10-Q 1 sir630201810q.htm 10-Q Document

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ     
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended June 30, 2018
OR
o     
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from                      to                     
Commission file number 000-54674
STEADFAST INCOME REIT, INC.
(Exact Name of Registrant as Specified in Its Charter)
Maryland
 
27-0351641
(State or Other Jurisdiction of
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)
 
 
 
18100 Von Karman Avenue, Suite 500
 
 
Irvine, California
 
92612
(Address of Principal Executive Offices)
 
(Zip Code)
(949) 852-0700
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
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 þ No o
Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated filer o
Accelerated filer o
 
 
Non-Accelerated filer þ
Smaller reporting company o
 
 
Emerging growth company o
 
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ



As of August 3, 2018, there were 74,861,588 shares of the Registrant’s common stock issued and outstanding.
 



STEADFAST INCOME REIT, INC.
INDEX
 
Page
 
 


1


PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
STEADFAST INCOME REIT, INC.
CONSOLIDATED BALANCE SHEETS
 
June 30, 2018
 
December 31, 2017
 
(Unaudited)
 
 
ASSETS
Assets:
 
 
 
Real Estate:
 
 
 
Land
$
126,002,217

 
$
106,932,041

Building and improvements
1,034,298,414

 
916,068,353

Tenant origination and absorption costs
1,766,904

 

Other intangible assets
2,644,263

 
2,644,263

Total real estate held for investment, cost
1,164,711,798

 
1,025,644,657

Less accumulated depreciation and amortization
(204,005,246
)
 
(182,081,988
)
Total real estate held for investment, net
960,706,552

 
843,562,669

Real estate held for sale, net

 
183,152,661

Total real estate, net
960,706,552

 
1,026,715,330

Cash and cash equivalents
91,588,750

 
171,228,485

Restricted cash
24,186,419

 
31,005,231

Investment in unconsolidated joint venture
13,695,764

 
8,133,156

Rents and other receivables
2,544,812

 
2,737,800

Assets related to real estate held for sale

 
2,862,292

Other assets
1,840,492

 
3,258,584

Total assets
$
1,094,562,789

 
$
1,245,940,878

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
 
 
 
Accounts payable and accrued liabilities
$
25,680,565

 
$
28,004,830

Notes payable:
 
 
 
Mortgage notes payable, net
719,338,161

 
625,302,105

Credit facility, net
52,303,881

 
90,222,098

Notes payable related to real estate held for sale

 
160,261,735

Total notes payable, net
771,642,042

 
875,785,938

Distributions payable
3,790,856

 
4,595,301

Due to affiliates
1,592,128

 
1,967,129

Liabilities related to real estate held for sale

 
4,939,907

Total liabilities
802,705,591

 
915,293,105

Commitments and contingencies (Note 11)

 

Stockholders’ Equity:
 
 
 
Preferred stock, $0.01 par value per share; 100,000,000 shares authorized, no shares issued and outstanding

 

Common stock, $0.01 par value per share; 999,999,000 shares authorized, 75,079,994 and 75,479,409 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively
750,800

 
754,794

Convertible stock, $0.01 par value per share; 1,000 shares authorized, issued and outstanding as of June 30, 2018 and December 31, 2017, respectively
10

 
10

Additional paid-in capital
660,149,499

 
664,110,915

Cumulative distributions and net losses
(369,043,111
)
 
(334,217,946
)
Total stockholders’ equity
291,857,198

 
330,647,773

Total liabilities and stockholders’ equity
$
1,094,562,789

 
$
1,245,940,878

See accompanying condensed notes to consolidated financial statements.

2


PART I — FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued)




STEADFAST INCOME REIT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
Rental income
$
30,062,993

 
$
48,763,373

 
$
61,240,920

 
$
96,979,147

Tenant reimbursements and other
3,994,015

 
6,355,033

 
8,271,014

 
12,419,523

Total revenues
34,057,008

 
55,118,406

 
69,511,934

 
109,398,670

Expenses:
 
 
 
 
 
 
 
Operating, maintenance and management
9,059,224

 
14,339,889

 
18,478,862

 
28,416,090

Real estate taxes and insurance
6,809,156

 
9,894,525

 
12,672,478

 
19,707,271

Fees to affiliates
3,809,224

 
5,667,962

 
7,741,290

 
11,289,985

Depreciation and amortization
11,311,894

 
18,048,070

 
22,202,690

 
36,001,793

Interest expense
7,855,662

 
11,260,913

 
15,568,434

 
22,108,949

Loss on debt extinguishment
271,790

 

 
2,282,246

 

General and administrative expenses
1,732,470

 
1,563,620

 
3,683,967

 
3,176,030

Total expenses
40,849,420

 
60,774,979

 
82,629,967

 
120,700,118

Loss before other income (expense)
(6,792,412
)
 
(5,656,573
)
 
(13,118,033
)
 
(11,301,448
)
Other income (expense):
 
 
 
 
 
 
 
Equity in loss from unconsolidated joint venture
(1,173,099
)
 

 
(2,814,504
)
 

Gain on sales of real estate, net

 

 
81,247,054

 

Total other income (expense)
(1,173,099
)
 

 
78,432,550

 

Net income (loss)
$
(7,965,511
)

$
(5,656,573
)
 
$
65,314,517

 
$
(11,301,448
)
Income (loss) per common share — basic and diluted
$
(0.11
)
 
$
(0.07
)
 
$
0.87

 
$
(0.15
)
Weighted average number of common shares outstanding — basic
75,212,006

 
75,878,088

 
75,277,570

 
75,969,547

Weighted average number of common shares outstanding — diluted
75,223,881

 
75,878,088

 
75,289,445

 
75,969,547

Distributions declared per common share
$
1.153

 
$
0.179

 
$
1.330

 
$
0.355

See accompanying condensed notes to consolidated financial statements.

3


PART I — FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued)




STEADFAST INCOME REIT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2017
AND FOR THE SIX MONTHS ENDED JUNE 30, 2018 (Unaudited)
 
Common Stock
 
Convertible Stock
 
Additional Paid-
In Capital
 
Cumulative
Distributions &
Net Losses
 
Total Stockholders’
Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
BALANCE, December 31, 2016
76,202,862

 
$
762,029

 
1,000

 
$
10

 
$
672,018,194

 
$
(352,351,990
)
 
$
320,428,243

Issuance of common stock
7,500

 
75

 

 

 
(75
)
 

 

Redemption of common stock
(730,953
)
 
(7,310
)
 

 

 
(7,992,690
)
 

 
(8,000,000
)
Distributions declared

 

 

 

 

 
(54,339,823
)
 
(54,339,823
)
Amortization of stock-based compensation

 

 

 

 
85,486

 

 
85,486

Net income for the year ended December 31, 2017

 

 

 

 

 
72,473,867

 
72,473,867

BALANCE, December 31, 2017
75,479,409

 
754,794

 
1,000

 
10

 
664,110,915

 
(334,217,946
)
 
330,647,773

Redemption of common stock
(399,415
)
 
(3,994
)
 

 

 
(3,996,006
)
 

 
(4,000,000
)
Distributions declared

 

 

 

 

 
(100,139,682
)
 
(100,139,682
)
Amortization of stock-based compensation

 

 

 

 
34,590

 

 
34,590

Net income for the six months ended June 30, 2018

 

 

 

 

 
65,314,517

 
65,314,517

BALANCE, June 30, 2018
75,079,994

 
$
750,800

 
1,000

 
$
10

 
$
660,149,499

 
$
(369,043,111
)
 
$
291,857,198

See accompanying condensed notes to consolidated financial statements.

4


PART I — FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued)




STEADFAST INCOME REIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended June 30,
 
2018
 
2017
Cash Flows from Operating Activities:
 
 
 
Net income (loss)
$
65,314,517

 
$
(11,301,448
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation and amortization
22,202,690

 
36,001,793

Amortization of deferred financing costs
536,980

 
938,707

Amortization of stock-based compensation
34,590

 
30,060

Amortization of loan premiums
(174,140
)
 
(617,277
)
Change in fair value of interest rate cap agreements
(85,307
)
 
516,089

Gain on sales of real estate
(81,247,054
)
 

Loss on debt extinguishment
2,282,246

 

Insurance claim recoveries

 
(45,660
)
Loss on disposal of building and improvements

 
6,034

Gain on short-term investments

 
(181,818
)
Equity in loss from unconsolidated joint venture
2,814,504

 

Changes in operating assets and liabilities:
 
 
 
Rents and other receivables
192,988

 
187,109

Other assets
1,706,699

 
2,474,662

Accounts payable and accrued liabilities
(4,033,829
)
 
(7,718,680
)
Due to affiliates
(369,005
)
 
(1,269,100
)
Net cash provided by operating activities
9,175,879

 
19,020,471

Cash Flows from Investing Activities:
 
 
 
Proceeds from short-term investments

 
169,500

Cash contributions to unconsolidated joint venture
(2,521,078
)
 

Cash distributions from unconsolidated joint venture
530,100

 

Acquisition of real estate investments
(67,886,062
)
 

Additions to real estate investments
(3,955,226
)
 
(7,790,236
)
Escrow deposits for pending real estate acquisitions
(2,600,000
)
 

Purchase of interest rate cap agreements
(203,300
)
 

Proceeds from sales of real estate, net
176,926,493

 

Proceeds from insurance claims

 
45,660

Net cash provided by (used in) investing activities
100,290,927

 
(7,575,076
)
Cash Flows from Financing Activities:
 
 
 
Proceeds from issuance of mortgage notes payable
94,482,000

 
303,751

Principal payments on mortgage notes payable
(148,490,527
)
 
(5,186,154
)
Principal payments on credit facility
(38,410,500
)
 

Payment of deferred financing costs
(1,248,916
)
 

Payment of debt extinguishment costs
(175,575
)
 

Distributions to common stockholders
(100,944,127
)
 
(27,167,402
)
Repurchase of common stock
(4,000,000
)
 
(4,000,000
)
Net cash used in financing activities
(198,787,645
)
 
(36,049,805
)
Net decrease in cash, cash equivalents and restricted cash
(89,320,839
)
 
(24,604,410
)
Cash, cash equivalents and restricted cash, beginning of period
205,096,008

 
93,777,878

Cash, cash equivalents and restricted cash, end of period
$
115,775,169

 
$
69,173,468


5


PART I — FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued)




STEADFAST INCOME REIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
 
Six Months Ended June 30,
 
2018
 
2017
Supplemental Disclosures of Cash Flow Information:
 
 
 
Interest paid
$
15,427,841

 
$
21,116,873

Supplemental Disclosure of Noncash Transactions:
 
 
 
Decrease in distributions payable
$
(804,445
)
 
$
(156,670
)
Assumption of mortgage notes payable to acquire real estate
$
65,000,000

 
$

Application of escrow deposits to acquire real estate
$
2,600,000

 
$

Mortgage notes payable assumed by buyer in connection with property sales
$
(67,140,194
)
 
$

Assets and liabilities deconsolidated in connection with the Second Closing Properties:
 
 
 
Real estate, net
$
(98,350,076
)
 
$

Notes payable, net
$
76,336,778

 
$

Restricted cash
$
(913,408
)
 
$

Accounts payable and accrued liabilities
$
674,912

 
$

Decrease in accounts payable and accrued liabilities from additions to investment in unconsolidated joint venture
$
(398,817
)
 
$

Decrease in accounts payable and accrued liabilities from additions to real estate investments
$
(174,008
)
 
$
(763,213
)
Decrease in due to affiliates from additions to real estate investments
$
(5,996
)
 
$
(20,983
)

See accompanying condensed notes to consolidated financial statements.

