10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2019

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

For the transition period from __________ to __________

Commission file number 000-55430

Resource Real Estate Opportunity REIT II, Inc.

(Exact name of registrant as specified in its charter)

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

1845 Walnut Street, 18th 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 exchange on which registered
None	None	None

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

Common Stock, par value $0.01 per share

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

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

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

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

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

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

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

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

There is no established market for the registrant’s shares of common stock.  On March 19, 2020, the board of directors of the Registrant approved an estimated value per share of the Registrant’s common stock of $9.08. For a full description of the methodologies used to calculate the Registrant’s estimated value per share as of December 31, 2019, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information.” There were 59,856,493 shares of common stock held by non-affiliates as of June 30, 2019, the last business day of the registrant's most recently completed second fiscal quarter, for an aggregate market value of $524,941,444, assuming an estimated value per share of $8.77, which was the Registrant’s estimated value per share as determined by its board of directors on March 22, 2019. For a full description of the methodologies used to calculate the Registrant’s estimated value per share as of December 31, 2018, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Market Information” in the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018.

As of March 18, 2020, there were 60,339,875 outstanding shares of common stock of Resource Real Estate Opportunity REIT II, Inc.  

Registrant incorporates by reference portions of the Resource Real Estate Opportunity REIT II, Inc. Definitive Proxy Statement for the 2020 Annual Meeting of Stockholders (Items 10, 11, 12, 13, and 14 of Part III).

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

INDEX TO ANNUAL REPORT

ON FORM 10-K

		PAGE
	Forward Looking Statements
PART I
Item 1.	Business	4
Item 1A.	Risk Factors	6
Item 1B.	Unresolved Staff Comments	33
Item 2.	Properties	33
Item 3.	Legal Proceedings	34
Item 4.	Mine Safety Disclosures	34
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	35
Item 6	Selected Financial Data	41
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	42
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	60
Item 8.	Financial Statements and Supplementary Data	60
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	61
Item 9A.	Controls and Procedures	61
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	62
Item 11.	Executive Compensation	62
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters	62
Item 13.	Certain Relationships and Related Transactions, and Director Independence	62
Item 14.	Principal Accounting Fees and Services	62
PART IV.
Item 15.	Exhibits and Financial Statement Schedule	63
Item 16.	Form 10-K Summary	64
SIGNATURES		65

Forward-Looking Statements

Certain statements included in this Annual Report on Form 10-K are forward-looking statements.  Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts.  In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expects,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will” and “would” or the negative of these terms or other comparable terminology.  Such statements are subject to the risks and uncertainties more particularly described in Item 1A of this Annual Report on Form 10-K. These risks and uncertainties could cause actual results to differ materially.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.  We undertake no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances after the date of this report, except as may be required under applicable law.

PART I

ITEM 1. BUSINESS

General

Resource Real Estate Opportunity REIT II, Inc. is a Maryland corporation that was formed on September 28, 2012. As used herein, the terms “we,” “our” and “us” refer to Resource Real Estate Opportunity REIT II, Inc. and, as required by context RRE Opportunity OP II, LP, a Delaware limited partnership, and to its subsidiaries.  We focus primarily on acquiring underperforming or distressed real estate and real estate loans.  We elected to be taxed as a real estate investment trust, or REIT, and to operate as a REIT beginning with our taxable year ended December 31, 2014.  Our objective is to invest in multifamily assets across the entire spectrum of investments in order to provide stockholders with growing cash flow and increasing asset values.

As of December 31, 2019, we owned 17 multifamily properties, as described further in “Item 2. Properties”. In the future we may reinvest proceeds from property sales or refinancings to purchase underperforming commercial real estate and real estate-related debt, including properties that, when acquired, may benefit from renovations that may increase their long-term values.

We are externally managed by Resource Real Estate Opportunity Advisor II, LLC, which we refer to as our Advisor, an indirect wholly owned subsidiary of Resource America, Inc., or RAI. RAI is a wholly-owned subsidiary of C-III Capital Partners, LLC ("C-III"), a leading commercial real estate services company engaged in a broad range of activities. C-III controls both our Advisor and Resource Real Estate Opportunity Manager II, LLC, our property manager (our “Manager”). C-III also controls all of the shares of common stock held by RAI and our Advisor. To provide its services, the Advisor draws upon RAI, C-III, their management teams and their collective investment experience.

Our Offerings

On February 6, 2014, our Registration Statement on Form S-11 (File No. 333-184476), covering a public offering of up to 100,000,000 shares of common stock in our primary offering and 10,000,000 shares of common stock under our distribution reinvestment plan (“DRIP”), was declared effective under the Securities Act of 1933, as amended (the "Securities Act"). We retained Resource Securities, LLC, an affiliate of our Advisor, as the dealer manager for our offering. We offered up to 100,000,000 shares of common stock in our primary offering at an aggregate offering price of up to $1.0 billion, or $10 per share with discounts available to certain categories of purchasers. We also offered up to 10,000,000 shares pursuant to DRIP at an initial purchase price of $9.50 per share. Following an announcement of an estimated net asset value per share on March 30, 2016, we are offering shares pursuant to the DRIP at a purchase price equal to 95% of the estimated net asset value per share. We terminated the primary portion of our initial public offering on February 6, 2016 and continued to offer shares pursuant to our DRIP on a Registration Statement in Form S-3 filed February 16, 2016. A new Registration Statement on Form S-3 (File No. 33-236040) to register 1,500,000 shares of common stock to be sold pursuant to our DRIP was filed in January 2020. We continue to offer shares to our existing stockholders pursuant our DRIP.

Our Business Strategy

Our business strategy has a particular focus on multifamily assets, although we may also purchase interests in other types of commercial property assets consistent with our investment objectives. We have acquired and may continue to acquire (i) underperforming multifamily rental properties which we will renovate and stabilize in order to increase rents and (ii) distressed real estate owned by financial institutions, usually as a result of foreclosure, and non-performing or distressed loans, including first- and second-priority mortgage loans and other loans which we will resolve. We may make adjustments to our target portfolio based on real estate market conditions and investment opportunities. We will not forego a good investment because it does not precisely fit our expected portfolio composition.

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Our Operating Policies and Strategies

Our Advisor has the primary responsibility for the selection of investments, the negotiation of the acquisition of these investments, and financing, asset-management and disposition decisions.  A majority of our Board of Directors and a majority of the Conflicts Committee, which includes only our three independent directors, approve certain significant proposed real estate property investments and real estate-related debt investments.  Our Board of Directors meets regularly to monitor the execution of our investment strategies and our progress in achieving our investment objectives.

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

Our Advisor and our Property Manager

Our Advisor manages our day-to-day operations and our portfolio of real estate investments, and provides asset management, marketing, investor relations, and other administrative services on our behalf, all subject to the supervision of our Board of Directors.  Our Advisor has invested approximately $1.2 million in us and as of December 31, 2019 it owned 137,432 shares of our common stock and 50,000 shares of our convertible stock. Under certain circumstances, the convertible shares may be converted into shares of our common stock. As of December 31, 2019 our Advisor had granted 19,968 shares of its convertible stock to employees of RAI and its subsidiaries and affiliates. The shares granted vest ratably over three years; 18,096 of the shares have vested as of December 31, 2019 and 1,872 shares have been forfeited.

We have a management agreement with Resource Real Estate Opportunity Manager II, LLC, or our Manager, an affiliate of our Advisor, to provide property management services, as applicable, for most, if not all, of the properties or other real estate related assets we acquire, provided our Advisor is able to control the operational management of such acquisitions.  Our Manager may subcontract with an affiliate or third party to provide day-to-day property management, construction management and/or other property specific functions as applicable for the properties it manages.

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

Competition

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

Environmental

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

Employees and Economic Dependency

We have no paid employees.  The employees of our Advisor and its affiliates provide management, acquisition, advisory and certain administrative services for us.  We are dependent on our Advisor and its affiliates for certain services that are essential to us, including the identification, evaluation, negotiation, purchase and disposition of properties and other investments; management of the daily operations of our portfolio; and other general and administrative responsibilities. In the

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event that these affiliated companies are unable to provide the respective services, we will be required to obtain such services from other sources.

Access to Company Information

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

We make available free of charge, the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports on our website, www.resourcereit2.com, or by responding to requests addressed to our investor relations group.  These reports are available as soon as reasonably practicable after such material is electronically filed or furnished to the SEC.

ITEM 1A. RISK FACTORS

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

Risks Related to an Investment in Us

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

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

Because we are dependent upon our Advisor and its affiliates to conduct our operations, any adverse changes in the financial health of our Advisor or its affiliates or our relationship with them could hinder our operating performance and the return on our stockholders’ investment.

We are dependent on our Advisor to manage our operations and our portfolio of real estate assets. Our Advisor depends largely upon the fees and other compensation that it receives from us in connection with the purchase, management and sale of assets to conduct its operations.  Any adverse changes in the financial condition of our Advisor or our relationship with our Advisor could hinder its ability to successfully manage our operations and our portfolio of investments.

Our ability to achieve our investment objectives and to conduct our operations is dependent upon the performance of our Advisor, which is a subsidiary of our sponsor and its parent company, C-III.  Our sponsor’s business is sensitive to trends in the general economy, as well as the commercial real estate and credit markets. To the extent that any decline in our sponsor’s or C-III’s revenues and operating results impacts the performance of our Advisor, our results of operations, and financial condition could also suffer.

