10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐	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 000-55430

Resource REIT, Inc.

(Exact name of registrant as specified in its charter)


Maryland	88-0854717
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

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

(Address of principal executive offices) (Zip code)

(215) 231-7050

(Registrant's telephone number, including area code)

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


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

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

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

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


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

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

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

As of November 8, 2021, there were 165,636,606 shares of common stock of Resource REIT, Inc., $0.01 par value per share, outstanding.

(Back to Index)

RESOURCE REIT, INC.

INDEX TO QUARTERLY REPORT

ON FORM 10-Q


		PAGE
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets – September 30, 2021 (unaudited) and December 31, 2020	3

	Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)	4

	Consolidated Statements of Comprehensive Income (Loss) - Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)	5

	Consolidated Statements of Changes in Equity - Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)	6

	Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2021 and 2020 (unaudited)	8

	Notes to Consolidated Financial Statements – September 30, 2021 (unaudited)	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	39

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	53

Item 4.	Controls and Procedures	53

PART II	OTHER INFORMATION

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54

Item 3.	Defaults Upon Senior Securities	55

Item 6.	Exhibits	56

SIGNATURES		57

(Back to Index)

Forward-Looking Statements

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

See the risk factors identified in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC for a discussion of some, although not all, of the risks and uncertainties that could cause actual results to differ materially from those presented in our forward-looking statements.

Explanatory Note Regarding Financial Information

In connection with the REIT I Merger described below in Note 1, Resource REIT, Inc. (f/k/a Resource Real Estate Opportunity REIT II, Inc.) (“REIT II”) was the legal acquirer and Resource Real Estate Opportunity REIT, Inc. (“REIT I”) was the accounting acquirer for financial reporting purposes. Thus, the financial information set forth herein subsequent to the REIT I Merger reflects results of the combined entity, and the financial information set forth herein prior to the REIT I Merger reflects REIT I’s results. For this reason, period to period comparisons may not be meaningful. Unless the context requires otherwise, all references to the “Company,” “we,” “our,” and “us” herein mean REIT I and one or more of REIT I’s subsidiaries for periods prior to the Mergers, and REIT II and one or more of REIT II’s subsidiaries for periods following the Mergers. Certain historical information of REIT II is included for background purposes. See Note 1, Nature of Business and Organization, for defined terms.

(Back to Index)

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RESOURCE REIT, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except share data)


	September 30, 2021			December 31, 2020
ASSETS
Investments:
Rental properties, net	$	2,039,963		$	897,975
Identified intangible assets, net		—			5
Assets held for sale - rental properties		75,215			—
Total investments		2,115,178			897,980
Cash		107,224			70,015
Restricted cash		19,976			14,769
Subtotal- cash and restricted cash		127,200			84,784
Due from related parties		—			2,763
Tenant receivables, net of allowance of $2,259 and $774, respectively		974			516
Prepaid expenses and other assets		10,192			6,000
Goodwill		154,667			154,935
Operating lease right-of-use assets		2,726			3,180
Total assets	$	2,410,937		$	1,150,158
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net	$	1,550,464		$	825,986
Accounts payable and accrued expenses		21,078			12,677
Accrued real estate taxes		20,759			7,370
Due to related parties		—			20,245
Tenant prepayments		2,227			1,210
Security deposits		5,201			2,860
Operating lease liabilities		2,761			3,190
Total liabilities	$	1,602,490		$	873,538
Equity:
Preferred stock, par value $.01; 10,000,000 shares authorized, none issued		—			—
Common stock, par value $.01; 1,000,000,000 shares authorized; 165,636,606 and 86,075,442 shares issued and outstanding (including 1,055,589 and 790,272 of unvested restricted shares, respectively)		1,656			861
Convertible stock; par value $.01; 50,000 shares authorized; 50,000 and 49,935 shares issued and outstanding, respectively		1			1
Additional paid-in capital		1,326,572			618,074
Accumulated other comprehensive income (loss)		(111	)		(391	)
Accumulated deficit		(519,671	)		(469,736	)
Total stockholders' equity		808,447			148,809
Noncontrolling interest		—			127,811
Total equity		808,447			276,620
Total liabilities and equity	$	2,410,937		$	1,150,158

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

(Back to Index)