6


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)


1. Organization and Business
Steadfast Income REIT, Inc. (the “Company”) was formed on May 4, 2009, as a Maryland corporation that elected to be taxed as, and currently qualifies as, a real estate investment trust (“REIT”). On June 12, 2009, the Company was initially capitalized pursuant to the sale of 22,223 shares of common stock to Steadfast REIT Investments, LLC (the “Sponsor”) at a purchase price of $9.00 per share for an aggregate purchase price of $200,007. On July 10, 2009, Steadfast Income Advisor, LLC (the “Advisor”), a Delaware limited liability company formed on May 1, 2009, invested $1,000 in the Company in exchange for 1,000 shares of convertible stock (the “Convertible Stock”) as described in Note 7.
The Company owns a diverse portfolio of real estate investments, primarily in the multifamily sector, located throughout the United States. As of June 30, 2018, the Company owned 39 multifamily properties comprising a total of 10,622 apartment homes, an additional 21,130 square feet of rentable commercial space at two properties, and a 10% interest in one unconsolidated joint venture that owned 20 multifamily properties with a total of 4,584 apartment homes.
Private Offering
On October 13, 2009, the Company commenced a private offering of up to $94,000,000 in shares of the Company’s common stock at a purchase price of $9.40 per share (with discounts available for certain categories of purchasers) (the “Private Offering”). The Company offered its shares of common stock for sale in the Private Offering pursuant to a confidential private placement memorandum and only to persons that were “accredited investors,” as that term is defined under the Securities Act of 1933, as amended (the “Securities Act”), and Regulation D promulgated thereunder. On July 9, 2010, the Company terminated the Private Offering and on July 19, 2010, the Company commenced its registered Public Offering (defined and described below). The Company sold 637,279 shares of common stock in the Private Offering for gross offering proceeds of $5,844,325.
Public Offering
On July 19, 2010, the Company commenced its initial public offering of up to a maximum of 150,000,000 shares of common stock for sale to the public at an initial price of $10.00 per share (with discounts available for certain categories of purchasers) (the “Primary Offering”). The Company also offered up to 15,789,474 shares of common stock for sale pursuant to the Company’s distribution reinvestment plan (the “DRP,” and together with the Primary Offering, the “Public Offering”) at an initial price of $9.50 per share.
The Company terminated its Public Offering on December 20, 2013. Following termination of the Public Offering, the Company continued to offer shares of common stock pursuant to the DRP until the Company’s board of directors suspended the DRP effective with distributions earned beginning on December 1, 2014. Through December 20, 2013, the Company sold 73,608,337 shares of common stock in the Public Offering for gross proceeds of $745,389,748, including 1,588,289 shares of common stock issued pursuant to the DRP for gross offering proceeds of $15,397,232.
On March 10, 2015, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $10.35 as of December 31, 2014. On February 25, 2016, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $11.44 as of December 31, 2015. On February 15, 2017, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $11.65 as of December 31, 2016. On March 13, 2018, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $10.84 as of December 31, 2017. On May 9, 2018, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $9.84, which represents the estimated value per share of the Company’s

7


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

common stock of $10.84 as of December 31, 2017, less the special distribution of $1.00 per share of common stock that was paid to stockholders of record as of the close of business on April 20, 2018.
The business of the Company is externally managed by the Advisor, pursuant to the Advisory Agreement by and among the Company, Steadfast Income REIT Operating Partnership, L.P., a Delaware limited partnership formed on July 6, 2009 (the “Operating Partnership”) and the Advisor (as amended, the “Advisory Agreement”), which is subject to annual renewal by the Company’s board of directors. The current term of the Advisory Agreement expires on November 15, 2018. Subject to certain restrictions and limitations, the Advisor manages the Company’s day-to-day operations, manages the Company’s portfolio of properties and real estate-related assets, sources and presents investment opportunities to the Company’s board of directors and provides investment management services on the Company’s behalf. Stira Capital Markets Group, LLC (formerly known as Steadfast Capital Markets Group, LLC) (the “Dealer Manager”), an affiliate of the Advisor, served as the dealer manager for the Public Offering. The Advisor, along with the Dealer Manager, also provides marketing, investor relations and other administrative services on the Company’s behalf.
Substantially all of the Company’s business is conducted through the Operating Partnership. The Company is the sole general partner of the Operating Partnership. The Company and Advisor entered into an Amended and Restated Limited Partnership Agreement of the Operating Partnership (the “Partnership Agreement”) on September 28, 2009.
The Partnership Agreement provides that the Operating Partnership is operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), which classification could result in the Operating Partnership being taxed as a corporation, rather than as a partnership. In addition to the administrative and operating costs and expenses incurred by the Operating Partnership in acquiring and operating real properties, the Operating Partnership will pay all of the Company’s administrative costs and expenses, and such expenses will be treated as expenses of the Operating Partnership.
2. Summary of Significant Accounting Policies
There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2017, other than the adoption of Accounting Standards Update (“ASU”) 2014-09, ASU 2016-18 and ASU 2017-05, as further described below. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2017, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2018.
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of the Company, the consolidated variable interest entity (“VIE”) that the Company controls and of which the Company is the primary beneficiary, and the Operating Partnership’s subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. The financial statements of the Company’s subsidiaries are prepared using accounting policies consistent with those of the Company. The Operating Partnership is a VIE as the limited partner lacks substantive kick-out rights and substantive participating rights. The Company is the primary beneficiary of, and consolidates, the Operating Partnership.
The accompanying unaudited consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards

8


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

Board (“FASB”), Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary for a fair and consistent presentation of the results of such periods. Operating results for the three and six months ended June 30, 2018, are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. The unaudited consolidated financial statements herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.
Fair Value Measurements
Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other assets and liabilities at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:
Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.
When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and will establish a fair value by assigning weights to the various valuation sources.
The following describes the valuation methodologies used by the Company to measure fair value, including an indication of the level in the fair value hierarchy in which each asset or liability is generally classified.
Interest rate cap agreements - The Company has entered into certain interest rate cap agreements. These derivatives did not qualify as fair value hedges. Fair value was based on a model-driven valuation using the associated variable rate curve and an implied market volatility, both of which were observable at commonly quoted intervals for the full term of the interest rate cap agreements. Therefore, the Company’s interest rate cap agreements were classified within Level 2 of the fair value hierarchy and are included in other assets in the accompanying consolidated balance sheets.

9


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

The following table reflects the Company’s assets required to be measured at fair value on a recurring basis on the consolidated balance sheets:
 
 
June 30, 2018
 
 
Fair Value Measurements Using
 
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
Interest rate cap agreements
 
$

 
$
340,253

 
$

 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
Fair Value Measurements Using
 
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
Interest rate cap agreements
 
$

 
$
51,646

 
$

 
 
 
 
 
 
 
Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.
Fair Value of Financial Instruments
The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities, distributions payable, due to affiliates and notes payable.
The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities and distributions payable to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. The fair value of amounts due to affiliates is not determinable due to the related party nature of such amounts.
The fair value of the notes payable is estimated using a discounted cash flow analysis using borrowing rates available to the Company for debt instruments with similar terms and maturities. As of June 30, 2018 and December 31, 2017, the fair value of the notes payable was $764,503,455 and $878,004,294, respectively, compared to the carrying value of $771,642,042 and $875,785,938, respectively. The Company has determined that its notes payable are classified as Level 3 within the fair value hierarchy.
Restricted Cash
Restricted cash represents those cash accounts for which the use of funds is restricted by loan covenants and cash placed with a qualified intermediary for reinvestment under Section 1031 of the Internal Revenue Code. As of June 30, 2018 and December 31, 2017, the Company had a restricted cash balance of $24,186,419 and $31,005,231, respectively, which represents $12,276,118 and $17,197,810 of cash proceeds from property sales that are being held by qualified intermediaries as of June 30, 2018 and December 31, 2017, respectively, and $11,910,301 and $13,807,421 set aside as impounds for future property tax payments, property insurance payments and tenant improvement payments as required by agreements with the Company’s lenders as of June 30, 2018 and December 31, 2017, respectively.