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

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

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

For the year ended December 31, 2018 we paid distributions of $36.9 million. We funded these distributions with a combination of cash flows from operations and proceeds from debt financing.  For the year ended December 31, 2019, we paid distributions of $27.2 million. We funded these distributions from a combination of cash flows from operations and proceeds from debt financing.  We will declare distributions when our board of directors determines we have sufficient cash flow. Our board of directors considers many factors before authorizing a cash distribution, including current and projected cash flow from operations, capital expenditure needs, general financial conditions and REIT qualification requirements. We expect to have little, if any, cash flow from operations available for cash distributions until we have executed our value-add strategy for a substantial portion of our investments. We expect that during our operational stage, our board will declare cash distributions that will be paid in advance of our receipt of cash flow that we expect to receive during a later period. In these instances, where we do not have sufficient cash flow to cover our distributions, we expect to use the proceeds from borrowings or asset sales to pay distributions. We may borrow funds or sell assets to make and cover our declared distributions, all or a portion of which could be deemed a return of capital. We may also fund such distributions from third-party borrowings or from advances from our Advisor or sponsor or from our Advisor’s deferral of its asset management fee. If we fund cash distributions from borrowings, sales of assets or the net proceeds from securities issuances, we will have less funds available for the acquisition of real estate and real estate-related assets and your overall return may be reduced. Further, to the extent cash distributions exceed cash flow from operations, a stockholder’s basis in our stock will be reduced and, to the extent distributions exceed a stockholder’s basis, the stockholder may recognize capital gain. Our organizational documents do not limit the amount of distributions we can fund from sources other than from cash flows from operations.

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

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

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

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

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

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

Because the offering price in our distribution reinvestment plan offering exceeds our net tangible book value per share, investors in the offering will experience immediate dilution in the net tangible book value of their shares.

We are currently offering shares pursuant to our distribution reinvestment plan at $8.63 per share. Our current offering price exceeds our net tangible book value per share. Our net tangible book value per share is a rough approximation of value calculated as total book value of assets (exclusive of certain intangible items, including deferred financing costs) minus total liabilities, divided by the total number of shares of common stock outstanding. It assumes that the value of real estate assets diminishes predictably over time as shown through the depreciation and amortization of real estate investments. Real estate values have historically risen or fallen with market conditions. Net tangible book value is used generally as a conservative measure of net worth that we do not believe reflects our estimated value per share. It is not intended to reflect the value of our assets upon an orderly liquidation of the company in accordance with our investment objectives. Our net tangible book value reflects dilution in value of our common stock from the issue price as a result of (i) operating losses, which reflect accumulated depreciation and amortization of real estate investments, (ii) fees paid in connection with our initial public offering, including selling commissions and marketing fees re-allowed by our dealer manager to participating broker dealers, and (iii) stock distributions we have made. As of December 31, 2019, our net tangible book value per share was $3.53.

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

On March 19, 2020, our board of directors approved an estimated value per share of our common stock of $9.08 based on the estimated market value of our portfolio of investments as of December 31, 2019.  As of the date of this filing, we are not aware of a material change in the value of our investment that would impact the overall estimated value per share; however, the outbreak of COVID-19, together with the resulting restrictions on travel and quarantines imposed, have had a negative impact on the economy and business activity globally, the full impact of which is not yet known and may result in an adverse impact to our investments and our resulting estimated value per share of our common stock.

We provided this estimated value per share to assist broker-dealers that participated in our public offerings in meeting their customer account statement reporting obligations under Financial Industry Regulatory Authority (“FINRA”) Rule 2231. This valuation was performed in accordance with the provisions of Practice Guideline 2013-01, Valuations for Publicly

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Registered Non-Listed REITs, issued by the Institute for Portfolio Alternatives (formerly Investment Program Association) (“IPA”) in April 2013 (the “IPA Valuation Guidelines”).

With the approval of the conflicts committee, we engaged Duff & Phelps, LLC (“Duff & Phelps”) to provide a calculation of the range in estimated value per share of our common stock as of December 31, 2019. Duff & Phelps held discussions with senior management of our Advisor and conducted appraisals, investigations, research, review and analysis as it deemed necessary.  Duff & Phelps based this range in estimated value per share upon its estimates of the “as is” market values of our interests in 17 multifamily properties. Duff & Phelps made adjustments to the aggregate estimated values of our investments to reflect balance sheet assets and liabilities provided by our management before calculating a range of estimated values based on the number of outstanding shares of our common stock as of December 31, 2019.

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

• a stockholder would be able to resell his or her shares at the estimated value per share;

• a stockholder would ultimately realize distributions per share equal to our estimated value per share upon liquidation of our assets and settlement of its liabilities or a sale of our company;

• our shares of common stock would trade at the estimated value per share on a national securities exchange;

• a third party would offer the estimated value per share in an arm’s-length transaction to purchase all or substantially all of our shares of common stock;

• another independent third-party appraiser or third-party valuation firm would agree with the our estimated value per share; or

• the methodology used to calculate our estimated value per share would be acceptable to FINRA or for compliance with ERISA reporting requirements.

Further, the estimated value per share as of December 31, 2019 is based on the estimated value of our investments as of December 31, 2019. We did not make any adjustments to the valuation for the impact of other transactions occurring subsequent to December 31, 2019, including, but not limited to, (i) the issuance of common stock under the distribution reinvestment plan, (ii) net operating income earned and distributions declared, (iii) the redemption of shares and (iv) the potential conversion of convertible stock into common stock. The value of our shares will fluctuate over time in response to developments related to individual assets in our portfolio and the management of those assets and in response to the real estate and finance markets. In particular, the outbreak of COVID-19, together with the resulting restrictions on travel and quarantines imposed, have had a negative impact on the economy and business activity globally, the full impact of which is not yet known and may result in an adverse impact to our operations and investments. For a full description of the methodologies and assumptions used to value our assets and liabilities in connection with the calculation of the estimated value per share, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Market Information.”

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

Under our share redemption program, the current maximum price that may be paid under the program is $9.08 per share, which is 100% of the current estimated value per share for special redemptions. Although this is based upon our current estimated value per share, this reported value is likely to differ from the price at which a stockholder could resell his or her shares for the reasons discussed in the risk factor above. Thus, when we repurchase shares of our common stock at $9.08 per share, the actual value of the shares that we repurchase is likely to be less, and the repurchase is likely to be dilutive to our remaining stockholders. Even at lower repurchase prices, the actual value of the shares may be substantially less than what we pay and the repurchase may be dilutive to our remaining stockholders.

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

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

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

In December 2019, a novel strain of coronavirus, COVID-19, was identified in Wuhan, China. This virus continues to spread globally including in the United States and has resulted in restrictions on travel and quarantines imposed.  These restrictions have had a negative impact on the economy and business activity globally and may adversely impact the ability of our tenants, many of whom may be restricted in their ability to work, to pay their rent as and when due.  In addition, our property managers may be limited in their ability to properly maintain our properties.  The extent to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including additional actions taken to contain COVID-19 or treat its impact, among others.  Our business and financial results could be materially and adversely impacted.

Risks Related to Conflicts of Interest

Because we rely on affiliates of Resource Real Estate for the provision of advisory and property management, if Resource Real Estate is unable to meet its obligations we may be required to find alternative providers of these services, which could result in a significant and costly disruption of our business.

Resource Real Estate, through one or more of its subsidiaries, owns and controls our Advisor and our Manager. The operations of our Advisor and our Manager rely substantially on Resource Real Estate and its affiliates. In the event that Resource Real Estate becomes unable to meet its obligations as they become due, we might be required to find alternative service providers, which could result in a significant disruption of our business and would likely adversely affect the value of your investment in us. Further, given the non-solicitation agreement we have with our advisor, it would be difficult for us to utilize any current employees that provide services to us.

Our Advisor and its affiliates, including all of our executive officers, our affiliated directors and other key real estate professionals face conflicts of interest caused by their compensation arrangements with us, which could result in actions that are not in the long-term best interests of our stockholders.

All of our executive officers and our affiliated directors are also officers, directors, managers or key professionals of our Advisor and other affiliated Resource Real Estate and/or C-III entities.  Our Advisor and its affiliates receive substantial

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fees from us.  These fees could influence our advisor’s advice to us as well as the judgment of affiliates of our advisor.  Among other matters, these compensation arrangements could affect their judgment with respect to:

• the continuation, renewal or enforcement of our agreements with our Advisor and its affiliates, including the advisory agreement and the management agreement;

• sales of properties and other investments, which may entitle our Advisor to disposition fees and the possible issuance to our Advisor of shares of our common stock through the conversion of our convertible stock;

• acquisitions of properties and investments in loans, which entitle our Advisor to acquisition and asset management fees, and, in the case of acquisitions or investments from other Resource Real Estate-sponsored programs, might entitle affiliates of our Advisor to disposition fees in connection with its services for the seller;

• borrowings to acquire properties and other investments, which borrowings will increase the acquisition and asset management fees payable to our Advisor;

• whether and when we seek to list our common stock on a national securities exchange, which listing could entitle our Advisor to the issuance of shares of our common stock through the conversion of our convertible stock; and

• whether and when we seek to sell the company or its assets, which sale could entitle our Advisor to disposition fees and to the issuance of shares of our common stock through the conversion of our convertible stock and terminate the asset management fee.

The fees our Advisor receives in connection with the acquisition and management of assets are based on the cost of the investment, and not based on the quality of the investment or the quality of the services rendered to us.  This may influence our Advisor to recommend riskier transactions to us.

Our Advisor will face conflicts of interest relating to the disposition of assets and such conflicts may not be resolved in our favor, which could limit our ability to make distributions and reduce your overall investment return.

We rely on our sponsor and other key real estate professionals at our Advisor to sell our assets.  The executive officers and several of the other key real estate professionals at our Advisor are also the key real estate professionals at the advisors to other sponsored programs and joint ventures.  As such, sponsored programs and joint ventures rely on many of the same real estate professionals as will future programs.  These other sponsored programs and joint ventures may possess properties in similar locations and may be attempting to sell these properties at the same time we are attempting to sell some of our properties. If our Advisor directs potential purchasers to properties owned by another sponsored program when it could direct such purchasers to our properties, we may be unable to sell some or all of our properties at the time or at the price we otherwise would, which could limit our ability to pay distributions and reduce the overall investment return of our stockholders.

