements. Our FFO, MFFO and AFFO as presented may not be comparable to amounts calculated by other REITs. Further, during the current period of uncertainty and business disruptions as a result of the outbreak of COVID-19, FFO, MFFO and AFFO are much more limited measures of assessing our operating performance. See “—Management’s Discussion and Analysis of Financial Condition and Results of Operations -- COVID-19 Pandemic and Portfolio Outlook” for a discussion of the impact of the outbreak of COVID-19 on our business.

The following section presents our calculation of FFO, MFFO and AFFO and provides additional information related to our operations (in thousands, except per share amounts).

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

For a discussion of our critical accounting policies and estimates, see the discussion in our Annual Report on Form 10-K for the year ended December 31, 2019 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies.”

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

On April 15, 2020 we refinanced the $66 million mortgage loan secured by The Bryant at Yorba Linda. The new loan for $76 million matures on April 15, 2027.

We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business, including how the pandemic will impact our tenants. While we did not incur significant disruptions from the COVID-19 pandemic during the three months ended March 31, 2020, during April 2020, a small percentage of tenants have requested rent deferral as a result of the pandemic. We are evaluating each tenant rent relief request on an individual basis, considering a number of factors.

Not all tenant requests will ultimately result in modified agreements, nor are we forgoing our contractual rights under our lease agreements.

We are unable to predict the impact that the pandemic will have on our financial condition, results of operations and cash flows due to numerous uncertainties. The extent to which the COVID-19 pandemic impacts our operations and those of our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.

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

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

We enter into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we entered into a total of 19 interest rate caps that were designated as cash flow hedges during the years 2016 through 2023. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

As of March 31, 2020 and December 31, 2019, we had $648.9 million and $650.6 million, respectively, in variable rate outstanding borrowings. If interest rates on the variable rate outstanding borrowings had been 100 basis points higher during the three months ended March 31, 2020 and the year ended December 31, 2019, our interest expense would have increased by approximately $1.6 million and $6.1 million, respectively.

In addition, changes in interest rates affect the fair value of our fixed rate outstanding borrowings. As of March 31, 2020 and December 31, 2019, we had $153.4 million and $154.3 million, respectively, in fixed rate outstanding borrowings. As of March 31, 2020 and December 31, 2019, our fixed rate outstanding borrowings had an estimated aggregate fair value of $154.3 million and $154.4 million, respectively. Fair value is computed using rates available to us for debt with similar terms and remaining maturities. If interest rates had been 100 basis points higher as of March 31, 2020 and December 31, 2019, the fair value of these fixed rate outstanding borrowings would have decreased by $2.6 million and $2.9 million, respectively.

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

Under the supervision of our principal executive officer and principal financial officer, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective as of March 31, 2020.

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

Please see the risks discussed below and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019.

The COVID-19 pandemic or any future pandemic, epidemic or outbreak of infectious disease could have material and adverse effects on our business, financial condition, results of operations and cash flows and the markets and communities in which we operate and our multifamily residents work and reside.

Since initially being reported in December 2019, COVID-19 has spread around the world, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The COVID-19 pandemic has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly. Many experts predict that the COVID-19 pandemic will trigger a period of global economic slowdown or recession. The rapid development and fluidity of the COVID-19 pandemic precludes any prediction as to the ultimate adverse impact of COVID-19.

The COVID-19 pandemic or any future pandemic, epidemic or outbreak of infectious disease affecting states or regions in which we operate and our multifamily tenants work and reside could have material and adverse effects on our business, financial condition, results of operations and cash flows due to, among other factors:

The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. We do not yet know the full extent of potential impacts on our business and operations, our residents’ financial situation or the global economy as a whole. Nevertheless, it appears reasonably likely in the near term that many of our tenants may suffer reductions in income and, depending upon the duration of quarantines and the corresponding economic slowdown, some of our tenants will seek rent deferrals or become unable to pay their rent. Since the pandemic was declared, we have received a small percentage of requests for such deferrals. If tenants default on their rent and vacate, the ability to re-lease this space is likely to be more difficult if the economic slowdown continues and any long term impact of this situation, even after an economic rebound, remains unclear. While the spread of COVID-19 may eventually be contained or mitigated, there is no guarantee that a future outbreak or any other widespread epidemics will not occur, or that the global economy will recover, either of which could materially harm our business.