10


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

The following table represents the components of the cash, cash equivalents and restricted cash presented on the accompanying consolidated statements of cash flows for the six months ended June 30, 2018 and 2017:
 
 
June 30,
 
 
2018
 
2017
Cash and cash equivalents
 
$
91,588,750

 
$
48,948,868

Restricted cash
 
24,186,419

 
20,224,600

Total cash, cash equivalents and restricted cash
 
$
115,775,169

 
$
69,173,468

The beginning of period restricted cash balance for the six months ended June 30, 2018, includes $2,862,292 that is included in assets related to real estate held for sale as of December 31, 2017, on the accompanying consolidated balance sheet. All such amounts were disposed of in conjunction with the property sales during the six months ended June 30, 2018.
Investments in Unconsolidated Joint Ventures
The Company accounts for investments in unconsolidated joint venture entities in which it may exercise significant influence over, but does not control, using the equity method of accounting. Under the equity method, the investment is initially recorded at cost and subsequently adjusted to reflect additional contributions or distributions and the Company’s proportionate share of equity in the joint venture’s income (loss). The Company recognizes its proportionate share of the ongoing income or loss of the unconsolidated joint venture as equity in income (loss) of unconsolidated joint venture on the consolidated statements of operations. On a quarterly basis, the Company evaluates its investment in an unconsolidated joint venture for other-than-temporary impairments. The Company has elected the cumulative earnings approach to classify cash receipts from the unconsolidated joint venture on the accompanying consolidated statements of cash flows. 
Distribution Policy
The Company has elected to be taxed as, and qualifies as, a REIT beginning with its taxable year ending December 31, 2010. To maintain its qualification as a REIT, the Company intends to make distributions each taxable year equal to at least 90% of its REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). Distributions during the three months ended June 30, 2018 were based on daily record dates and calculated at a rate of $0.001683 per share per day. Distributions were based on daily record dates and calculated at a rate of $0.001964 per share per day during the three months ended March 31, 2018 and six months ended June 30, 2017. Each day during the six months ended June 30, 2018 and 2017, was a distribution record date.
Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to qualify as a REIT under the Internal Revenue Code. During the three and six months ended June 30, 2018, the Company declared aggregate distributions of $1.153 and $1.330 per common share, respectively, including a special distribution the Company’s board of directors declared in the amount $1.00 per share of common stock to stockholders of record as of the close of business on April 20, 2018. During the three and six months ended June 30, 2017, the Company declared distributions of $0.179 and $0.355 per common share, respectively.
Per Share Data
Basic earnings (loss) per share attributable to common stockholders for all periods presented are computed by dividing net income (loss) by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted earnings (loss) per share is computed based on the weighted average number of shares of the Company’s common stock and all potentially dilutive securities, if any. Distributions declared per common share assume each share was issued and

11


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

outstanding each day during the period. Nonvested shares of the Company’s restricted common stock give rise to potentially dilutive shares of the Company’s common stock.
In accordance with FASB ASC Topic 260-10-45, Earnings Per Share, the Company uses the two-class method to calculate earnings (loss) per share. Basic earnings (loss) per share is calculated based on dividends declared and the rights of common shares and participating securities in any undistributed earnings, which represents net income (loss) remaining after deduction of dividends declared during the period. The undistributed earnings (loss) are allocated to all outstanding common shares based on the relative percentage of each class of shares. The Company does not have any participating securities outstanding other than the shares of common stock and the unvested restricted common stock during the periods presented. Earnings (loss) attributable to the unvested restricted common stock are deducted from earnings (loss) in the computation of per share amounts where applicable.
Reclassifications
Certain amounts in the Company’s prior period condensed consolidated unaudited financial statements were reclassified to conform to the current period presentation. These reclassifications did not change the results of operations of prior periods. On January 1, 2018, the Company adopted ASU 2016-18, as further described below. As a result, the Company no longer presents transfers between cash and restricted cash in the consolidated statements of cash flows. Instead, restricted cash is included with cash and cash equivalents when reconciling the beginning of the period and end of the period total amounts shown on the consolidated statements of cash flows.
Segment Disclosure
The Company has determined that it has one reportable segment with activities related to investing in multifamily properties. The Company’s investments in real estate are in different geographic regions, and management evaluates operating performance on an individual asset level. However, as each of the Company’s assets has similar economic characteristics, tenants and products and services, its assets have been aggregated into one reportable segment.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. ASU 2014-09 supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification. ASU 2014-09 does not apply to lease contracts within the scope of Leases (Topic 840). In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), which delayed the effective date of ASU 2014-09 by one year, which resulted in ASU 2014-09 being effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and is to be applied retrospectively. Early adoption is permitted, but can be no earlier than the original public entity effective date of fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company selected the modified retrospective transition method with a cumulative effect recognized as of the date of adoption and adopted ASU 2014-09 effective January 1, 2018. The Company identified limited sources of revenues from non-lease components, and the Company did not experience a material impact on its revenue recognition in the consolidated financial statements upon adoption. Additionally, there was no impact to the Company’s recognition of rental revenue, as rental revenue from leasing arrangements was specifically excluded from ASU 2014-09.
In February 2016, the FASB issued ASU 2016-02, Leases, (“ASU 2016-02”), amending the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 requires a modified retrospective transition approach. ASU 2016-02 will be effective in the first quarter of 2019 and allows for early adoption. The Company is evaluating the impact of ASU 2016-02 on its leases both as it relates to the Company acting as a lessor and as a lessee. Based on the preliminary results of its evaluation, as it relates to the former, the Company does not expect any material impact on the recognition of leases in the consolidated financial statements because under ASU 2016-02, lessors will continue to account for leases using an approach that is substantially equivalent to

12


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

existing guidance for sales-type leases, direct financing leases, and operating leases. As it relates to the latter, the Company does not expect a material impact on the recognition of leases in the consolidated financial statements because the quantity of leased equipment by the Company is limited. The Company is finalizing its evaluation of ASU 2016-02 and plans to adopt ASU 2016-02 on January 1, 2019.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted this guidance January 1, 2018 and applied it retrospectively. As a result of adopting ASU 2016-18, the Company began presenting restricted cash along with cash and cash equivalents in its consolidated statements of cash flows.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the definition of business (“ASU 2017-01”), that clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. ASU 2017-01 provides a screen to determine when a set is not a business. If the screen is not met, it (1) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) removes the evaluation of whether a market participant could replace the missing elements. Upon adoption of ASU 2017-01 during the year ended December 31, 2017, the Company did not experience a material impact. The Company capitalized $1,186,062 of acquisition fees and expenses on the consolidated balance sheet as of June 30, 2018 related to its multifamily property acquisitions in 2018. Acquisition fees and acquisition expenses were included in fees to affiliates and acquisition costs, respectively, on the consolidated statements of operations prior to the adoption of this guidance. Upon adoption of ASU 2017-01, all such costs are included in the purchase price that is allocated between land, buildings and improvements and tenant origination and absorption costs on the consolidated balance sheets.
In February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“Subtopic 610-20”): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”), that clarifies that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset and defines the term in substance nonfinancial asset. ASU 2017-05 also clarifies that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. Subtopic 610-20, which was issued in May 2014 as part of ASU 2014-09 (discussed above), provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. An entity is required to apply amendments in ASU 2017-05 at the same time it applies the amendments in ASU 2014-09 (discussed above). ASU 2017-05 requires modified retrospective application and is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within those fiscal years. Early adoption is permitted. The Company adopted ASU 2014-09 and ASU 2017-05 on January 1, 2018, and experienced an impact on the gain recognized related to the sale of the Second Closing Properties (as defined in Note 3). The sale of the Second Closing Properties is considered a partial sale and the Company no longer controls the Second Closing Properties after the sale. The retained noncontrolling interest was recognized at fair value and a full gain on sale was recognized under the new guidance.
In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). The FASB issued ASU 2017-09 to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation - Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 requires prospective application and is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. Upon adoption of ASU 2017-09 on January 1, 2018, the Company did not experience a material impact.

13


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements (“ASU 2018-11”). The FASB issued ASU 2018-11 to clarify ASU 2016-02. The amendments in ASU 2018-11 provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies ASU 2016-02 at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2018-11 also provides lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (Topic 606) and both of the following are met: (1) the timing and pattern of transfer of the nonlease components and associated lease component are the same, and (2) the lease component, if accounted for separately, would be classified as an operating lease. If the nonlease components associated with the lease component are the predominant component of the combined component, an entity is required to account for the combined component in accordance with Topic 606. Otherwise, the entity must account for the combined component as an operating lease in accordance with Topic 842. For entities that have not adopted Topic 842 before the issuance of ASU 2018-11, the effective date and transition requirements for ASU 2018-11 related to separating components of a contract are the same as the effective date and transition requirements in ASU 2016-02.
3. Real Estate
Property Acquisitions
During the six months ended June 30, 2018, the Company acquired the following two properties:
 
 
 
 
 
 
 
 
Purchase Price Allocation
Property Name
 
Location
 
Purchase Date
 
Units
 
Land
 
Buildings and Improvements
 
Tenant Origination and Absorption Costs
 
Total Purchase Price
Double Creek Flats
 
Plainfield, IN
 
5/7/2018
 
240

 
$
1,306,880

 
$
30,081,288

 
$
463,911

 
$
31,852,079

Jefferson at Perimeter Apartments
 
Dunwoody, GA
 
6/11/2018
 
504

 
17,763,296

 
84,567,694

 
1,302,993

 
103,633,983

 
 
 
 
 
 
744

 
$
19,070,176

 
$
114,648,982

 
$
1,766,904

 
$
135,486,062

As of June 30, 2018, the Company owned 39 multifamily properties, encompassing in the aggregate 10,622 apartment homes and an additional 21,130 square feet of rentable commercial space at two properties. The total purchase price of the Company’s real estate portfolio was $1,131,486,219. As of June 30, 2018 and December 31, 2017, the Company’s portfolio was approximately 94.8% and 93.8% occupied and the average monthly rent was $1,049 and $1,037, respectively.
As of June 30, 2018 and December 31, 2017, accumulated depreciation and amortization related to the Company’s consolidated real estate properties and related intangibles were as follows:
 
 
June 30, 2018
 
 
Assets
 
 
Land
 
Building and Improvements
 
Tenant Origination and Absorption Costs
 
Other Intangible Assets
 
Total Real Estate Held for Investment
 
Real Estate Held for Sale
Investments in real estate
 
$
126,002,217

 
$
1,034,298,414

 
$
1,766,904

 
$
2,644,263

 
$
1,164,711,798

 
$

Less: Accumulated depreciation and amortization
 

 
(202,945,014
)
 
(284,449
)
 
(775,783
)
 
(204,005,246
)
 

Net investments in real estate and related lease intangibles
 
$
126,002,217

 
$
831,353,400

 
$
1,482,455

 
$
1,868,480

 
$
960,706,552

 
$


14


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

 
 