Our Advisor faces conflicts of interest relating to joint ventures that we may form with affiliates of our Advisor, which conflicts could result in a disproportionate benefit to the other venture partners at our expense.

If approved by our conflicts committee, we may enter into joint venture agreements with other sponsored programs or affiliated entities for the acquisition, development or improvement of properties or other investments.  Our Advisor and the advisors to the other Resource Real Estate or C-III-sponsored programs have the same executive officers and key employees; and these persons will face conflicts of interest in determining which program or investor should enter into any particular joint venture agreement. These persons may also face a conflict in structuring the terms of the relationship between our interests and the interests of the affiliated co-venturer and in managing the joint venture.  Any joint venture agreement or transaction between us and an affiliated co-venturer will not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers.  The affiliated co-venturer may have economic or business interests or goals that are or may become inconsistent with our business interests or goals. These co-venturers may thus be either to our and your benefit or detriment.

Our Advisor, the real estate professionals assembled by our Advisor, their affiliates and our officers face competing demands relating to their time, and this may cause our operations and your investment to suffer.

We rely on our Advisor, the real estate professionals our Advisor has assembled and their affiliates and officers for the day-to-day operation of our business.  Our Advisor, its real estate professionals and affiliates, including our officers and employees, have interests in other affiliated programs and engage in other business activities.  As a result of their interests in other affiliated programs and the fact that they have engaged in and they will continue to engage in other business activities, they face conflicts of interest in allocating their time among us, our Advisor and other affiliate-sponsored programs and other business activities in which they are involved.  Should our Advisor inappropriately devote insufficient time or resources to our business, the returns on our investments may suffer.

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Our executive officers and our affiliated directors face conflicts of interest related to their positions in our Advisor and its affiliates which could hinder our ability to implement our business strategy and to generate returns to you.

Our executive officers and our affiliated directors are also executive officers, directors, managers and key professionals of our Advisor and other affiliated Resource Real Estate and/or C-III entities. Their loyalties to these other entities could result in actions or inactions that are detrimental to our business, which could harm the implementation of our business strategy and our investment and leasing opportunities.  If we do not successfully implement our business strategy, we may be unable to generate the cash needed to make distributions to you and to maintain or increase the value of our assets.

Payment of substantial fees and expenses to our Advisor and its affiliates reduces cash available for investment and distribution and increases the risk that you will not be able to recover the amount of your investment in our shares.

Our Advisor and its affiliates perform services for us in connection with the selection and acquisition of our investments, the management and leasing of our properties and the administration of our other investments. We pay them substantial fees for these services, which result in immediate dilution to the value of your investment and reduce the amount of cash available for investment or distribution to stockholders.

We also pay significant fees to our Advisor and its affiliates during our operational stage. Those fees include property management and debt servicing fees, asset management fees and obligations to reimburse our advisor and its affiliates for expenses they incur in connection with their providing services to us, including certain personnel services.

We may also pay significant fees during our listing/liquidation stage.  The subordinated incentive fee that we will pay to our Advisor should our investors receive an agreed upon return on their investment is structured in the form of convertible stock.  Our Advisor has exchanged 5,000 shares of our common stock for 50,000 shares of our convertible stock.  Under limited circumstances, these shares may be converted into shares of our common stock satisfying our obligation to pay our advisor an incentive fee and diluting our stockholders’ interest in us.  Our convertible stock will convert into shares of common stock on one of two events.  First, it will convert if we have paid distributions to common stockholders such that aggregate distributions are equal to 100% of the price at which we sold our outstanding shares of common stock plus an amount sufficient to produce a 7% cumulative, non-compounded, annual return at that price.  Alternatively, the convertible stock will convert if we list our shares of common stock on a national securities exchange and, on the 31st trading day after listing, the value of our company based on the average trading price of our shares of common stock since the listing, plus prior distributions, combine to meet the same 7% return threshold for our common stockholders.  Each of these two events is a “Triggering Event.”

Upon a Triggering Event, our convertible stock will, unless our advisory agreement with our advisor has been terminated or not renewed on account of a material breach by our Advisor, generally be converted into a number of shares of common stock equal to 1/50,000 of the quotient of:

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

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

• (2) the sum of the aggregate issue price of those outstanding shares plus a 7% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, divided by

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

However, if our advisory agreement with our Advisor expires without renewal or is terminated (other than because of a material breach by our advisor) prior to a Triggering Event, then upon a Triggering Event the holder of the convertible stock will be entitled to a prorated portion of the number of shares of common stock determined by the foregoing calculation, where such proration is based on the percentage of time we were advised by our advisor.  As a result, following conversion, the holder of the convertible stock will be entitled to a portion of amounts distributable to our stockholders, which such amounts distributable to the holder could be significant.

Our Advisor can influence whether our common stock is listed for trading on a national securities exchange.  Accordingly, our advisor can influence the conversion of the convertible stock issued to it and the resulting dilution of other stockholders’ interests.

These fees and other potential payments increase the risk that the amount available for distribution to common stockholders upon a liquidation of our portfolio would be less than the purchase price of the shares in this offering. Substantial

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consideration paid to our Advisor and its affiliates also increases the risk that you will not be able to resell your shares at a profit, even if our shares are listed on a national securities exchange.

Risks Related to Our Corporate Structure

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

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

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

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

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

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

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

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

In addition, our share redemption program contains other restrictions and limitations.  We expect to redeem shares on a quarterly basis.  If the Board of Directors determines to fully resume the share redemption program, shares will be redeemed pro rata among all stockholders requesting redemption in such quarter, with a priority given to redemptions upon the death, qualifying disability, or confinement to a long-term care facility of a stockholder; next, to stockholders who demonstrate, in the

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discretion of our board of directors, another involuntary, exigent circumstance, such as bankruptcy; next, to stockholders subject to a mandatory distribution requirement under such stockholder’s IRA; and, finally, to other redemption requests.

We will not redeem more than 5% of the weighted average number of shares outstanding during the twelve-month period immediately prior to the date of redemption.  Our board of directors will determine from time to time, and at least quarterly, whether we have sufficient excess cash to repurchase shares.  Generally, the cash available for redemption will be limited to proceeds from our distribution reinvestment plan plus 1% of the operating cash flow from the previous fiscal year (to the extent positive).

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

Our stockholders do not have preemptive rights to any shares we issue in the future.  Our charter authorizes us to issue 1,010,050,000 shares of capital stock, of which 1,000,000,000 shares are designated as common stock, 50,000 shares are designated as convertible stock and 10,000,000 are designated as preferred stock. Our board of directors may increase the number of authorized shares of capital stock without stockholder approval.  Our board may elect to (1) sell additional equity securities in future public or private offerings; (2) issue shares of our common stock upon the exercise of the options we may grant to our independent directors or to employees of our advisor or property manager; (3) issue shares to our Advisor, its successors or assigns, in payment of an outstanding obligation or as consideration in a related-party transaction; (4) issue shares of common stock upon the conversion of our convertible stock; or (5) issue shares of our common stock to sellers of properties we acquire in connection with an exchange of limited partnership interests of our operating partnership.  To the extent we issue additional equity interests, your percentage ownership interest in us will be diluted.  Further, depending upon the terms of such transactions, most notably the offering price per share, which may be less than the price paid per share in any public offering and the value of our properties, existing stockholders may also experience a dilution in the book value of their investment in us.

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

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

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

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

• stagger our board of directors into three classes;

• require a two-thirds stockholder vote for removal of directors;

• provide that only the board can fix the size of the board;

• provide that all vacancies on the board, however created, may be filled only by the affirmative vote of a majority of the remaining directors in office; and

• require that special stockholder meetings may only be called by holders of a majority of the voting shares entitled to be cast at the meeting.

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

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If we internalize our management functions, we could incur significant costs associated with being self-managed and may not be able to retain or replace key personnel; and we may have increased exposure to litigation as a result of internalizing our management functions.

We may internalize management functions provided by our Advisor, our Manager and their respective affiliates by acquiring assets and personnel from our advisor, our property manager or their affiliates. In the event we were to acquire our advisor or our property manager, we cannot be sure of the terms relating to any such acquisition.

If we internalize, we would no longer bear the costs of the various fees and expenses we expect to pay to our Advisor and to our Manager under their respective agreements; however, our direct expenses would increase due to the inclusion of general and administrative costs, including legal, accounting, and other expenses related to corporate governance, SEC reporting and compliance. We would also incur the compensation and benefits costs of our officers and other employees and consultants that are now paid by our advisor, our property manager or their affiliates. We cannot reasonably estimate the amount of fees to our advisor, property manager and other affiliates we would save, and the costs we would incur, if we acquired these entities. If the expenses we assume as a result of an internalization are higher than the expenses we avoid paying to our advisor, our property manager and their affiliates, our net income per share and funds from operations per share would be lower than they otherwise would have been had we not acquired these entities, potentially decreasing the amount of funds available for distribution.

Additionally, if we internalize our management functions, we would employ personnel and would be subject to potential liabilities commonly faced by employers, such as workers’ disability and compensation claims, potential labor disputes and other employee-related liabilities and grievances.  Also, there can be no assurances that we will be successful in retaining key personnel at our advisor or property manager in the event of an internalization transaction.  In addition, we could have difficulty integrating the functions currently performed by our advisor, our property manager and their affiliates. Currently, the officers and employees of our Advisor, our Manager, and their affiliates perform asset management, property management, and general and administrative functions, including accounting and financial reporting, for multiple entities. We may fail to properly identify the appropriate mix of personnel and capital needs to operate as a stand-alone entity. An inability to manage an internalization transaction effectively could result in our incurring additional costs and/or experiencing deficiencies in our disclosures controls and procedures or our internal control over financial reporting.  Such deficiencies could cause us to incur additional costs and our management’s attention could be diverted from effectively managing our properties and overseeing other real estate-related assets.