The current offering price of shares under our distribution reinvestment plan is equal to 95% of our current estimated value per share which was derived from the estimated value of our investments as of December 31, 2019 and approved by our board of directors on March 19, 2020. It does not take into account developments in our portfolio or the markets since December 31, 2019, including the current business disruptions as a result of the COVID-19 pandemic. As a result of these developments, a reinvestment of distributions in our common stock bears increased risk.

Pursuant to our distribution reinvestment plan, participants in the distribution reinvestment plan acquire shares of our common stock under the plan at a price equal to 95% of the estimated value per share of our common stock. As such,

participants currently acquire shares of the Company’s common stock under the plan at a price equal to $10.55 per share. The value of our shares will fluctuate over time in response to developments related to the performance of individual assets in the portfolio and the management of those assets, the real estate and finance markets and due to other factors. As such, the estimated value per share does not take into account developments in our portfolio since December 31, 2019. In particular, the outbreak of the COVID-19 pandemic, together with the resulting restrictions on travel and quarantines imposed, has had a negative impact on the economy and business activity globally as discussed in the risk factor above. These risks are not priced into our most recent estimated value per share and given the uncertainty, no assurances can be given that the purchase price of shares of our common stock reflect the underlying value of our assets. As a result, a reinvestment of distribution in our common stock bears increased risk.

For a full description of the methodologies and assumptions used to value our assets and liabilities in connection with the calculation of our most estimated value per share, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Market Information” of the Company’s annual report on Form 10-K for the year ended December 31, 2019.

All securities sold by us during the three months ended March 31, 2020 were sold in an offering registered under the Securities Act of 1933, as amended (the "Securities Act").

During the three months ended March 31, 2020, we redeemed shares of our common stock as follows:

(2)The share redemption program commenced on June 16, 2010 and was subsequently amended on September 29, 2011 and March 28, 2018.

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

Effective March 20, 2020, our share redemption program is only available for redemptions submitted in connection with a stockholder’s death, qualifying disability, or confinement of a stockholder to a long-term care facility. While the partial suspension of the share redemption program is in effect, we will only accept requests for redemption in connection with a stockholder’s death or qualifying disability and all other pending or new requests will not be honored or retained, but will be cancelled with the ability to resubmit when, if ever, the share redemption program is fully resumed. Pursuant to the terms of the share redemption program, we will not redeem in excess of 5% of the weighted-average number of shares outstanding during the 12-month period immediately prior to the effective date of redemption. Our Board of Directors will determine at least quarterly whether we have sufficient excess cash to repurchase shares. Generally, the cash available for redemption will be limited to proceeds from our distribution reinvestment plan plus, if we had positive operating cash flow from the previous fiscal year, 1% of all operating cash flow from the previous fiscal year.

Our share redemption program, including redemptions sought upon a stockholder's death or disability or upon confinement of a stockholder to a long-term care facility, will be available only for stockholders who purchase their shares directly from us or the transferees mentioned below, and is not intended to provide liquidity to any stockholder who acquired his or her shares by purchase from another stockholder. In connection with a request for redemption, the stockholder or his or her estate, heir or beneficiary will be required to certify to us that the stockholder acquired the shares to be repurchased either

(1) directly from us or (2) from the original investor by way of (i) a bona fide gift not for value to, or for the benefit of, a member of the investor's immediate or extended family (including the investor's spouse, parents, siblings, children or grandchildren and including relatives by marriage), (ii) through a transfer to a custodian, trustee or other fiduciary for the account of the investor or members of the investor's immediate or extended family in connection with an estate planning transaction, including by bequest or inheritance upon death or (iii) operation of law.

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

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

Maryland	27-0331816
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

		PAGE
PART 1	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets - March 31, 2020 (unaudited) and December 31, 2019	3

	Consolidated Statements of Operations and Comprehensive (Loss) Income - Three Months Ended March 31, 2020 and 2019 (unaudited)	4

	Consolidated Statements of Changes in Stockholders' Equity - Three Months Ended March 31, 2020 and 2019 (unaudited)	5

	Consolidated Statements of Cash Flows - Three Months Ended March 31, 2020 and 2019 (unaudited)	6

	Notes to Consolidated Financial Statements – March 31, 2020 (unaudited)	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	39

Item 4.	Controls and Procedures	39

PART II

Item 1A.	Risk Factors	41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 3.	Defaults Upon Senior Securities	43

Item 6.	Exhibits	44

SIGNATURES		45

Buildings		27.5 years
Building improvements		5.0 to 27.5 years
Furniture, fixtures, and equipment		3.0 to 5.0 years
Tenant improvements		Shorter of lease term or expected useful life
Lease intangibles		Remaining term of related lease