December 31, 2017
 
 
Assets
 
 
Land
 
Building and Improvements
 
Tenant Origination and Absorption Costs
 
Other Intangible Assets
 
Total Real Estate Held for Investment
 
Real Estate Held for Sale
Investments in real estate
 
$
106,932,041

 
$
916,068,353

 
$

 
$
2,644,263

 
$
1,025,644,657

 
$
222,652,327

Less: Accumulated depreciation and amortization
 

 
(181,382,789
)
 

 
(699,199
)
 
(182,081,988
)
 
(39,499,666
)
Net investments in real estate and related lease intangibles
 
$
106,932,041

 
$
734,685,564

 
$

 
$
1,945,064

 
$
843,562,669

 
$
183,152,661

Depreciation and amortization expenses were $11,311,894 and $22,202,690 for the three and six months ended June 30, 2018, and $18,048,070 and $36,001,793 for the three and six months ended June 30, 2017, respectively.
Depreciation of the Company’s buildings and improvements were $10,989,153 and $21,841,657 for the three and six months ended June 30, 2018, and $18,009,778 and $35,925,209 for the three and six months ended June 30, 2017, respectively.
Amortization of the Company’s tenant origination and absorption costs was $284,449 and $284,449 for the three and six months ended June 30, 2018, respectively. There was no amortization of the Company’s tenant origination and absorption costs for the three and six months ended June 30, 2017. Tenant origination and absorption costs had a weighted-average amortization period as of the date of acquisition of less than one year.
Amortization of the Company’s other intangible assets was $38,292 and $76,584 for the three and six months ended June 30, 2018, and $38,292 and $76,584 for the three and six months ended June 30, 2017, respectively.
The future amortization of the Company’s acquired other intangible assets as of June 30, 2018, and thereafter is as follows:
July 1 through December 31, 2018
$
76,584

2019
153,168

2020
153,168

2021
153,168

2022
153,168

Thereafter
1,179,224

 
$
1,868,480

Operating Leases
As of June 30, 2018, the Company’s real estate portfolio comprised 10,622 residential apartment homes and was 96.6% leased by a diverse group of residents. For each of the three and six months ended June 30, 2018 and 2017, the Company’s real estate portfolio earned in excess of 99% and less than 1% of its rental income from residential tenants and commercial office tenants, respectively. The residential tenant lease terms consist of lease durations equal to 12 months or less. The commercial office tenant leases consist of remaining lease durations varying from 0.92 to 6.76 years.
Some residential and commercial leases contain provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company

15


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

requires security deposits from tenants in the form of a cash deposit and/or a letter of credit for commercial tenants. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets and totaled $3,067,404 and $3,339,602 as of June 30, 2018 and December 31, 2017, respectively.
The future minimum rental receipts from the Company’s properties under non-cancelable operating leases attributable to commercial office tenants as of June 30, 2018, and thereafter is as follows:
July 1 through December 31, 2018
$
130,002

2019
180,858

2020
74,313

2021
76,535

2022
76,535

Thereafter
185,501

 
$
723,744

As of June 30, 2018 and December 31, 2017, no tenant represented over 10% of the Company’s annualized base rent and there were no significant industry concentrations with respect to its commercial leases.
Joint Venture Arrangement with Blackstone Real Estate Income Trust, Inc.
On November 10, 2017, the Company, BREIT Steadfast MF JV LP (the “Joint Venture”), BREIT Steadfast MF Parent LLC (“BREIT LP”) and BREIT Steadfast MF GP LLC (“BREIT GP”, and together with BREIT LP, “BREIT”), executed a Contribution Agreement (the “Contribution Agreement”) whereby the Company agreed to contribute a portfolio of 20 properties owned by the Company to the Joint Venture in exchange for a combination of cash and a 10% ownership interest in the Joint Venture (the “Transaction”). BREIT LP owns a 90% interest in the Joint Venture and BREIT GP serves as the general partner of the Joint Venture. Each of BREIT LP and BREIT GP is a wholly-owned subsidiary of Blackstone Real Estate Income Trust, Inc. SIR LANDS Holdings, LLC, a wholly-owned subsidiary of the Company, holds the Company’s 10% interest in the Joint Venture.
The 20 properties contributed by the Company to the Joint Venture consist of properties located in Austin, Dallas and San Antonio, Texas, Nashville, Tennessee and Louisville, Kentucky (the “LANDS Portfolio”). On November 15, 2017 (the “First Closing Date”), the Company, through certain indirect wholly-owned subsidiaries, contributed 12 apartment communities (the “First Closing Properties”) to indirect, wholly-owned subsidiaries of the Joint Venture. On January 31, 2018 (the “Second Closing Date”), the Company, through certain indirect wholly-owned subsidiaries, contributed eight apartment communities (the “Second Closing Properties”) to indirect, wholly-owned subsidiaries of the Joint Venture. For additional information on the Transaction, see Note 4 (Investment in Unconsolidated Joint Venture).
The aggregate purchase price of the First Closing Properties was $318,576,792, exclusive of closing costs. On the First Closing Date, the Company sold a 90% interest in the First Closing Properties for $335,430,000, resulting in a gain of $76,135,530, which includes reductions to the net book value of the properties due to historical depreciation and amortization expense. The aggregate purchase price of the Second Closing Properties was $117,240,032, exclusive of closing costs. On the Second Closing Date, the Company sold a 90% interest in the Second Closing Properties for $125,370,000, resulting in a gain

16


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

of $38,523,427, which includes reductions to the net book value of the properties due to historical depreciation and amortization expense. The purchaser of the First Closing Properties and Second Closing Properties was the Joint Venture.
2018 Property Dispositions
The Moorings Apartments
On November 30, 2012, the Company, through an indirect wholly owned subsidiary, acquired The Moorings Apartments, a multifamily property located in Roselle, Illinois, containing 216 apartment homes. The purchase price of The Moorings Apartments was $20,250,000, exclusive of closing costs. On January 5, 2018, the Company sold The Moorings Apartments for $28,100,000, resulting in a gain of $9,658,823, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of The Moorings Apartments was not affiliated with the Company or the Advisor.
Arrowhead Apartment Homes
On November 30, 2012, the Company, through an indirect wholly owned subsidiary, acquired Arrowhead Apartment Homes, a multifamily property located in Palatine, Illinois, containing 200 apartment homes. The purchase price of the Arrowhead Apartment Homes was $16,750,000, exclusive of closing costs. On January 31, 2018, the Company sold the Arrowhead Apartment Homes for $23,600,000, resulting in a gain of $8,928,691, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of the Arrowhead Apartment Homes was not affiliated with the Company or the Advisor.
Willow Crossing Apartments
On November 20, 2013, the Company, through an indirect wholly owned subsidiary, acquired Willow Crossing Apartments, a multifamily property located in Elk Grove, Illinois, containing 579 apartment homes. The purchase price of the Willow Crossing Apartments was $58,000,000, exclusive of closing costs. On February 28, 2018, the Company sold the Willow Crossing Apartments for $79,000,000, resulting in a gain of $24,136,113, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of the Willow Crossing Apartments was not affiliated with the Company or the Advisor.

17


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

The results of operations for the three and six months ended June 30, 2018 and 2017, for the disposed properties through the date of sale, including the properties contributed to the Joint Venture, were included in continuing operations on the Company’s consolidated statements of operations and are as follows:
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
Rental income
$

 
$
20,028,065

 
$
2,534,906

 
$
39,766,054

Tenant reimbursements and other
41,924

 
2,731,622

 
420,978

 
5,427,992

Total revenues
41,924

 
22,759,687

 
2,955,884

 
45,194,046

Expenses:
 
 
 
 
 
 
 
Operating, maintenance and management
139,407

 
6,216,470

 
949,393

 
12,375,306

Real estate taxes and insurance
49,810

 
4,294,378

 
321,054

 
8,552,381

Fees to affiliates
12,667

 
888,988

 
134,307

 
1,756,248

Depreciation and amortization

 
7,462,327

 
279,432

 
14,852,085

Interest expense

 
4,421,560

 
681,322

 
8,597,170

Loss on debt extinguishment

 

 
2,010,457

 

General and administrative expenses
9,916

 
175,897

 
484,494

 
354,344

Total expenses
$
211,800

 
$
23,459,620

 
$
4,860,459

 
$
46,487,534

4.
Investment in Unconsolidated Joint Venture
On November 10, 2017, the Company, the Joint Venture, BREIT LP and BREIT GP executed the Contribution Agreement whereby the Company agreed to contribute the LANDS Portfolio to the Joint Venture in exchange for a combination of cash and a 10% ownership interest in the Joint Venture. BREIT LP owns a 90% interest in the Joint Venture and BREIT GP serves as the general partner of the Joint Venture. Each of BREIT LP and BREIT GP is a wholly-owned subsidiary of Blackstone Real Estate Income Trust, Inc. SIR LANDS Holdings, LLC, holds the Company’s 10% interest in the Joint Venture.
The Company exercises significant influence, but does not control the Joint Venture. Accordingly, as of the First Closing Date and Second Closing Date, the Company deconsolidated the First Closing Properties and Second Closing Properties and has accounted for its investment in the Joint Venture under the equity method of accounting. Income, losses, contributions and distributions are generally allocated based on the members’ respective equity interests.
As of June 30, 2018 and December 31, 2017, the book value of the Company’s investment in the Joint Venture was $13,695,764 and $8,133,156, respectively, which includes $7,640,166 and $5,515,754 of outside basis difference. The outside basis difference represents the Company’s transaction costs related to entering into the Joint Venture. During the three and six months ended June 30, 2018, $216,042 and $474,298 of amortization of this basis difference was included in equity in loss from unconsolidated joint venture on the accompanying consolidated statements of operations. There was no amortization of the outside basis difference during the three and six months ended June 30, 2017. During the three and six months ended June 30, 2018, the Company received distributions of $263,500 and $530,100 related to its investment in the Joint Venture, respectively. No distributions were received during the three and six months ended June 30, 2017.