In addition, internalization transactions have been the subject of stockholder litigation. Stockholder litigation can be costly and time-consuming, and there can be no assurance that any litigation expenses we might incur would not be significant or that the outcome of litigation would be favorable to us. Any amounts we are required to expend defending any such litigation will reduce the amount of funds available for investment by us in properties or other investments.

Risks Related to Investments in Real Estate

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

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

• downturns in national, regional and local economic conditions;

• competition;

• adverse local conditions, such as oversupply or reduction in demand and changes in real estate zoning laws that may reduce the desirability of real estate in an area;

• vacancies, changes in market rental rates and the need to periodically repair, renovate and re-let space;

• changes in the supply of or the demand for similar or competing properties in an area;

• changes in interest rates and the availability of permanent mortgage financing, which may render the sale of a property or loan difficult or unattractive;

• changes in governmental regulations, including those involving tax, real estate usage, environmental and zoning laws; and

• periods of high interest rates and tight money supply.

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

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

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

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

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

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

• increased staffing levels;

• enhanced technology applications; and

• increased marketing efforts.

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

• real estate taxes;

• insurance costs; and

• maintenance costs.

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

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

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

Competition with these entities may result in the following:

• greater demand for the acquisition of real estate and real estate-related assets, which results in increased prices we must pay for our real estate and real estate-related assets;

• delayed investment of our capital;

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• decreased availability of financing to us; or

• reductions in the size or desirability of the potential tenant base for one or more properties that we lease.

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

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

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

• that our co‑venturer, co‑tenant or partner in an investment could become insolvent or bankrupt;

• that such co‑venturer, co‑tenant or partner may at any time have economic or business interests or goals that are or that become inconsistent with our business interests or goals;

• that such co‑venturer, co‑tenant or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives; or

• that such co-venturer, co-tenant or partner may grant us a right of first refusal or buy/sell right to buy out such co-venturer or partner, and that we may be unable to finance such a buy-out if it becomes exercisable or we are required to purchase such interest at a time when it would not otherwise be in our best interest to do so. If our interest is subject to a buy/sell right, we may not have sufficient cash, available borrowing capacity or other capital resources to allow us to elect to purchase an interest of a co-venturer subject to the buy/sell right, in which case we may be forced to sell our interest as the result of the exercise of such right when we would otherwise prefer to keep our interest.

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

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

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

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

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

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

If we need additional capital in the future to improve or maintain our properties or for any other reason, we may have to obtain financing from sources beyond our cash flow from operations, such as borrowings, sales of assets or future equity offerings. These sources of funding may not be available on attractive terms or at all. If we cannot procure additional funding for capital improvements, our investments may generate lower cash flows or decline in value, or both, which would limit our ability to make distributions to you and could reduce the value of your investment.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

As of December 31, 2019, our real estate investments located in Texas, Illinois, Colorado, Oregon, and Georgia, represented approximately 19.6%, 18.9% 15.6%, 14.1% and 9.1% of the portfolio. As a result, the geographic concentration of our portfolio makes it particularly susceptible to adverse economic developments in these real estate markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for multifamily rentals resulting from the local business climate, could adversely affect our operating results and our ability to make distributions to stockholders.

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

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

• make it more difficult for us to find residents to lease units in our apartment communities;

• force us to lower our rental prices in order to lease units in our apartment communities; or

• substantially reduce our revenues and cash available for distribution.

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

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

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Repositioning risks could affect our profitability.

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

• funds may be expended and management’s time devoted to projects that may not be completed due to a variety of factors, including without limitation, the inability to obtain necessary governmental approvals;

• construction costs of a renovation or repositioning project may exceed original estimates, possibly making the project economically unfeasible or the economic return on a repositioned property less than anticipated;

• increased material and labor costs, problems with subcontractors, or other costs due to errors and omissions which occur in the renovation process;

• projects may be delayed due to required governmental approvals, adverse weather conditions, labor shortages or other unforeseen complications;

• occupancy rates and rents at a repositioned property may be less than anticipated; and

• the operating expenses at a repositioned property may be higher than anticipated.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Risks Related to Investments in Real Estate-Related Debt Assets

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

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

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

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

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

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

Government action may reduce recoveries on defaulted loans.

Legislative or regulatory initiatives by federal, state or local legislative bodies or administrative agencies, if enacted or adopted, could delay foreclosure, provide new defenses to foreclosure or otherwise impair our ability to foreclose on real estate-related debt investments in default. Bankruptcy courts could, if this legislation is enacted, reduce the amount of the

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principal balance on a mortgage loan that is secured by a lien on the mortgaged property, reduce the interest rate, extend the term to maturity or otherwise modify the terms of a bankrupt borrower’s mortgage loan.

Property owners filing for bankruptcy may adversely affect us.

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

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

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

Investments in subordinated loans may be subject to losses.

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

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

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

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

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

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

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

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

Real estate securities may become non‑performing after acquisition for a wide variety of reasons.  Such non‑performing real estate investments may require a substantial amount of workout negotiations or restructuring, which may entail, among other things, a substantial reduction in the interest rate and a substantial write‑down of such loan or asset.  However, even if a restructuring is successfully accomplished, upon maturity of such real estate security, replacement “takeout” financing may not be available.  We may find it necessary or desirable to foreclose on some of the collateral securing one or more of our investments.  Intercreditor provisions may substantially interfere with our ability to do so.  Even if foreclosure is an

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option, the foreclosure process can be lengthy and expensive.  Borrowers often resist foreclosure actions by asserting numerous claims, counterclaims and defenses, including, without limitation, lender liability claims and defenses, in an effort to prolong the foreclosure action.  In some states, foreclosure actions can take up to several years or more to litigate.  At any time during the foreclosure proceedings, the borrower may file for bankruptcy, which would have the effect of staying the foreclosure action and further delaying the foreclosure process.  Foreclosure litigation tends to create a negative public image of the collateral property and may result in disrupting ongoing leasing and management of the property.  Foreclosure actions by senior lenders may substantially affect the amount that we may earn or recover from an investment.

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

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

Prepayments can adversely affect the yields on our investments.

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

Risks Associated with Debt Financing

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

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

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

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

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

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

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

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

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

Fannie Mae and Freddie Mac are a major source of financing for multifamily real estate in the United States. We have utilized and expect to continue to utilize loan programs sponsored by these entities as a key source of capital to finance our growth and our operations. In September 2008, the U.S. government increased its control of Fannie Mae and Freddie Mac and placed both companies into a government conservatorship under the Federal Housing Finance Agency (the “FHFA”). Since that time, members of Congress have introduced and Congressional committees have considered a substantial number of bills that include comprehensive or incremental approaches to winding down Fannie Mae and Freddie Mac or changing their purposes, businesses or operations. In 2019, the FHFA for the first time released formal objectives calling for the return of Fannie Mae and Freddie Mac to the private sector. It was also announced during the year that Fannie Mae and Freddie Mac will be permitted to retain a combined $45 billion worth of earnings (Fannie Mae will be allowed to retain $25 billion and Freddie Mac $20 billion). This is a modification of the so-called “net worth sweep” provision that has required Fannie Mae and Freddie Mac to deliver nearly all of their profits to the Treasury; the result being that each organization will have the opportunity to build its net worth.  A decision by the U.S. government to eliminate or downscale Fannie Mae or Freddie Mac or to reduce government support for multifamily housing more generally may adversely affect interest rates, capital availability, development of multifamily communities and the value of multifamily assets and, as a result, may adversely affect our operations. Any potential reduction in loans, guarantees and credit enhancement arrangements from Fannie Mae and Freddie Mac could jeopardize the effectiveness of the multifamily sector’s derivative securities market, potentially causing breaches in loan covenants, and through reduced loan availability, impact the value of multifamily assets, which could impair the value of a significant portion of multifamily communities. Specifically, the potential for a decrease in liquidity made available to the multifamily sector by Fannie Mae and Freddie Mac could (i) hinder our ability to refinance our existing loans; (ii) require us to obtain other sources of debt capital with potentially different terms; and (iii) make it more difficult for potential buyers of our properties to obtain financing.

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

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

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

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As of December 31, 2019, we had total outstanding debt of approximately $552.1 million, including approximately $405.8 millionof debt subject to variable interest rates (excluding amounts that were hedged to fix rates), and may incur additional indebtedness in the future. Interest we pay reduces our cash available for distributions. Since we have incurred and may continue to incur variable rate debt, increases in interest rates raise our interest costs, which reduces our cash flows and our ability to make distributions to you. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to sell one or more of our properties at times which may not permit realization of the maximum return on such investments.

We may be adversely affected by changes to the LIBOR settling process and potential phasing out of LIBOR after 2021

As of December 31, 2019, we had approximately $405.8 million of debt and 12 interest rate caps with an aggregate notional value of $408.6 million that were indexed to the London Interbank Offered Rate (“LIBOR”). LIBOR and certain other interest “benchmarks” may be subject to regulatory guidance and/or reform that could cause interest rates under our current or future debt agreements and derivatives to perform differently than in the past or cause other unanticipated consequences. The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, has announced that it intends to stop encouraging or requiring banks to submit rates for the calculation of LIBOR rates after 2021, and it is unclear whether new methods of calculating LIBOR will be established, such that LIBOR may continue to exist after 2021. While there is no consensus on what rate or rates may become accepted alternatives to LIBOR, the Alternative Reference Rates Committee, a steering committee comprised of U.S. financial market participants, selected the Secured Overnight Finance Rate (“SOFR”) as an alternative to LIBOR. SOFR is a broad measure of the cost of borrowing cash in the overnight U.S. treasury repo market, and the Federal Reserve Bank of New York started to publish the SOFR in May 2018. At this time, it is impossible to predict whether the SOFR or another reference rate will become an accepted alternative to LIBOR. The discontinuation, reform or replacement of LIBOR or any other benchmark rates may have an unpredictable impact on contractual mechanics in the credit markets or cause disruption to the broader financial markets, and could have an adverse effect on LIBOR-based interest rates on our current or future debt obligations and derivatives.