	Three Months Ended
	March 31,
	2020		2019
Non-cash financing and investing activities:
Stock issued from the distribution reinvestment plan	$	6,085	$	6,298
Accruals for construction in progress		1,236		990
Lease liabilities arising from obtaining right-of-use assets		—		526
Non-cash activity related to dispositions:
Mortgage notes payable settled directly with proceeds from sale of rental property		—		53,936
Cash paid during the period for:
Interest	$	7,741	$	9,996

	March 31, 2020		December 31, 2019
Real estate taxes	$	4,050	$	8,824
Insurance		904		1,438
Capital improvements		1,933		2,042
Total	$	6,887	$	12,304

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

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

	March 31, 2020			December 31, 2019
Land	$	196,358		$	196,358
Building and improvements		923,209			920,781
Furniture, fixtures and equipment		44,654			43,757
Construction in progress		2,062			2,831
		1,166,283			1,163,727
Less: accumulated depreciation		(238,521	)		(225,583	)
	$	927,762		$	938,144

	March 31, 2020			December 31, 2019
Unpaid principal balance	$	881		$	885
Unamortized discount and acquisition costs		(70	)		(76	)
Net book value	$	811		$	809
Maturity date	10/28/2021
Interest rate		7.5	%
Average monthly payment	$	8

	Revenues Attributable to Property Sold		Net Loss Attributable to Property Sold
Multifamily Community	Three Months Ended March 31, 2019		Three Months Ended March 31, 2019
2019 Dispositions:
Williamsburg	$	2,168	$	(1,455	)

2021	$	96,720
2022		127,367
2023		10,774
2024		128,350
2025		153,566
Thereafter		285,548
	$	802,325

2021	$	1,383
2022		1,213
2023		1,067
2024		954
2025		601
Thereafter		470
	$	5,688

Balance, January 1, 2020	$	(218	)
Reclassification adjustment for realized loss on designated derivatives		44
Designated derivatives, fair value adjustments		54
Balance, March 31, 2020	$	(120	)

Balance, January 1, 2019	$	(474	)
Reclassification adjustment for realized loss on designated derivatives		172
Designated derivatives, fair value adjustments		(28	)
Balance, March 31, 2019	$	(330	)

	March 31, 2020		December 31, 2019
Due from related parties:
RAI and affiliates	$	16	$	236
Due to related parties:
Advisor:
Operating expense reimbursements		386		35
Manager:
Property management fees		502		521
Construction management fees		126		119
Other operating expense reimbursements		—		8
	$	1,014	$	683

	Three Months Ended March 31,
	2020		2019
Fees earned / expenses paid to related parties:
Advisor:
Acquisition fees ⁽¹⁾	$	113	$	—
Asset management fees ⁽²⁾		3,091		3,198
Disposition fees ⁽³⁾		—		330
Overhead allocation ⁽⁴⁾		1,172		1,050
Internal audit ⁽⁴⁾		28		27
Manager:
Property management fees ⁽²⁾	$	1,491	$	1,558
Construction management fees ⁽⁵⁾		126		105
Construction payroll reimbursements ⁽⁵⁾		—		36
Operating expense reimbursements ⁽⁶⁾		—		117
Debt servicing fees ⁽²⁾		1		—

	Shares Issued			Gross Proceeds
Shares issued through private offering		1,263,727		$	12,582
Shares issued through primary public offering⁽¹⁾		62,485,461			622,077
Shares issued through stock distributions		2,132,266			—
Shares issued through distribution reinvestment plan		17,018,612			175,018
Shares issued in conjunction with the Advisor's initial investment, net of 4,500 share conversion		15,500			155
Total		82,915,566		$	809,832
Shares redeemed and retired		(12,889,153	)
Total shares issued and outstanding as of March 31, 2020		70,026,413

Period	Total Number of Shares Redeemed₍₁₎		Average Price Paid per Share
January 2020		—	$	—
February 2020		—	$	—
March 2020		27,769	$	10.83
		27,769

Record Date	Per Common Share		Distribution Date	Distributions reinvested in Shares of Common Stock		Net Cash Distribution		Total Aggregate Distribution
January 30, 2020	$	0.05	January 31, 2020	$	2,033	$	1,440	$	3,473
February 27, 2020		0.05	February 28, 2020		2,027		1,456		3,483
March 30, 2020		0.05	March 31, 2020		2,025		1,468		3,493
.	$	0.15		$	6,085	$	4,364	$	10,449