18


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

Unaudited financial information for the Joint Venture as of June 30, 2018 and December 31, 2017, and for the three and six months ended June 30, 2018, is summarized below:
 
 
June 30, 2018
 
December 31, 2017
Assets:
 
 
 
 
Real estate assets, net
 
$
492,774,957

 
$
374,277,205

Other assets
 
22,170,584

 
15,328,440

Total assets
 
$
514,945,541

 
$
389,605,645

Liabilities and equity:
 
 
 
 
Notes payable, net
 
$
341,211,418

 
$
264,558,057

Other liabilities
 
22,211,163

 
11,525,292

Company’s capital
 
15,152,291

 
11,352,230

Other partner’s capital
 
136,370,669

 
102,170,066

Total liabilities and equity
 
$
514,945,541

 
$
389,605,645

 
For the Three Months Ended June 30, 2018
 
For the Six Months Ended June 30, 2018
Revenues
$
15,542,460

 
$
29,212,188

Expenses
25,113,025

 
52,614,244

Net loss
$
(9,570,565
)
 
$
(23,402,056
)
 
 
 
 
Company’s proportional net loss
$
(957,057
)
 
$
(2,340,206
)
Amortization of outside basis
(216,042
)
 
(474,298
)
Equity in loss of unconsolidated joint venture
$
(1,173,099
)
 
$
(2,814,504
)
5. Other Assets
As of June 30, 2018 and December 31, 2017, other assets consisted of:
 
June 30,
2018
 
December 31,
2017
Prepaid expenses
$
491,454

 
$
2,132,212

Interest rate cap agreements (Note 12)
340,253

 
51,646

Deposits
1,008,785

 
1,074,726

Other assets
$
1,840,492

 
$
3,258,584


19


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

6. Debt
Mortgage Notes Payable
The following is a summary of mortgage notes payable secured by real property as of June 30, 2018 and December 31, 2017:
 
 
June 30, 2018
 
 
 
 
 
 
Interest Rate Range
 
Weighted Average Interest Rate
 
 
Type
 
Number of Instruments
 
Maturity Date Range
 
Minimum
 
Maximum
 
 
Principal Outstanding
Mortgage notes payable - fixed
 
24

 
7/1/2018 - 10/1/2056
 
3.19
%
 
5.75
%
 
3.96
%
 
$
381,990,625

Mortgage notes payable - variable(1)
 
12

 
7/1/2023 - 11/1/2027
 
1-Mo LIBOR + 1.77%

 
1-Mo LIBOR + 2.38%

 
4.28
%
 
341,562,000

Total mortgage notes payable, gross
 
36

 
 
 
 
 
 
 
4.12
%
 
723,552,625

Premium, net(2)
 
 
 
 
 
 
 
 
 
 
 
428,855

Deferred financing costs, net(3)
 
 
 
 
 
 
 
 
 
 
 
(4,643,319
)
Total mortgage notes payable, net
 
 
 
 
 
 
 
 
 
 
 
$
719,338,161

 
 
December 31, 2017
 
 
 
 
 
 
Interest Rate Range
 
Weighted Average Interest Rate
 
 
Type
 
Number of Instruments
 
Maturity Date Range
 
Minimum
 
Maximum
 
 
Principal Outstanding
Mortgage notes payable - fixed
 
32

 
4/1/2018 - 10/1/2056
 
3.19
%
 
5.75
%
 
3.89
%
 
$
416,673,854

Mortgage notes payable - variable(1)
 
14

 
10/1/2018 - 1/1/2026
 
1-Mo LIBOR +2.02%

 
1-Mo LIBOR + 2.50%

 
3.86
%
 
372,481,000

Total mortgage notes payable, gross
 
46

 
 
 
 
 
 
 
3.87
%
 
789,154,854

Premium, net(2)
 
 
 
 
 
 
 
 
 
 
 
673,653

Deferred financing costs, net(3)
 
 
 
 
 
 
 
 
 
 
 
(4,264,667
)
Total mortgage notes payable, net
 
 
 
 
 
 
 
 
 
 
 
$
785,563,840

_____________________________
(1)
See Note 12 for a discussion of the interest rate cap agreements used to manage the exposure to interest rate movement on the Company’s variable rate loans.

20


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

(2)
Accumulated amortization related to debt premiums as of June 30, 2018 and December 31, 2017 was $951,914 and $2,468,041, respectively.
(3)
Accumulated amortization related to deferred financing costs as of June 30, 2018 and December 31, 2017 was $3,133,898 and $3,951,049, respectively.
Credit Facility
On July 29, 2016, nine wholly-owned subsidiaries of the Company entered into the Credit Agreement and a multifamily note with PNC Bank (the Credit Agreement, multifamily note, loan and security agreements, mortgages and guaranty, collectively referred to herein as the “Loan Documents”) that provide for a new credit facility in an amount not to exceed $350,000,000 to refinance certain of the Company’s existing mortgage loans. The credit facility has a maturity date of August 1, 2021, subject to extension, as further described in the Credit Agreement. Advances made under the credit facility are secured by the properties set out in the schedule below (the “Collateral Pool Property”), pursuant to a mortgage deed of trust with the nine wholly-owned subsidiaries of the Company in favor of PNC Bank.
The credit facility accrues interest at the one-month London Inter-bank Offered Rate plus (1) the servicing spread of 0.05% and (2) the net spread, based on the debt service coverage ratio, of between 1.73% and 1.93%, as further described in the Credit Agreement. Interest only payments on the credit facility are payable monthly in arrears and are due and payable on the first day of each month, commencing September 1, 2016. The entire outstanding principal balance and any accrued and unpaid interest on the credit facility are due on the maturity date. The Company’s nine wholly-owned subsidiaries may voluntarily prepay all or a portion of the amounts advanced under the Loan Documents. Notwithstanding the foregoing, in the event a Collateral Pool Property is released or the Credit Agreement is terminated, a termination fee is due and payable by the Company’s nine wholly-owned subsidiaries. In certain instances of a breach of the Credit Agreement, the Company guarantees to PNC Bank the full and prompt payment and performance when due of all amounts for which the Company’s nine wholly-owned subsidiaries are personally liable under the Loan Documents, in addition to all costs and expenses incurred by PNC Bank in enforcing such guaranty. Between November 15, 2017 and May 31, 2018, seven of the Collateral Pool Properties were either disposed or refinanced, with the advances made to each of the seven Collateral Pool Properties being repaid in full.
As of June 30, 2018 and December 31, 2017, the advances obtained under the credit facility are summarized in the following table:
 
 
Amount of Advance as of
Collateralized Property(1)
 
June 30, 2018
 
December 31, 2017
Carrington Park at Huffmeister
 
$

 
$
20,430,500

Carrington Place
 
27,535,500

 
27,535,500

Carrington at Champion Forest
 
25,121,250

 
25,121,250

Oak Crossing
 

 
17,980,000

 
 
52,656,750

 
91,067,250

Deferred financing costs, net on Credit Facility(2)
 
(352,869
)
 
(845,152
)
Credit Facility, net
 
$
52,303,881

 
$
90,222,098

___________

21


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

(1)
Each property is pledged as collateral for repayment of all amounts advanced under the credit facility.
(2)
Accumulated amortization related to deferred financing costs for the credit facility as of June 30, 2018 and December 31, 2017, was $234,670 and $390,241, respectively.
Maturity and Interest
The following is a summary of the Company’s aggregate maturities as of June 30, 2018:
 
 
 
 
Remainder of 2018
 
Maturities During the Years Ending December 31,
 
 
Contractual Obligation
 
Total
 
 
2019
 
2020
 
2021
 
2022
 
Thereafter
Principal payments on outstanding debt obligations(1)
 
$
776,209,375

 
$
11,183,085

 
$
59,094,341

 
$
53,820,140

 
$
73,610,006

 
$
31,899,158

 
$
546,602,645

_____________________________
(1)
Projected principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude the amortization of the deferred financing costs and debt premiums associated with certain notes payable.
The Company’s notes payable contain customary financial and non-financial debt covenants. As of June 30, 2018 and December 31, 2017, the Company was in compliance with all financial and non-financial debt covenants.
For the three and six months ended June 30, 2018, the Company incurred interest expense of $7,855,662 and $15,568,434, respectively. Interest expense for the three and six months ended June 30, 2018, includes amortization of deferred financing costs of $256,743 and $536,980, amortization of loan premiums of $48,326 and $174,140 and net unrealized loss (gain) from the change in fair value of interest rate cap agreements of $41,953 and $(85,307), respectively.
For the three and six months ended June 30, 2017, the Company incurred interest expense of $11,260,913 and $22,108,949, respectively. Interest expense for the three and six months ended June 30, 2017 includes amortization of deferred financing costs of $468,011 and $938,707, amortization of loan premiums of $308,639 and $617,277 and net unrealized gain from the change in fair value of interest rate cap agreements of $196,136 and $516,089, respectively.
Interest expense of $2,629,096 and $2,766,036 was payable as of June 30, 2018 and December 31, 2017, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.
7. Stockholders’ Equity
General
Under the Company’s Third Articles of Amendment and Restatement (the “Charter”), the total number of shares of capital stock authorized for issuance is 1,100,000,000 shares, consisting of 999,999,000 shares of common stock with a par value of $0.01 per share, 1,000 shares of convertible stock with a par value of $0.01 per share and 100,000,000 shares designated as preferred stock with a par value of $0.01 per share.

22


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

Common Stock
The shares of the Company’s common stock entitle the holders to one vote per share on all matters upon which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law. The common stock has no preferences or preemptive, conversion or exchange rights.
During 2009, the Company issued 22,223 shares of common stock to the Sponsor for $200,007. From inception to June 30, 2018, the Company had issued 76,732,395 shares of common stock in its Private Offering and Public Offering for offering proceeds of $679,572,220, net of offering costs of $95,845,468, including 4,073,759 shares of common stock pursuant to the DRP, for total proceeds of $39,580,847. Offering costs primarily consisted of selling commissions and dealer manager fees. The Company terminated its Public Offering on December 20, 2013, but continued to offer shares pursuant to the DRP through November 30, 2014.
The issuance and vesting activity for the six months ended June 30, 2018, and for the year ended December 31, 2017, for the restricted stock issued to the Company’s independent directors as compensation for services in connection with their re-election to the board of directors at the Company’s annual meeting is as follows:
 
 
For the Six Months Ended June 30, 2018
 
For the Year Ended
December 31, 2017
 
 
 
Nonvested shares at the beginning of the period
 
11,875

 
11,875

Granted shares
 

 
7,500

Vested shares
 

 
(7,500
)
Nonvested shares at the end of the period
 
11,875

 
11,875

The weighted average fair value of restricted stock issued to the Company’s independent directors for the six months ended June 30, 2018 and for the year ended December 31, 2017 is as follows:
Grant Year
 
Weighted Average Fair Value
2017
 
$
11.65

2018
 
n/a

The shares of restricted common stock vest and become non-forfeitable in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant and will become fully vested and become non-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to death or disability or (2) a change in control of the Company and as otherwise provided in the Incentive Award Plan, as defined below.
Included in general and administrative expenses is $17,295 and $34,590 for the three and six months ended June 30, 2018, and $15,030 and $30,060 for the three and six months ended June 30, 2017, respectively, for compensation expense related to the issuance of restricted common stock. The weighted average remaining term of the restricted common stock is 1.01 years as of June 30, 2018. As of June 30, 2018, the compensation expense related to the issuance of the restricted common stock not vested was $72,418.