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

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

Federal Income Tax Risks

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

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

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

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

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

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

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

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

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

• In order to continue to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain for this purpose) to you.

• To the extent that we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on the undistributed income.

• We will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.

• If we have net income from the sale of foreclosure property that we hold primarily for sale to customers in the ordinary course of business or other non-qualifying income from foreclosure property, we must pay a tax on that income at the highest corporate income tax rate.

• If we sell an asset, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business and do not qualify for a safe harbor in the Internal Revenue Code, our gain would be subject to the 100% “prohibited transaction” tax.

• Any domestic taxable REIT subsidiary, or TRS, of ours will be subject to federal corporate income tax on its income, and on any non-arm’s-length transactions between us and any TRS, for instance, excessive rents charged to a TRS could be subject to a 100% tax.

• We may be subject to tax on income from certain activities conducted as a result of taking title to collateral.

• We may be subject to state or local income, property and transfer taxes, such as mortgage recording taxes.

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

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

We must also ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified real estate assets, including certain mortgage loans and mortgage-backed securities.  The remainder of our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer.  In addition, in general, no more than 5% of the value of our assets can consist of the securities of any one issuer (other than government securities and qualified real estate assets) and no more than 20% of the value of our gross assets (25% for tax years ending before 2018) may be represented by securities of one or more TRSs.  Finally, for the taxable years after 2015, no more than 25% of our assets may consist of debt investments that are issued by “publicly offered REITs” and would not otherwise be treated as qualifying real estate assets.  If we fail to comply with these requirements at the end of any calendar quarter, we must correct such failure within 30 days after the end of the calendar quarter to avoid losing our REIT status and suffering adverse tax consequences, unless certain relief provisions apply.  As a result, compliance with the REIT requirements may hinder our ability to operate solely on the basis of profit maximization and may require us to liquidate investments from our portfolio, or refrain from making, otherwise attractive investments.  These actions could have the effect of reducing our income and amounts available for distribution to stockholders.

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

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

Liquidation of assets may jeopardize our REIT qualification.

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

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

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

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

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

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

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

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

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

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

We generally must distribute annually at least 90% of our REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain for this purpose) in order to continue to qualify as a REIT.  We intend to make distributions to our stockholders to comply with the REIT requirements of the Internal Revenue Code and to avoid corporate income tax and the 4% excise tax.  We may be required to make distributions to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution.  Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

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

The maximum tax rate for “qualified dividends” paid by corporations to non-corporate stockholders is currently 20%.  Distributions paid by REITs, however, generally are taxed at ordinary income rates (subject to a maximum rate of 37.0% for non-corporate stockholders, provided individuals may be able to deduct 20% of income received as ordinary REIT dividends, thus reducing the maximum effective federal income tax rate on such dividends), rather than the preferential rate applicable to qualified dividends.

Legislative or regulatory tax changes could adversely affect us or stockholders.

Changes recently made to the U.S. tax laws could have a negative impact on our business.

The President signed a tax reform bill into law on December 22, 2017 (the “Tax Cuts and Jobs Act”). Among other things, the Tax Cuts and Jobs Act:

• Reduces the corporate income tax rate from 35% to 21% (including with respect to our taxable REIT subsidiary);

• Reduces the rate of U.S. federal withholding tax on distributions made to non-U.S. stockholders by a REIT that are attributable to gains from the sale or exchange of U.S. real property interests from 35% to 21%; 

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• Allows an immediate 100% deduction of the cost of certain capital asset investments (generally excluding real estate assets), subject to a phase-down of the deduction percentage over time;

• Changes the recovery periods for certain real property and building improvements (for example, to 15 years for qualified improvement property under the modified accelerated cost recovery system, and to 30 years (previously 40 years) for residential real property and 20 years (previously 40 years) for qualified improvement property under the alternative depreciation system);

• Restricts the deductibility of interest expense by businesses (generally, to 30% of the business’ adjusted taxable income) except, among others, real property businesses electing out of such restriction; we have not yet determined whether we and/or our subsidiaries can and/or will make such an election;

• Requires the use of the less favorable alternative depreciation system to depreciate real property in the event a real property business elects to avoid the interest deduction restriction above;

• Restricts the benefits of like-kind exchanges that defer capital gains for tax purposes to exchanges of real property;

• Permanently repeals the “technical termination” rule for partnerships, meaning sales or exchanges of the interests in a partnership will be less likely to, among other things, terminate the taxable year of, and restart the depreciable lives of assets held by, such partnership for tax purposes;

• Requires accrual method taxpayers to take certain amounts in income no later than the taxable year in which such income is taken into account as revenue in an applicable financial statement prepared under GAAP, which, with respect to certain leases, could accelerate the inclusion of rental income; 

• Eliminates the federal corporate alternative minimum tax; 

• Reduces the highest marginal income tax rate for individuals to 37% from 39.6% (excluding, in each case, the 3.8% Medicare tax on net investment income);

• Generally allows a deduction for individuals equal to 20% of certain income from pass-through entities, including ordinary dividends distributed by a REIT (excluding capital gain dividends and qualified dividend income), generally resulting in a maximum effective federal income tax rate applicable to such dividends of 29.6% compared to 37% (excluding, in each case, the 3.8% Medicare tax on net investment income); and

• Limits certain deductions for individuals, including deductions for state and local income taxes, and eliminates deductions for miscellaneous itemized deductions (including certain investment expenses).                         

Many of the provisions in the Tax Cuts and Jobs Act, in particular those affecting individual taxpayers, expire at the end of 2025.  As a result of the changes to U.S. federal tax laws implemented by the Tax Cuts and Jobs Act, our taxable income and the amount of distributions to our stockholders required in order to maintain our REIT status, and our relative tax advantage as a REIT, could change.  As a REIT, we are required to distribute at least 90% of our taxable income to our stockholders annually.

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The Tax Cuts and Jobs Act is a complex revision to the U.S. federal income tax laws with various impacts on different categories of taxpayers and industries, and will require subsequent rulemaking and interpretation in a number of areas. The long-term impact of the Tax Cuts and Jobs Act on the overall economy, government revenues, our tenants, us, and the real estate industry cannot be reliably predicted at this time. Furthermore, the Tax Cuts and Jobs Act may negatively impact certain of our tenants’ operating results, financial condition, and future business plans. The Tax Cuts and Jobs Act may also result in reduced government revenues, and therefore reduced government spending, which may negatively impact some of our tenants that rely on government funding. There can be no assurance that the Tax Cuts and Jobs Act will not negatively impact our operating results, financial condition, and future business operations.

Retirement Plan Risks Retirement Plan Risks

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

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

• the investment is consistent with their fiduciary and other obligations under ERISA and the Internal Revenue Code;

• the investment is made in accordance with the documents and instruments governing the plan or IRA, including the plan’s or account’s investment policy;

• the investment satisfies the prudence and diversification requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA and other applicable provisions of ERISA and the Internal Revenue Code;

• the investment in our shares, for which no public market currently exists, is consistent with the liquidity needs of the plan or IRA;

• the investment will not produce an unacceptable amount of “unrelated business taxable income” for the plan or IRA;

• our stockholders will be able to comply with the requirements under ERISA and the Internal Revenue Code to value the assets of the plan or IRA annually; and

• the investment will not constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code.

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

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

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

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

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

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

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

As of December 31, 2019, we owned 17 multifamily properties encompassing approximately 4.9 million rentable square feet and 5,159 units. We acquired these properties from third parties unaffiliated with us or our Advisor. The following is a summary of our real estate properties as of December 31, 2019:

Multifamily Community Name	City and State	Number of Units		Date of Acquisition	Purchase Price (1) (in thousands)		Year of Construction	Average Unit Size (Sq. Ft.)		Physical Occupancy Rate (2)			Effective Monthly Revenue per Unit (3)		Mortgage Debt Secured by Property (in thousands)
Adair off Addison	Dallas, TX		152	6/4/2014	$	9,500	1980		856		93.7	%	$	1,117	$	9,963
Uptown Buckhead	Atlanta, GA		216	3/30/2015	$	32,500	1989		739		95.5	%	$	1,274	$	19,264
Crosstown at Chapel Hill	Chapel Hill, NC		411	5/19/2015	$	46,750	1990/1996		1,005		95.3	%	$	1,132	$	42,650
The Brookwood	Homewood, AL		274	8/21/2015	$	30,050	1968/1972		1,051		93.6	%	$	1,067	$	19,629
Adair off Addison Apartment    Homes	Dallas, TX		200	8/27/2015	$	21,250	1979		1,098		93.6	%	$	1,245	$	23,247
1000 Spalding Crossing	Atlanta, GA		252	9/24/2015	$	41,000	1995		989		93.6	%	$	1,423	$	23,737
Montclair Terrace	Portland, OR		188	10/29/2015	$	32,750	1968		918		89.9	%	$	1,520	$	19,958
Grand Reserve	Naperville, IL		319	12/18/2015	$	66,700	1997		1,025		91.4	%	$	1,780	$	47,845
Verdant Apartment Homes	Boulder, CO		216	12/18/2015	$	65,200	1991		850		89.7	%	$	2,062	$	36,913
Arcadia Apartment Homes	Centennial, CO		300	1/22/2016	$	60,250	1984		977		88.5	%	$	1,642	$	39,782
Ravina Apartment Homes	Austin, TX		498	3/23/2016	$	57,000	2001		993		95.7	%	$	1,174	$	26,241
81 Fifty at West Hills    Apartment  Homes	Portland, OR		357	5/17/2016	$	81,500	1985		763		90.6	%	$	1,452	$	51,833
The Palmer at Las Colinas	Irving, TX		476	6/28/2016	$	70,000	1991		966		94.0	%	$	1,405	$	45,700
Windbrooke	Buffalo Grove, IL		236	12/22/2016	$	48,250	1986		903		94.3	%	$	1,670	$	37,222
The Woods of Burnsville	Burnsville, MN		400	12/23/2016	$	51,000	1984		953		96.0	%	$	1,234	$	37,744
Indigo Creek	Glendale, AZ		408	4/4/2017	$	55,200	1998		983		90.4	%	$	1,129	$	40,402
Martin's Point	Lombard, IL		256	10/31/2017	$	38,250	1989		789		92.8	%	$	1,513	$	29,944

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

(2) Physical occupancy rate is defined as the units occupied as of December 31, 2019 divided by the total number of residential units

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(3) Effective monthly rental revenue per unit has been calculated based on the leases in effect as ofDecember 31, 2019, adjusted for any tenant concessions, such as free rent. Effective monthly rental revenue per unit only includes base rents for occupied units, including affordable housing payments and subsidies. It does not include other charges for storage, parking, pets, cleaning, clubhouse or other miscellaneous amounts.