RESOURCE REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Revenues:
Rental income	$	62,961		$	33,258		$	178,466		$	99,625
Property management fee income - related parties		—			289			342			289
Asset management fee income - related parties		—			702			833			702
Other revenue		—			—			37			—
Total revenues		62,961			34,249			179,678			100,616
Expenses:
Property operating expenses		17,013			10,652			48,824			28,911
Real estate taxes		7,292			4,033			22,477			12,864
Acquisition costs		—			—			—			113
Property management fees - third party		1,696			392			5,017			392
Property management fees- related party		—			1,124			—			4,071
Asset Management fees - related party		—			2,335			—			8,518
Transaction costs		—			1,849			—			1,849
Casualty loss		454			18			1,372			221
General and administrative- Property related		1,335			954			3,982			2,640
General and administrative- Corporate		5,207			1,972			18,454			5,332
Loss on disposal of assets		188			142			606			363
Depreciation and amortization expense		24,128			12,760			75,178			38,927
Total expenses		57,313			36,231			175,910			104,201
Income (loss) before other income (expense)		5,648			(1,982	)		3,768			(3,585	)
Other income (expense):
Interest expense		(10,774	)		(5,632	)		(36,204	)		(19,772	)
Interest income		—			42			21			141
Gain on sale of rental property		—			—			18,734			—
Gain on sale of land easement		—			20			—			310
Insurance proceeds in excess of cost basis		80			3			241			39
Total other income (expense)		(10,694	)		(5,567	)		(17,208	)		(19,282	)
Loss before income taxes		(5,046	)		(7,549	)		(13,440	)		(22,867	)
Provision for income taxes		—			—			(206	)		—
Net loss	$	(5,046	)	$	(7,549	)	$	(13,646	)	$	(22,867	)
Redemption of preferred OP units		(342	)		—			(342	)		—
Preferred return to preferred OP unit holders		(921	)		(286	)		(3,161	)		(286	)
Net loss after preferred return		(6,309	)		(7,835	)		(17,149	)		(23,153	)
Less: Allocation of income to preferred unit holders attributable to noncontrolling interest		47			6			158			6
Less: Net loss attributable to noncontrolling interest		188			171			696			171
Net loss attributable to common stockholders	$	(6,074	)	$	(7,658	)	$	(16,295	)	$	(22,976	)

Weighted average common shares outstanding- basic		158,320			85,598			150,202			85,533
Weighted average common shares outstanding- diluted		158,320			85,598			150,202			85,533

Net loss per common share- BASIC	$	(0.04	)	$	(0.09	)	$	(0.11	)	$	(0.27	)
Net loss per common share- DILUTED	$	(0.04	)	$	(0.09	)	$	(0.11	)	$	(0.27	)

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

(Back to Index)

RESOURCE REIT, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Net loss	$	(5,046	)	$	(7,549	)	$	(13,646	)	$	(22,867	)
Other comprehensive income (loss):
Reclassification adjustment for realized loss on designated derivatives		61			29			120			109
Designated derivatives, fair value adjustments		(168	)		(288	)		169			(258	)
Total comprehensive loss		(5,153	)		(7,808	)		(13,357	)		(23,016	)
Redemption of preferred OP units		(342	)		—			(342	)		—
Preferred return to preferred OP unit holders		(921	)		(286	)		(3,161	)		(286	)
Total comprehensive loss after preferred return to preferred OP unit holders		(6,416	)		(8,094	)		(16,860	)		(23,302	)
Net loss attributable to noncontrolling interest		188			171			696			171
Allocation of income to preferred unit holders attributable to noncontrolling interest		47			6			158			6
Total other comprehensive loss (income) attributable to noncontrolling interest		12			6			(9	)		6
Comprehensive (income) loss attributable to noncontrolling interest		247			183			845			183
Comprehensive loss attributable to common stockholders	$	(6,169	)	$	(7,911	)	$	(16,015	)	$	(23,119	)

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

(Back to Index)

RESOURCE REIT, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021

(in thousands)

(unaudited)


	Common Stock			Convertible Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity		Noncontrolling Interest		Total Equity
	Shares	Amount	Shares		Amount
Balance at January 1, 2021	86,076	$861	50		$1	$618,074		$(391)		$(469,736)		$148,809		$127,811		$276,620
Merger	71,222	712	—		—	644,563		—		—		645,275		—		645,275
Common stock issued through the distribution reinvestment plan	289	3	—		—	2,487		—		—		2,490		—		2,490
Issuance of restricted stock	568	5	—		—	(5)		—		—		—		—		—
Stock-based compensation	—	—	—		—	3,022		—		—		3,022		—		3,022
Distributions declared	—	—	—		—	—		—		(11,029)		(11,029)		(555)		(11,584)
Common stock redemptions	(306)	(3)	—		—	(2,774)		—		—		(2,777)		—		(2,777)
Preferred return to preferred OP unit holders	—