23


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

Convertible Stock
During 2009, the Company issued 1,000 shares of Convertible Stock to the Advisor for $1,000. The Convertible Stock will convert into shares of the Company’s common stock if and when: (A) the Company has made total distributions on the then outstanding shares of common stock equal to the original issue price of those shares plus an 8.0% cumulative, non-compounded, annual return on the original issue price of those shares, (B) subject to specified conditions, the Company lists the common stock for trading on a national securities exchange or (C) the Advisory Agreement is terminated or not renewed by the Company (other than for “cause” as defined in the Advisory Agreement). A “listing” will also be deemed to have occurred on the effective date of any merger of the Company in which the consideration received by the holders of the Company’s common stock is the securities of another issuer that are listed on a national securities exchange. Upon conversion, each share of Convertible Stock will convert into a number of shares of common stock equal to 1/1000 of the quotient of (A) 10% of the amount, if any, by which (1) the Company’s “enterprise value” (as defined in the Charter) plus the aggregate value of distributions paid to date on the outstanding shares of common stock exceeds (2) the aggregate purchase price paid by the stockholders for those shares plus an 8.0% cumulative, non-compounded, annual return on the original issue price of those shares, divided by (B) the Company’s enterprise value divided by the number of outstanding shares of common stock, in each case calculated as of the date of the conversion. In the event of a termination or non-renewal of the Advisory Agreement by the Company for cause, the Convertible Stock will be redeemed by the Company for $1.00.
Preferred Stock
The Charter also provides the Company’s board of directors with the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such shares of preferred stock, the board of directors shall have the power from time to time to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares of preferred stock. The Company’s board of directors is authorized to amend the Charter, without the approval of the stockholders, to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue. As of June 30, 2018 and December 31, 2017, no shares of the Company’s preferred stock were issued and outstanding.
Distribution Reinvestment Plan
The Company’s board of directors had approved the DRP through which common stockholders could elect to reinvest an amount equal to the distributions declared on their shares of common stock in additional shares of the Company’s common stock in lieu of receiving cash distributions. The initial purchase price per share under the DRP was $9.50. Effective September 10, 2012, shares of the Company’s common stock were issued pursuant to the DRP at a price of $9.73 per share. Effective with distributions earned beginning on December 1, 2014, the Company’s board of directors elected to suspend the DRP. As a result, all distributions are paid in cash and not reinvested in shares of the Company’s common stock. The Company’s board of directors may, in its sole discretion, from time to time, reinstate the DRP, although there is no assurance as to if or when this will happen, and change the DRP price based upon changes in the Company’s estimated value per share and other factors that the Company’s board of directors deems relevant.
No sales commissions or dealer manager fees were payable on shares sold through the DRP.
Share Repurchase Program and Redeemable Common Stock
The Company’s share repurchase program may provide an opportunity for stockholders to have their shares of common stock repurchased by the Company, subject to certain restrictions and limitations. No shares can be repurchased under the Company’s share repurchase program until after the first anniversary of the date of purchase of such shares; provided, however, that this holding period does not apply to repurchases requested within two years after the death or disability of a stockholder.

24


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

The purchase price for shares repurchased under the Company’s share repurchase program prior to April 28, 2018, was as follows:
Share Purchase Anniversary
 
Repurchase Price
on Repurchase Date(1)
Less than 1 year
 
No Repurchase Allowed
1 year
 
92.5% of Estimated Value per Share(2)
2 years
 
95.0% of Estimated Value per Share(2)
3 years
 
97.5% of Estimated Value per Share(2)
4 years
 
100.0% of Estimated Value per Share(2)
In the event of a stockholder’s death or disability(3)
 
Average Issue Price for Shares(4)
The Company’s board of directors elected to suspend the Company’s share repurchase program, effective April 28, 2018. The board of directors of the Company subsequently determined to reinstate and amend the terms of the Company’s share repurchase program, effective May 20, 2018. Pursuant to the amended and reinstated share repurchase program, the revised repurchase price is equal to 93% of the most recently publicly disclosed estimated value per share. From May 20, 2018 to June 30, 2018, the share repurchase price was $9.15 per share, which represents 93% of the estimated value per share of $9.84. The share repurchase price is further reduced based on how long the stockholder has held the shares as follows:
Share Purchase Anniversary
 
Repurchase Price
on Repurchase Date(1)
Less than 1 year
 
No Repurchase Allowed
1 year
 
92.5% of the Share Repurchase Price(2)
2 years
 
95.0% of the Share Repurchase Price(2)
3 years
 
97.5% of the Share Repurchase Price(2)
4 years
 
100.0% of the Share Repurchase Price(2)
In the event of a stockholder’s death or disability(3)
 
Average Issue Price for Shares(4)
________________
(1)
As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock.
(2)
The “Share Repurchase Price” shall equal 93% of the Estimated Value per Share. The “Estimated Value per Share” equals the most recently determined estimated value per share determined by the Company’s board of directors.
(3)
The required one year holding period to be eligible to redeem shares under the Company’s share repurchase program does not apply in the event of death or disability of a stockholder.
(4)
The purchase price per share for shares redeemed upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares.
The purchase price per share for shares repurchased pursuant to the share repurchase program is further reduced by the aggregate amount of net proceeds per share, if any, distributed to the Company’s stockholders prior to the repurchase date as a result of the sale of one or more of the Company’s assets that constitutes a return of capital distribution as a result of such sales.

25


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

Repurchases of shares of the Company’s common stock are made quarterly upon written request to the Company at least 15 days prior to the end of the applicable quarter during which the share repurchase program is in effect. Repurchase requests are honored approximately 30 days following the end of the applicable quarter (the “Repurchase Date”). Stockholders may withdraw their repurchase request at any time up to three business days prior to the end of the applicable quarter.
During the three and six months ended June 30, 2018, the Company redeemed a total of 218,011 and 399,415 shares with a total redemption value of $2,000,000 and $4,000,000, respectively, and received net requests for the redemption of 955,293 and 1,571,654 shares with a total net redemption value of $8,270,898 and $13,863,033, respectively. During the three and six months ended June 30, 2017, the Company redeemed a total of 180,226 and 364,181 shares with a total redemption value of $2,000,000 and $4,000,000, respectively, and received net requests for the repurchase of 503,205 and 1,022,901 shares with a total net repurchase value of $5,774,695 and $11,741,716. As of June 30, 2018 and 2017, the Company’s total outstanding redemption requests received that were subject to the Company’s limitations on redemptions (discussed below) were 4,272,959 shares and 1,969,057 shares, respectively, with a total net redemption value of $39,527,939 and $22,862,852, respectively.
The Company cannot guarantee that the funds set aside for the share repurchase program will be sufficient to accommodate all repurchase requests made in any quarter. To the extent that redemption requests exceed the Company’s limitations on redemptions or the Company does not have sufficient funds available to repurchase all of the shares of the Company’s common stock for which repurchase requests have been submitted in any quarter, priority is given to redemption requests in the case of the death or disability of a stockholder. If the Company repurchases less than all of the shares subject to a repurchase request in any quarter, with respect to any shares which have not been repurchased, the requesting stockholder could (1) withdraw the request for repurchase or (2) ask that the Company honor the request in a future quarter, if any, when such repurchases may be made pursuant to the limitations of the share repurchase program and when sufficient funds were available. Such pending requests are honored among all requests for redemptions in any given redemption period as follows: first, pro rata as to redemptions sought upon a stockholder’s death or disability; and, next, pro rata as to other redemption requests.
The Company is not obligated to repurchase shares of the Company’s common stock under the share repurchase program. In no event shall redemptions under the share repurchase program exceed 5% of the weighted average number of shares of the Company’s common stock outstanding during the prior calendar year or the $2,000,000 limit for any quarter put in place by the Company’s board of directors. There is no fee in connection with a repurchase of shares of the Company’s common stock. As of June 30, 2018, the Company has recognized redemptions payable of $2,000,000, which is included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets.
The Company’s board of directors may, in its sole discretion, amend, suspend or terminate the share repurchase program at any time upon 30 days’ notice to the Company’s stockholders if it determines that the funds available to fund the share repurchase program are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase program is in the best interest of the Company’s stockholders. Therefore, stockholders may not have the opportunity to make a repurchase request prior to any potential termination of the Company’s share repurchase program.
Distributions Declared
Distributions declared (1) accrued daily to stockholders of record as of the close of business on each day, (2) were payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month and (3) were calculated at a rate of $0.001683 per share per day during the three months ended June 30, 2018, which if paid each day over a 365-day period, is equivalent to a 6.0% annualized distribution rate based on a purchase price of $10.24 per share of common stock and were calculated at a rate of $0.001964 per share per day during the three months ended March 31, 2018, which if paid each day over a 365-day period, is equivalent to a 7.0% annualized distribution rate based on a purchase price of $10.24 per share of common stock. Additionally, on April 16, 2018, the Company’s board of directors declared a special distribution in the