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

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

Stockholder Information

As of March 18, 2020, we had 60,339,863 shares of common stock outstanding held by a total of 12,056 stockholders.

Estimated Value Per Share

On March 19, 2020, our board of directors approved an estimated value per share of our common stock of $9.08 based on the estimated market value of our portfolio of investments as of December 31, 2019. As of the date of this filing, we are not aware of a material change in the value of our investments that would impact the overall estimated value per share; however, the outbreak of COVID-19, together with the resulting restrictions on travel and quarantines imposed, have had a negative impact on the economy and business activity globally, the full impact of which is not yet known and may result in an adverse impact to our investments and our resulting estimated value per share of our common stock. We are providing this estimated value per share to assist broker-dealers that participated in our public offerings in meeting their customer account statement reporting obligations under Financial Industry Regulatory Authority (“FINRA”) Rule 2231. This valuation was performed in accordance with the provisions of Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the Institute for Portfolio Alternatives (“IPA”) (formerly the Investment Program Association) in April 2013 (the “IPA Valuation Guidelines”).

Our Conflicts Committee, composed solely of all of our independent directors, is responsible for the oversight of the valuation process, including the review and approval of the valuation process and methodology used to determine the estimated value per share, the consistency of the valuation and appraisal methodologies with real estate industry standards and practices and the reasonableness of the assumptions used in the valuations and appraisals. With the approval of the conflicts committee, we engaged Duff & Phelps, LLC (“Duff & Phelps”) to provide a calculation of the range in estimated value per share of our common stock as of December 31, 2019. Duff & Phelps held discussions with senior management of our Advisor, and conducted appraisals, investigations, research, review and analysis as it deemed necessary.  Duff & Phelps based this range in estimated value per share upon its estimates of the “as is” market values of our interests in 17 multifamily properties. Duff & Phelps made adjustments to the aggregate estimated values of our investments to reflect balance sheet assets and liabilities provided by the our management, before calculating a range of estimated values based on the number of outstanding shares of the our common stock as of December 31, 2019. The valuation report Duff & Phelps prepared (the “Valuation Report”) summarized the key inputs and assumptions involved in the appraisal of each of our investments. Duff & Phelps’s valuation was designed to follow the prescribed methodologies of the IPA Valuation Guidelines. The methodologies and assumptions used to determine the estimated value of our investments are described further below.

Upon the conflicts committee’s receipt and review of the Valuation Report and in light of other factors considered by our conflicts committee and the conflicts committee’s own extensive knowledge of our assets and liabilities, the conflicts committee concluded that the range in estimated value per share of $8.26 to $9.98, with an approximate midpoint value of $9.08 per share, as indicated in the Valuation Report, was appropriate. Upon recommendation by the Advisor, the Conflicts Committee recommended to our board of directors that it adopt $9.08 as the estimated value per share of our common stock, which approximates the midpoint value. Our board of directors unanimously agreed to accept the recommendation of the conflicts committee and approved $9.08 as the estimated value per share of our common stock, which determination is ultimately and solely the responsibility of the board of directors.

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The following table summarizes the material components of the December 31, 2019 net asset value (in thousands, except per share amounts):

	Net Asset Value as of December 31, 2019			Net Asset Value as of December 31, 2019 (per share)
Investments	$	1,061,600,000		$	17.67
Cash		46,180,830		$	0.77
Other Assets		2,113,036		$	0.03
Mortgage Notes Payable and Credit Facilities		(550,858,283	)	$	(9.17	)
Other Liabilities		(13,509,533	)	$	(0.22	)
Net asset value	$	545,526,050		$	9.08

The table below sets forth the calculation of our estimated net asset value per share as of December 31, 2019, as well as the calculation of our prior estimated net asset value per share as of December 31, 2018:

	December 31, 2019			December 31, 2018			Change in
	Net Asset Value per Share			Net Asset Value per Share (1)			Estimated Value per Share
Investments	$	17.67		$	17.62		$	0.05
Cash		0.77			0.78			(0.01	)
Other Assets		0.03			0.03			0.00
Mortgage Notes Payable and Credit Facilities		(9.17	)		(9.43	)		0.26
Other Liabilities		(0.22	)		(0.23	)		0.01
	$	9.08		$	8.77		$	0.31

(1) For information relating to the December 31, 2018 net asset value per share and the assumptions and methodologies used by Duff & Phelps and our management, see our Annual Report on Form 10-K filed on March 22, 2019.

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

Methodology

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

Real Estate

Independent Valuation Firm

Duff & Phelps was recommended by our Advisor, and approved by the conflicts committee. Duff & Phelps is engaged in the business of appraising commercial real estate properties and is not affiliated with the Company or the Advisor. Duff &

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

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

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

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

Real Estate Valuation

Duff & Phelps estimated the “as is” market value of each of our real estate properties owned as of December 31, 2019, using various methodologies, including the direct capitalization approach, discounted cash flow analyses and sales comparison approach, and relied primarily on the discounted cash flow analyses for our properties. The sales comparison approach was utilized as a secondary approach to value. The direct capitalization approach applies a current market capitalization rate to the properties’ net operating income. The capitalization rate was based on recent national overall capitalization rates, and the net operating income (NOI) was estimated based on Duff & Phelps’s expertise in appraising commercial real estate. The direct capitalization approach was utilized for one of our properties that finished renovations and stabilized its operations. The discounted cash flow analyses focus on the operating cash flows expected from the properties and the anticipated proceeds of hypothetical sales at the end of assumed holding periods, which are then discounted to their present value.  Discounted cash flow analyses were utilized for 16 of our properties as they were either recently acquired and either not yet stabilized or are currently undergoing renovations.  Real estate is currently carried in our financial statements at its amortized cost basis. Duff & Phelps performed its appraisals as of December 31, 2019.

The following summarizes the range of terminal capitalization rates and discount rates used to arrive at the estimated market values of our 17 properties:

	Range in Values	Weighted Average Basis
Terminal Capitalization Rate	4.50% to 5.50%		5.01	%
Discount Rate	5.25% to 7.25%		6.25	%

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

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levels and uncertainties with respect to future market rental rates and timing of lease-up and stabilization. Accordingly, different assumptions may materially change the appraised value of the property.

The total appraised value of our real estate properties using the appraisal methodologies described above was $545.5 million, compared to an aggregate purchase price, adjusted for related capital expenditures through December 31, 2019 of $216.3 million.

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

	Change in Estimated Value per Share
	Increase of 25 Basis Points		Decrease of 25 Basis Points		Increase of 5%		Decrease of 5%
Terminal Capitalization Rate	$	8.26	$	9.98	$	8.27	$	9.96
Discount Rate	$	7.43	$	7.52	$	7.87	$	7.97

Other Assets and Liabilities

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

Limitations of Estimated Value Per Share

As mentioned above, we are providing this estimated value per share to assist broker dealers that participated in our public offering in meeting their customer account statement reporting obligations. This valuation was performed in accordance with the provisions of the IPA Valuation Guidelines. The estimated value per share set forth above will first appear on the March 31, 2020 customer account statements that will be mailed in April 2020. As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive a different estimated value per share, and this difference could be significant. The estimated value per share is not audited and does not represent the fair value of our assets or liabilities according to GAAP.

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

• a stockholder would be able to resell his or her shares at the estimated value per share;

• a stockholder would ultimately realize distributions per share equal to our estimated value per share upon liquidation of our assets and settlement of its liabilities or a sale of the Company;

• our shares of common stock would trade at the estimated value per share on a national securities exchange;

• a third party would offer the estimated value per share in an arm’s-length transaction to purchase all or substantially all of our shares of common stock;

• another independent third-party appraiser or third-party valuation firm would agree with the our estimated value per share; or

• the methodology used to calculate our estimated value per share would be acceptable to FINRA or for compliance with ERISA reporting requirements.

Further, the estimated value per share as of December 31, 2019 is based on the estimated value of our investments as of December 31, 2019. We did not make any adjustments to the valuation for the impact of other transactions occurring subsequent to December 31, 2019, including, but not limited to, (i) the issuance of common stock under the distribution reinvestment plan, (ii) net operating income earned and distributions declared, (iii) the redemption of shares and (iv) the potential conversion of convertible stock into common stock. The value of our shares will fluctuate over time in response to developments related to individual assets in our portfolio and the management of those assets and in response to the real estate

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and finance markets. In particular, the outbreak of COVID-19, together with the resulting restrictions on travel and quarantines imposed, have had a negative impact on the economy and business activity globally, the full impact of which is not yet known and may result in an adverse impact to our operations and investments. Because of, among other factors, our high concentration of total assets in real estate and the number of shares of our common stock outstanding, any change in the value of individual assets in the portfolio, particularly changes affecting our real estate properties, could have a very significant impact on the value of our shares. The estimated value per share does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share also does not take into account estimated disposition costs and fees for real estate properties, debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations or the impact of restrictions on the assumption of debt.