	Level 1		Level 2		Level 3		Total
March 31, 2020
Assets:
Interest rate caps	$	—	$	89	$	—	$	89
	$	—	$	89	$	—	$	89
December 31, 2019
Assets:
Interest rate caps	$	—	$	20	$	—	$	20
	$	—	$	20	$	—	$	20

	March 31, 2020						December 31, 2019
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Loan held for investment, net	$	811		$	930		$	809		$	938
Mortgage notes payable- outstanding borrowings	$	(802,325	)	$	(827,507	)	$	(804,903	)	$	(790,413	)

Multifamily Community	Rental Increase (in thousands)		Change in Occupancy			Increase in Effective Monthly Revenue Per Unit (in dollars)
Heritage Pointe	$	149		(0.49	%)	$	121
The Westside Apartments		115		4.01	%		53
Terraces at Lake Mary		85		0.71	%		99
The Bryant at Yorba Linda		77		(1.20	%)		95
Courtney Meadows Apartments		67		1.41	%		70
Calloway at Las Colinas		63		1.54	%		23
Bristol at Grapevine		61		0.11	%		58
Cannery Lofts		55		2.31	%		89
Village of Bonita Glen		52		(3.20	%)		120
Aston at Cinco Ranch		36		2.64	%		19
All other, net		252
	$	1,012

	Properties owned both periods			Properties purchased/sold during either period			Total
Depreciation	$	(96	)	$	(340	)	$	(436	)
Amortization of intangibles		—			—			—
	$	(96	)	$	(340	)	$	(436	)

Multifamily Community	Capital deployed during the three months ended March 31, 2020		Remaining capital budgeted
The Bryant at Yorba Linda	$	262	$	2,650
Terraces at Lake Mary		242		1,391
Vista Apartment Homes		218		1,192
Heritage Pointe		197		743
Providence in the Park		158		1,431
Courtney Meadows Apartments		154		1,927
Bristol Grapevine		143		1,239
Verona Apartment Homes		138		322
The Westside Apartments		129		636
Point Bonita Apartment Homes		120		1,050
All other properties		31		7,272
	$	1,792	$	19,853

Fiscal Year Paid	Per Common Share		Distribution reinvested in shares of Common Stock		Net Cash Distribution		Total Aggregate Distribution
2012	$	0.15	$	1,052	$	841	$	1,893
2013		0.41		9,984		4,757		14,741
2014		0.48		22,898		9,959		32,857
2015		0.60		28,959		13,257		42,216
2016		0.60		28,497		14,508		43,005
2017		0.60		27,114		15,919		43,033
2018		0.60		25,931		16,548		42,479
2019		0.60		24,499		17,521		42,020
2020		0.15		6,085		4,364		10,449
	$	4.19	$	175,019	$	97,674	$	272,693

Period	Total Number of Shares Redeemed ₍₁₎		Average Price Paid per Share		Year-to-Date Number of Shares Purchased as Part of a Publicly Announced Plan or Program ₍₂₎		Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
January 2020		—	$	—		—	(3)
February 2020		—	$	—		—	(3)
March 2020		27,769	$	10.83		27,769	(3)
		27,769


Exhibit No.		Description
3.1		Amended and Restated Articles of Incorporation (incorporated by reference to Pre-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed February 9, 2010)
3.2		Bylaws (incorporated by reference to Pre-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed February 9, 2010)
4.1		Form of Distribution Reinvestment Plan Enrollment Form (incorporated by reference to the Company’s Registration Statement on Form S-3 (No. 333-211721) filed May 31, 2016)
4.2		Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates) (incorporated by reference to Pre-Effective Amendment No. 2 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed November 12, 2009)
4.3		Third Amended and Restated Distribution Reinvestment Plan dated March 28, 2018 (incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K filed March 29, 2018)
10.3		Form of Indemnification Agreement (incorporated by reference to the Company’s Current Report on Form 8-K filed March 16, 2020)
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1		Second Amended and Restated Share Redemption Program dated March 28, 2018 (incorporated by reference to Exhibit 99.2 to the Company's Annual Report on Form 10-K filed March 29, 2018)
101.1		Interactive Data Files

	RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

May 11, 2020	By:	/s/ Alan F. Feldman
		ALAN F. FELDMAN
		Chief Executive Officer
		(Principal Executive Officer)

May 11, 2020	By:	/s/ Steven R. Saltzman
		STEVEN R. SALTZMAN
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)