26


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

amount of $1.00 per share, or $75,298,163 in the aggregate, to stockholders of record as of the close of business on April 20, 2018. Distributions declared for the three and six months ended June 30, 2018, were $86,819,112 and $100,139,682, all of which were attributable to cash distributions.
Distributions declared for the three and six months ended June 30, 2017, were $13,563,610 and $27,010,732, all of which were attributable to cash distributions.
As of June 30, 2018 and December 31, 2017, $3,790,856 and $4,595,301 in distributions declared were payable.
Distributions Paid
For the three and six months ended June 30, 2018, the Company paid cash distributions of $87,612,706 and $100,944,127, which related to distributions declared for each day in the period from March 1, 2018 through May 31, 2018, and December 1, 2017 through May 31, 2018, respectively, inclusive of the special distribution in the amount of $75,298,163 paid on May 2, 2018, to stockholders of record as of the close of business on April 20, 2018. All such distributions were paid in cash.
For the three and six months ended June 30, 2017, the Company paid cash distributions of $13,722,790 and $27,167,402, which related to distributions declared for each day in the period from March 1, 2017 through May 31, 2017, and December 1, 2016 through May 31, 2017, respectively. All such distributions were paid in cash.
8. Earnings (Loss) Per Share
The following table presents a reconciliation of net income (loss) attributable to common stockholders and shares used in calculating basic and diluted earnings (loss) per share (“EPS”) for the three and six months ended June 30, 2018 and 2017:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Net income (loss) attributable to the Company
 
$
(7,965,511
)
 
$
(5,656,573
)
 
$
65,314,517

 
$
(11,301,448
)
Less: dividends declared on participating securities
 
1,819

 
2,122

 
3,618

 
4,221

Net income (loss) attributable to common stockholders
 
(7,967,330
)
 
(5,658,695
)
 
65,310,899

 
(11,305,669
)
Weighted average common shares outstanding — basic
 
75,212,006

 
75,878,088

 
75,277,570

 
75,969,547

Weighted average common shares outstanding — diluted
 
75,223,881

 
75,878,088

 
75,289,445

 
75,969,547

Earnings (loss) per common share — basic and diluted
 
$
(0.11
)
 
$
(0.07
)
 
$
0.87

 
$
(0.15
)
For the three and six months ended June 30, 2017, the Company excluded all unvested restricted common shares outstanding issued to the Advisor and the Company’s independent directors from the calculation of diluted loss per common share as the effect would have been antidilutive.

27


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

9. Related Party Arrangements
The Company has entered into the Advisory Agreement with the Advisor. Pursuant to the Advisory Agreement, the Company is obligated to pay the Advisor specified fees upon the provision of certain services related to the investment of funds in real estate and real estate-related investments, the management of the Company’s investments and for other services (including, but not limited to, the disposition of investments). Subject to the limitations described below, the Company is also obligated to reimburse the Advisor and its affiliates for organization and offering costs incurred by the Advisor and its affiliates on behalf of the Company, and the Company is obligated to reimburse the Advisor and its affiliates for acquisition and origination expenses and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company.
Amounts attributable to the Advisor and its affiliates incurred for the three and six months ended June 30, 2018 and 2017, and amounts that are payable (prepaid) to the Advisor and its affiliates as of June 30, 2018 and December 31, 2017, are as follows:

28


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

 
Incurred (Received) For the
 
Incurred (Received) For the
 
Payable (Prepaid) as of
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
 
June 30, 2018
 
December 31, 2017
Consolidated Statements of Operations:
 
 
 
 
 
 
 
 
 
 
 
Expensed
 
 
 
 
 
 
 
 
 
 
 
Investment management fees(1)
$
2,343,430

 
$
3,567,979

 
$
4,766,441

 
$
7,149,134

 
$
755

 
$

Acquisition expenses(2)
25,438

 

 
223,317

 

 

 

Property management:
 
 
 
 
 
 
 
 
 
 
 
Fees(1)
978,620

 
1,624,548

 
2,003,352

 
3,231,084

 
330,642

 
402,315

Reimbursement of onsite personnel(3)
2,969,457

 
4,660,447

 
6,086,367

 
9,339,177

 
1,081,387

 
772,584

Other fees(1)
286,264

 
475,435

 
609,337

 
909,767

 
33,223

 
44,981

Other fees - property operations(3)
18,414

 
36,070

 
42,393

 
82,906

 

 

Other fees - G&A(2)
13,438

 
29,844

 
34,726

 
70,425

 

 

Other operating expenses(2)
291,236

 
215,565

 
675,749

 
650,443

 
143,551

 
87,221

Disposition fees(4)

 

 
3,841,050

 

 

 
566,625

Disposition transaction costs(4)

 

 
67,464

 

 

 

Loan coordination fee(1)
200,910

 

 
362,160

 

 

 
86,675

Property insurance(5)
314,077

 
62,093

 
628,181

 
124,185

 

 
(160,942
)
Insurance proceeds(6)

 
(102,147
)
 

 
(102,147
)
 

 

Consolidated Balance Sheets:
 
 
 
 
 
 
 
 
 
 
 
Capitalized
 
 
 
 
 
 
 
 
 
 
 
Construction management:
 
 
 
 
 
 
 
 
 
 
 
Fees(7)
59,328

 
63,839

 
65,473

 
261,718

 
2,370

 
6,431

Reimbursement of labor costs(7)
19,087

 
65,393

 
35,437

 
130,864

 
200

 
297

Capital expenditures(7)
11,178

 
30,799

 
38,180

 
38,680

 

 

Capitalized costs on investment in unconsolidated joint venture(8)

 

 
58,386

 

 

 

Acquisition expenses(9)
235,847

 

 
245,048

 

 

 

Acquisition fees(9)
705,722

 

 
705,722

 

 

 

 
$
8,472,446

 
$
10,729,865

 
$
20,488,783

 
$
21,886,236

 
$
1,592,128

 
$
1,806,187

_____________________________
(1)
Included in fees to affiliates in the accompanying consolidated statements of operations.

29


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

(2)
Included in general and administrative expenses in the accompanying consolidated statements of operations. Reflects acquisition expenses that did not meet the capitalization criteria under ASU 2017-01.
(3)
Included in operating, maintenance and management in the accompanying consolidated statements of operations.
(4)
Included in gain on sales of real estate, net in the accompanying consolidated statements of operations.
(5)
Property related insurance expense and the amortization of the prepaid insurance deductible account are included in general and administrative expenses in the accompanying consolidated statements of operations. The amortization of the prepaid property insurance is included in operating, maintenance and management expenses in the accompanying consolidated statements of operations. The prepaid insurance is included in other assets in the accompanying consolidated balance sheets upon payment.
(6)
Included in tenant reimbursements and other in the accompanying consolidated statements of operations.
(7)
Included in building and improvements in the accompanying consolidated balance sheets.
(8)
Included in investment in unconsolidated joint venture in the accompanying consolidated balance sheets.
(9)
Included in total real estate, cost in the accompanying consolidated balance sheets. Reflects acquisition expenses that did meet the capitalization criteria under ASU 2017-01.
Investment Management Fee
The Company pays the Advisor a monthly investment management fee equal to one-twelfth of 0.80% of (1) the cost of real properties and real estate-related assets acquired directly by the Company or (2) the Company’s allocable cost of each real property or real estate-related asset acquired through a joint venture. The investment management fee is calculated including acquisition fees, acquisition expenses and any debt attributable to such investments, or the Company’s proportionate share thereof in the case of investments made through joint ventures. The cost of real properties and real estate-related assets that have been sold by the Company during the applicable month is excluded from the fee.
Acquisition Fees and Expenses
The Company pays the Advisor an acquisition fee equal to 2.0% of (1) the cost of investment, as defined in the Advisory Agreement, in connection with the acquisition or origination of any type of real property or real estate-related asset acquired directly by the Company or (2) the Company’s allocable portion of the purchase price in connection with the acquisition or origination of any type of real property or real estate-related asset acquired through a joint venture, including any acquisition and origination expenses and any debt attributable to such investments. In some instances, the Advisor has agreed to reduce the acquisition fee to 0.5% of the cost of investment when funds from the disposition of a prior property are used to fund the acquisition of a real property.
In addition to acquisition fees, the Company reimburses the Advisor for amounts directly incurred by the Advisor or its affiliates, including personnel-related costs for acquisition due diligence, legal and non-recurring management services, and amounts the Advisor pays to third parties in connection with the selection, acquisition or development of a property or acquisition of real estate-related assets, whether or not the Company ultimately acquires the property or the real estate-related assets.
The Charter limits the Company’s ability to pay acquisition fees if the total of all acquisition fees and expenses relating to the purchase would exceed 6.0% of the contract purchase price. Under the Charter, a majority of the Company’s board of directors, including a majority of the independent directors, is required to approve any acquisition fees (or portion thereof) that would cause the total of all acquisition fees and expenses relating to an acquisition to exceed 6.0% of the contract purchase price. In connection with the purchase of securities, the acquisition fee may be paid to an affiliate of the Advisor that is

30


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

registered as a Financial Industry Regulatory Authority (“FINRA”) member broker-dealer if applicable FINRA rules would prohibit the payment of the acquisition fee to a firm that is not a registered broker-dealer.
Property Management Fees and Expenses
The Company has entered into Property Management Agreements with Steadfast Management Company, Inc., an affiliate of the Sponsor (the “Property Manager”), in connection with the acquisition of each of the Company’s properties (other than EBT Lofts, Library Lofts and Stuart Hall Lofts, which are managed by an unaffiliated third-party management company). As of June 30, 2018, the property management fee payable with respect to each property under the Property Management Agreements (each a “Property Management Agreement”) ranged from 2.50% to 3.50% of the annual gross revenue collected, which is usual and customary for comparable property management services rendered to similar properties in similar geographic markets, as determined by the Advisor and approved by a majority of the members of the Company’s board of directors, including a majority of the independent directors. The Property Manager also receives an oversight fee of 1% of gross revenues at certain of the properties at which it does not serve as a property manager. Generally, each Property Management Agreement has an initial one year term and will continue thereafter on a month-to-month basis unless either party gives 60-days’ prior notice of its desire to terminate the Property Management Agreement, provided that the Company may terminate the Property Management Agreement at any time upon a determination of gross negligence, willful misconduct or bad acts of the Property Manager or its employees or upon an uncured breach of the Property Management Agreement upon 30 days’ prior written notice to the Property Manager.
In addition to the property management fee, the Property Management Agreements also specify certain other fees payable to the Property Manager or its affiliates, including fees for benefit administration, information technology infrastructure, licenses, support and training services and capital expenditures. The Company also reimburses the Property Manager for the salaries and related benefits of on-site property management employees.
Construction Management
The Company has entered into Construction Management Agreements with Pacific Coast Land and Construction, Inc., an affiliate of the Sponsor (the “Construction Manager”), in connection with the planned capital improvements and renovation for certain of the Company’s properties. As of June 30, 2018, the construction management fee payable with respect to each property pursuant to the Construction Management Agreements (each a “Construction Management Agreement”) ranged from 6.0% to 12.0% of the costs of the improvements for which the Construction Manager has planning and oversight authority. Generally, each Construction Management Agreement can be terminated by either party with 30 days’ prior written notice to the other party. Construction management fees are capitalized to the respective real estate properties in the period in which they are incurred, as such costs relate to capital improvements and renovations for units taken out of service while they undergo the planned renovation.
The Company may also reimburse the Construction Manager for the salaries and related benefits of certain of its employees for time spent working on capital improvements and renovations at its properties.
Property Insurance
The Company deposits amounts with an affiliate of the Sponsor to fund a prepaid insurance deductible account to cover the cost of required insurance deductibles across all properties of the Company and other affiliated entities. Upon filing a major claim, proceeds from the insurance deductible account may be used by the Company or another affiliate of the Sponsor. In addition, the Company deposits amounts with an affiliate of the Sponsor to cover the cost of property insurance across certain properties of the Company.