Historical Estimated Values per Share

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

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

Purchase Price for Distribution Reinvestment Plan

In accordance with our distribution reinvestment plan (“DRIP”), participants in the DRIP acquire shares of common stock under the plan at a price equal to 95% of the current estimated value per share of our common stock. Commencing on the next DRIP purchase date, which is on March 31, 2020, participants will acquire shares of our common stock under the plan at a price equal to $8.63 per share.

As provided under the DRIP, for a participant to terminate participation effective for a particular distribution, we must have received notice of termination from the participant at least ten business days prior to the last day of the month to which the distribution relates. Notwithstanding the ten business day termination notice requirement under the DRIP, if a participant wishes to terminate participation in the DRIP plan for the March 2020 purchase date, participants must notify us of such decision and we must receive the notice by the close of business on March 26, 2020, which is four business days following our announcement of an updated estimated value per share in this Annual Report on Form 10-K.

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

Redemption Price for Share Redemption Program

Effective March 20, 2020, the share redemption program is suspended except for redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility. Such redemptions are made at a purchase price equal to our estimated share value, or $9.08, as of March 20, 2020.

The complete share redemption program plan document, as amended is filed as Exhibit 99.2 to this Annual Report on Form 10-K and is available at the SEC’s website at http://www.sec.gov.

Unregistered Sale of Equity Securities

All securities sold by us during the year ended December 31, 2019 were sold in an offering registered under the Securities Act of 1933.

Redemption of Securities

Our Board of Directors has adopted a share redemption program that may enable stockholders to sell their shares to us, subject to the significant conditions and limitations of the program. In its sole discretion, our Board of Directors can amend, suspend or terminate the program upon 30 days’ notice without stockholder approval. In addition, we will not redeem in excess of 5% of the weighted average number of shares outstanding during the 12 month period immediately prior to the effective date of redemption. Currently, our share redemption program is suspended except for redemptions submitted in connection with a stockholder death, qualifying disability or confinement to a long-term care facility. Generally, the cash available for redemption will be limited to proceeds from our DRIP plus, if we had positive operating cash flow from the previous fiscal year, 1% of all

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operating cash flow from the previous fiscal year.  These limitations apply to all redemptions, including redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility.

Pursuant to our share redemption program, during the quarter ended December 31, 2019, we redeemed shares as follows (in thousands, except per share data):

Period	Total Number of Shares Redeemed (1)		Average Price Paid per Share		Year to Date Number of Shares Purchased as Part of a Publicly Announced Plan or Program (2)		Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
October 2019		—	$	—		—	(2)
November 2019		—	$	—		—	(2)
December 2019		236	$	8.33		3,038	(2)

(1) All purchases of equity securities by the Company in the three months ended December 31, 2019 were made pursuant to our share redemption program.

(2) We currently limit the dollar value and number of shares that may be repurchased under the program, as discussed above.

During the three months ended December 31, 2019, not all redemption requests were honored. As a result of the 5% limitation on shares that may be repurchased under the program, during the three months ended December 31, 2019, 14.84% of all redemption requests were honored. As a result, we had $11.1 million of outstanding and unfilled redemption requests, representing 1,337,293 shares, as of December 31, 2019.  While the share redemption program is partially suspended, pending and new redemption requests for redemptions submitted other than in connection with a stockholder’s death, qualifying disability or confinement to a long-term care facility will not be honored or retained, but will be cancelled with the ability to resubmit when, if ever, the share redemption program is fully resumed. 

Distribution Information

For the year ended December 31, 2019, we paid aggregate distributions of $27.2 million, including $12.5 million of distributions paid in cash and $14.7 million of distributions reinvested in shares of common stock through our DRIP. Distributions declared, distributions paid and cash flows provided by (used in) operating activities were as follows for the year ended December 31, 2019 (in thousands):

	Distributions Paid								Distributions Declared				Sources of Distributions Paid
2019	Cash		Distributions Reinvested (DRIP)		Total		Cash Provided By (Used In ) Operating Activities		Total		Per Share per Day		Operating Activities Amount Paid/Percent of Total	Debt Financing Amount Paid/ Percent of Total	Property Dispositions Amount Paid/Percent of Total
First Quarter	$	4,035	$	4,864	$	8,899	$	1,694	$	6,132	$	0.00164384	$1,694/19%	$-/-%	$7,204/91%
Second Quarter		2,799		3,307		6,106		1,230		6,045	$	0.00109589	$1,230/20%	$-/-%	$4,877/80%
Third Quarter		2,786		3,268		6,054		4,511		6,179	$	0.00109589	$4,511/75%	$-/-%	$1,544/25%
Fourth Quarter		2,899		3,285		6,184		1,587		6,002	$	0.00109589	$1,587/26%	$-/-%	$4,595/74%
Total	$	12,519	$	14,724	$	27,243	$	9,022	$	24,358

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

Our Board of Directors considers many factors before authorizing a cash distribution, including current and projected cash flow from operations, capital expenditure needs, general financial conditions and REIT qualification requirements. To the extent permitted by Maryland law, we may borrow funds, issue new securities or sell assets to make and cover our declared distributions, all or a portion of which could be deemed a return of capital.  We may also fund such distributions from advances from our Advisor or sponsor or from our Advisor's deferral of its asset management fee, although we have no present intention

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to do so.   Our organizational documents do not limit the amount of distributions we can fund from sources other than from cash flows from operations.

Our net loss for the year ended December 31, 2019 was $11.9 million and net cash provided by operating activities was $9.0 million. We have funded our cumulative distributions, which includes net cash distributions and distributions reinvested by stockholders, with cash flow from operating activities and proceeds from debt financing. To the extent that we pay distributions from sources other than our cash flow from operating activities or gains from asset sales, we will have fewer funds available for investment in commercial real estate and real estate-related debt and the overall return to our stockholders may be reduced.

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

ITEM 6. SELECTED FINANCIAL DATA

Selected financial data has been omitted as permitted under rules applicable to smaller reporting companies.

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

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

Overview

We are a Maryland corporation that invests in multifamily assets across the entire spectrum of investments in order to provide investors with growing cash flow and increasing asset values. We were formed on September 28, 2012.  We commenced active real estate operations on June 4, 2014 with the acquisition of our first multi-family property. We have acquired and may continue to acquire (i) underperforming multifamily rental properties which we will renovate and stabilize in order to increase rents, (ii) distressed real estate owned by financial institutions, usually as a result of foreclosure, and non-performing or distressed loans, including first- and second-priority mortgage loans and other loans which we will resolve, and (iii) performing loans, including first- and second-priority mortgage loans and other loans we originate or purchase either directly or with a co-investor or joint venture partner. We may make adjustments to our target portfolio based on real estate market conditions and investment opportunities. We will not forego a good investment because it does not precisely fit our expected portfolio composition.

We commenced the public offering of our common stock in February 2014 and terminated the primary portion of the offering in February 2016. We describe this offering in “Liquidity and Capital Resources,” below.

Results of Operations

  As of December 31, 2019, we owned 17 multifamily properties. Since our inception we have acquired 18 multifamily properties. Through December 31, 2019, we had sold one multifamily property.

Our management is not aware of any material trends or uncertainties, favorable, or unfavorable, other than national economic conditions affecting our targeted portfolio, the multifamily residential housing industry and real estate generally, which may reasonably be expected to have a material impact on either capital resources or the revenues or incomes to be derived from the operation of such assets or those that we expect to acquire.

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Year ended December 31, 2019 Compared to the Year ended December 31, 2018

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

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

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The following table presents the results of operations separated into three categories: the results of operations of the 17 properties we owned for the entirety of both periods presented, properties purchased or sold during either of the periods presented and company level activity for the years ended December 31, 2019 and 2018 (in thousands):

	For the year ended December 31, 2019												For the year ended December 31, 2018
	Properties owned both periods			Properties purchased or sold since prior period			Company level			Total			Properties owned both periods			Properties purchased or sold since prior period			Company level			Total
Revenues:
Rental income	$	79,173		$	955		$	—		$	80,128		$	75,659		$	6,031		$	—		$	81,690
Utility income		4,405			173			6			4,584			4,237			314			—			4,551
Ancillary tenant fees		954			15			—			969			967			48			—			1,015
Total revenues		84,532			1,143			6			85,681			80,863			6,393			—			87,256
Expenses:
Rental operating - expenses		13,238			130			(163	)		13,205			13,414			1,156			(159	)		14,411
Rental operating - payroll		7,517			154			11			7,682			7,499			530			(86	)		7,943
Rental operating - real estate taxes		11,035			244			37			11,316			10,398			1,631			(37	)		11,992
Subtotal - Rental operating expenses		31,790			528			(115	)		32,203			31,311			3,317			(282	)		34,346
Acquisition costs		—			—			—			—			30			—			—			30
Management fees		3,788			46			9,374			13,208			3,604			284			9,840			13,728
General and administrative		1,873			40			5,673			7,586			2,191			187			5,777			8,155
Loss on disposal of assets		219			—			—			219			507			15			—			522
Depreciation and amortization expense		39,599			—			—			39,599			38,602			2,822			—			41,424
Total expenses		77,269			614			14,932			92,815			76,245			6,625			15,335			98,205
Income (loss) before net gain on disposition		7,263			529			(14,926	)		(7,134	)		4,618			(232	)		(15,335	)		(10,949	)
Net gain on disposition of property		—			20,619			—			20,619			—			—			—			—
Income (loss) before other income (expense)		7,263			21,148			(14,926	)		13,485			4,618			(232	)		(15,335	)		(10,949	)
Other income (expense):
Interest income		219			—			4			223			151			3			3			157
Insurance proceeds in excess of cost basis		225			—			—			225			115			—			—			115
Interest expense		(25,099	)		(778	)		—			(25,877	)		(23,531	)		(1,233	)		—			(24,764	)
Net loss	$	(17,392	)	$	20,370		$	(14,922	)	$	(11,944	)	$	(18,647	)	$	(1,462	)	$	(15,332	)	$	(35,441	)