31


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

Other Operating Expense Reimbursement
In addition to the various fees paid to the Advisor, the Company is obligated to pay directly or reimburse all expenses incurred by the Advisor in providing services to the Company, including the Company’s allocable share of the Advisor’s overhead, such as rent, employee costs, utilities and information technology costs. The Company will not reimburse the Advisor for employee costs in connection with services for which the Advisor or its affiliates receive acquisition fees or disposition fees or for the salaries the Advisor pays to the Company’s executive officers.
The Charter limits the Company’s total operating expenses during any four fiscal quarters to the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income for the same period (the “2%/25% Limitation”). The Company may reimburse the Advisor, at the end of each fiscal quarter, for operating expenses incurred by the Advisor; provided, however, that the Company shall not reimburse the Advisor at the end of any fiscal quarter for operating expenses that exceed the 2%/25% Limitation unless the independent directors have determined that such excess expenses were justified based on unusual and non-recurring factors. The Advisor must reimburse the Company for the amount by which the Company’s operating expenses for the preceding four fiscal quarters then ended exceed the 2%/25% Limitation unless the independent directors have determined that such excess expenses were justified. For purposes of determining the 2%/25% Limitation amount, “average invested assets” means the average monthly book value of the Company’s assets invested directly or indirectly in equity interests and loans secured by real estate during the 12-month period before deducting depreciation, bad debts or other non-cash reserves. “Total operating expenses” means all expenses paid or incurred by the Company that are in any way related to the Company’s operation, including the Company’s allocable share of Advisor overhead and investment management fees, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, listing and registration of shares of the Company’s common stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of the Company’s assets; (f) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that the Company does not close); (g) real estate commissions on the resale of investments; and (h) other expenses connected with the acquisition, disposition, management and ownership of investments (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property).
At June 30, 2018, the Company’s total operating expenses, as defined above, did not exceed the 2%/25% Limitation.
Disposition Fee
The Company pays the Advisor a disposition fee in connection with a sale of a property or real estate-related asset and in the event of the sale of the entire Company (a “Final Liquidity Event”), in either case when the Advisor or its affiliates provides a substantial amount of services as determined by a majority of the Company’s independent directors. With respect to a sale of a property or real estate-related asset, the Company pays the Advisor a disposition fee equal to 1.5% of the contract sales price of the investment sold. With respect to a Final Liquidity Event, the Company will pay the Advisor a disposition fee equal to (i) 0.5% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is less than or equal to $9.00; (ii) 0.75% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is between $9.01 and $10.24; (iii) 1.00% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is between $10.25 and $11.24; (iv) 1.25% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is between $11.25 and $12.00; and (v) 1.50% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is greater than or equal to $12.01. To the extent the disposition fee is paid upon the sale of any assets other than real property, it will be included as an operating expense for purposes of the 2%/25%

32


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

Limitation. In connection with the sale of securities, the disposition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the disposition fee to a firm that is not a registered broker-dealer. The Charter limits the maximum amount of the disposition fees payable to the Advisor for the sale of any real property to the lesser of one-half of the brokerage commission paid or 3% of the contract sales price, but in no event shall the total real estate commissions paid, including any disposition fees payable to the Advisor, exceed 6% of the contract sales price.
Loan Coordination Fee
From time to time, upon the approval of a majority of independent directors, the Company pays the Advisor a loan coordination fee equal to 0.50% of the amount of debt refinanced.
Contribution, Settlement and Release Agreements
Certain of the Company’s subsidiaries and the Property Manager were named as defendants in two Texas class action lawsuits alleging violations of the Texas Water Code (collectively, the “Actions”). The Company’s subsidiaries and the Property Manager disputed plaintiffs’ claims in the Actions; however, to avoid the time and expense associated with defending the Actions, the Company’s subsidiaries and other affiliated Steadfast entities (collectively, the “Steadfast Parties”) entered into Settlement Agreements with the plaintiffs that provided for a settlement payment to the class members and a release of claims by plaintiffs and class members against the Steadfast Parties. In connection with the settlement agreements, on April 17, 2017, the Steadfast Parties entered into a contribution, settlement and release agreement whereby all agreed to an allocation of all costs related to the actions and their settlements and a release of all claims a Steadfast Party may have against any other Steadfast Party. The Company’s proportionate share of the settlements was $378,405, which consisted of funds used to pay a portion of (1) the settlement payments to the plaintiffs and class members in the actions and (2) legal costs, less insurance proceeds.
10. Incentive Award Plan and Independent Director Compensation
The Company has adopted an incentive plan (the “Incentive Award Plan”) that provides for the grant of equity awards to its employees, directors and consultants and those of the Company’s affiliates. The Incentive Award Plan authorizes the grant of non-qualified and incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, dividend equivalents and other stock-based awards or cash-based awards. No awards have been granted under the Incentive Award Plan as of June 30, 2018 and December 31, 2017, except those awards granted to the independent directors as described below.
Under the Company’s independent directors’ compensation plan, which is a sub-plan of the Incentive Award Plan, each of the Company’s then independent directors was entitled to receive 5,000 shares of restricted common stock in connection with the initial meeting of the Company’s full board of directors. The Company’s initial board of directors, and each of the independent directors, agreed to delay the initial grant of restricted stock until the Company raised $2,000,000 in gross offering proceeds in the Private Offering. Each subsequent independent director, if any, that joins the Company’s board of directors would receive 5,000 shares of restricted common stock upon election to the Company’s board of directors. In addition, on the date following an independent director’s re-election to the Company’s board of directors, he or she receives 2,500 shares of restricted common stock. One-fourth of the shares of restricted common stock generally vest and become non-forfeitable upon issuance and the remaining portion will vest in three equal annual installments beginning on the first anniversary of the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted stock will become fully vested and become non-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability or (2) a change in control of the Company and as otherwise provided in the

33


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

Incentive Award Plan. The Company recorded stock-based compensation expense of $17,295 and $34,590 for the three and six months ended June 30, 2018, and $15,030 and $30,060 for the three and six months ended June 30, 2017, respectively.
11. Commitments and Contingencies
Economic Dependency
The Company is dependent on the Advisor and its affiliates for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase and disposition of real estate and real estate-related investments; management of the daily operations of the Company’s real estate and real estate-related investment portfolio; and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other sources.
Concentration of Credit Risk
The geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the Houston, Texas and Oklahoma City, Oklahoma apartment markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition from other apartment communities, decrease in demand for apartments or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.
Environmental
As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.
Legal Matters
From time to time, the Company is subject, or party, to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on the Company’s results of operations or financial condition nor is the Company aware of any such legal proceedings contemplated by government agencies.

34


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)

12. Derivative Financial Instruments
The Company uses interest rate derivatives with the objective of managing exposure to interest rate movements thereby minimizing the effect of interest rate changes and the effect they could have on future cash flows. Interest rate cap agreements are used to accomplish this objective. The following table provides the terms of the Company’s interest rate derivative instruments that were in effect at June 30, 2018 and December 31, 2017:
June 30, 2018
Type
 
Maturity Date Range
 
Based on
 
Number of Instruments
 
Notional Amount
 
Variable Rate
 
Weighted Average Rate Cap
 
Fair Value
Interest rate cap
 
12/1/2018 - 7/1/2021
 
One-Month LIBOR
 
14

 
$
386,897,000

 
2.09
%
 
2.91
%
 
$
340,253

December 31, 2017
Type
 
Maturity Date Range
 
Based on
 
Number of Instruments
 
Notional Amount
 
Variable Rate
 
Weighted Average Rate Cap
 
Fair Value
Interest rate cap
 
1/1/2018 - 10/1/2019
 
One-Month LIBOR
 
18

 
$
458,655,000

 
1.56
%
 
2.89
%
 
$
51,646

The interest rate cap agreements are not designated as cash flow hedges. Accordingly, the Company records any changes in the fair value of the interest rate cap agreements as interest expense. The change in the fair value of the interest rate cap agreements for the three and six months ended June 30, 2018, resulted in an unrealized (loss) gain of $(41,953) and $85,307, respectively, which is included in interest expense in the accompanying consolidated statements of operations. During the three and six months ended June 30, 2018, the Company acquired interest rate cap agreements of $203,300. No interest rate cap agreements were acquired during the three and six months ended June 30, 2017. The fair value of the interest rate cap agreements of $340,253 and $51,646 as of June 30, 2018 and December 31, 2017, respectively, are included in other assets on the accompanying consolidated balance sheets.
13. Subsequent Events
Distributions Paid
On July 2, 2018, the Company paid distributions of $3,790,856, which related to distributions declared for each day in the period from June 1, 2018 through June 30, 2018. All such distributions were paid in cash.
On August 1, 2018, the Company paid distributions of $3,535,232, which related to distributions declared for each day in the period from July 1, 2018 through July 31, 2018. All such distributions were paid in cash.
Shares Repurchased
On July 31, 2018, the Company repurchased 218,555 shares of its common stock for a total repurchase value of $2,000,000, or $9.15 per share, pursuant to the Company’s share repurchase program.

35


PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
(unaudited)