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Revenues:  Rental income on the 17 properties we owned both periods increased by $3.5 million during the year ended December 31, 2019 as compared to the year ended December 31, 2018. The increase is primarily due to the implementation of our investment strategy to increase monthly rental income and occupancy rates after renovating and stabilizing operations, and was primarily comprised of:

							Change in Effective
							Monthly Revenue
Multifamily Community	Rental Change (in thousands)			Change in Occupancy %			per Unit (in dollars)
Adair off Addison	$	72			-0.4	%	$	47
Uptown Buckhead		87			-0.3	%		39
Crosstown at Chapel Hill		283			1.7	%		41
The Brookwood		149			0.9	%		39
Adair off Addison Apartment Homes		122			1.1	%		40
1000 Spalding Crossing		129			-1.2	%		64
Montclair		294			-6.4	%		237
Grand Reserve		178			-3.0	%		105
Verdant Apartment Homes		328			-5.7	%		256
Arcadia Apartment Homes		88			-4.8	%		111
Ravina Apartment Homes		232			4.8	%		(19	)
81 Fifty at West Hills Apartment Homes		374			0.9	%		82
The Palmer at Las Colinas		611			1.6	%		92
Windbrooke Crossing		(46	)		-1.5	%		9
Woods of Burnsville		307			0.2	%		64
Indigo Creek		241			-2.5	%		84
Martin's Point		64			0.5	%		31
	$	3,513

Expenses:  Our operating expenses on the 17 properties we owned during both periods increased by $479,000 during the year ended December 31, 2019 as compared to the year ended December 31, 2018, primarily as a result of an increase in real estate tax assessments as well as the continued implementation of our investment strategy.

Management fees decreased during the year ended December 31, 2019 as compared to the year ended December 31, 2018 primarily as a result of the sale of Overton Trails in February 2019. The monthly asset management fee is equal to one-twelfth of 1.0% of the cost of each asset, without deduction for deprecation, bad debts or other non-cash reserves.

General and administrative expenses decreased during the year ended December 31, 2019 as compared to the year ended December 31, 2018 primarily as a result of the sale of Overton Trails in February 2019.

Loss on disposal of assets is related to the replacement of appliances at our rental properties in conjunction with unit upgrades.

Depreciation and amortization is comprised of the depreciation on our rental properties and amortization of intangible assets related to in-place leases which are amortized over a period of approximately six to nine months after acquisition.  The increases (decreases) in the components of depreciation and amortization during the year ended December 31, 2019, as compared to the year ended December 31, 2018, were as follows (in thousands):

	Properties owned during both periods			All other properties			Total
Depreciation	$	1,810		$	(2,822	)	$	(1,012	)
Amortization of intangibles		(813	)		—			(813	)
	$	997		$	(2,822	)	$	(1,825	)

45

The overall decrease in depreciation expense for all properties was due to the sale of Overton Trails in February 2019. The decrease in amortization expense was due to amortization no longer being taken on properties that have been owned for a period of six to nine months. As of December 31, 2019, there are no properties with a remaining unamortized intangible balance. There were no acquisitions during the year ended December 31, 2019.

Interest expense increased by $1.1 million during the year ended December 31, 2019 as compared to the year ended December 31, 2018 due to incremental borrowings from refinancings subsequent to December 31, 2018.

Liquidity and Capital Resources

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

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

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

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

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Capital Expenditures

We deployed a total of $8.2 million during the year ended December 31, 2019 for capital expenditures. The properties in which we deployed the most capital during the year ended December 31, 2019 are listed separately and the capital expenditures made on all other properties are aggregated in "All other properties" below (in thousands):

	Capital deployed during the year ended		Remaining capital
	December 31, 2019		budgeted
Crosstown at Chapel Hill	$	902	$	889
The Brookwood		599		2,827
1000 Spalding Crossing		615		220
Montclair		438		2,248
Grand Reserve		433		244
Arcadia Apartment Homes		465		222
Ravina Apartment Homes		518		4,094
81 Fifty at West Hills Apartment Homes		991		2,037
The Palmer at Las Colinas		1,232		3,800
The Woods at Burnsville		358		450
All other properties		1,605		4,675
	$	8,156	$	21,706

Common Stock

As of December 31, 2019, we had an aggregate of 60.1 million shares of $0.01 par value common stock outstanding, as follows (dollars in thousands):

	Shares			Gross Proceeds
Shares issued through initial public offering		55,791,297		$	556,197
Shares issued through stock distributions		246,365			—
Shares issued through distribution reinvestment plan		9,826,431			85,348
Advisor's initial investment, net of 5,000 share conversion		15,000			150
Total		65,879,093		$	641,695
Shares redeemed and retired		(5,784,470	)
Total shares outstanding		60,094,623

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Debt

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

	December 31, 2019									December 31, 2018
Collateral	Outstanding borrowings		Premium, net		Deferred Financing Costs, net			Carrying Value		Outstanding borrowings		Premium, net		Deferred Financing Costs, net			Carrying Value
Overton Trails Apartment Homes	$	-	$	—	$	-		$	-	$	29,841	$	—	$	(246	)	$	29,595
Uptown Buckhead		19,264		—		(178	)		19,086		19,651		—		(213	)		19,438
Crosstown at Chapel Hill		42,650		—		(325	)		42,325		42,650		—		(386	)		42,264
The Brookwood - Key Bank		17,063		186		(88	)		17,161		17,477		291		(137	)		17,631
The Brookwood - Capital One		2,566		14		(15	)		2,565		2,613		22		(24	)		2,611
Adair off Addison and Adair    off Addison Apartment Homes		33,210		—		(380	)		32,830		24,629		—		(233	)		24,396
1000 Spalding Crossing		23,737		—		(113	)		23,624		24,195		—		(171	)		24,024
Montclair Terrace		19,958		—		(182	)		19,776		20,312		—		(234	)		20,078
Grand Reserve		47,845		—		(539	)		47,306		47,845		—		(606	)		47,239
Verdant Apartment Homes		36,913		—		(178	)		36,735		37,300		—		(233	)		37,067
Arcadia Apartment Homes		39,782		—		(195	)		39,587		40,200		—		(256	)		39,944
Ravina Apartment Homes		26,241		—		(165	)		26,076		26,951		—		(239	)		26,712
81 Fifty at West Hills Apartment    Homes		51,833		—		(368	)		51,465		52,645		—		(477	)		52,168
The Palmer at Las Colinas		45,700		—		(437	)		45,263		45,700		—		(506	)		45,194
Windbrooke Crossing		37,222		—		(272	)		36,950		37,788		—		(343	)		37,445
Woods of Burnsville		37,744		—		(355	)		37,389		38,250		—		(445	)		37,805
Indigo Creek		40,402		—		(320	)		40,082		40,789		—		(397	)		40,392
Martin's Point		29,944		—		(289	)		29,655		29,990		—		(351	)		29,639
	$	552,074	$	200	$	(4,399	)	$	547,875	$	578,826	$	313	$	(5,497	)	$	573,642

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The following table presents additional information about our mortgage notes payable, net, as of December 31, 2019 (in thousands, except percentages):

	Maturity Date		Margin over LIBOR			Annual Interest Rate			Average Monthly Debt Service		Average Monthly Escrow
Overton Trails Apartment Homes		—		—			—		$	-	$	-	(8)
Uptown Buckhead	7/1/2025			2.22	%		3.98	%	$	104	$	63	(1) (3) (5)
Crosstown at Chapel Hill	7/1/2025			1.77	%		3.53	%	$	142	$	279	(1) (3) (4) (7)
The Brookwood - Key Bank	11/1/2021			—			4.73	%	$	104	$	54	(2) (6)
The Brookwood - Capital One	11/1/2021			—			5.40	%	$	16	$	—	(2) (6)
Adair off Addison and Adair    off Addison Apartment Homes	5/1/2026			1.64	%		3.40	%	$	107	$	81	(1) (3) (9)
1000 Spalding Crossing	1/1/2022			—			3.88	%	$	116	$	51	(2) (4)
Montclair Terrace	6/1/2023			2.45	%		4.21	%	$	107	$	102	(1) (3) (6)
Grand Reserve	5/1/2028			1.72	%		3.48	%	$	157	$	90	(1) (3) (4) (7)
Verdant Apartment Homes	5/1/2023			—			3.89	%	$	176	$	37	(2) (4)
Arcadia Apartment Homes	5/1/2023			—			3.89	%	$	189	$	35	(2) (4)
Ravina Apartment Homes	5/1/2022			—			3.76	%	$	144	$	144	(2) (6)
81 Fifty at West Hills Apartment    Homes	7/1/2023			2.36	%		4.12	%	$	269	$	58	(1) (3) (4)
The Palmer at Las Colinas	9/1/2026			2.11	%		3.87	%	$	166	$	159	(1) (3) (4)
Windbrooke Crossing	1/1/2024			2.69	%		4.45	%	$	201	$	65	(1) (3) (4)
Woods of Burnsville	2/1/2024			2.13	%		3.89	%	$	190	$	84	(1) (3) (4)
Indigo Creek	5/1/2024			1.93	%		3.69	%	$	199	$	52	(1) (3) (4)
Martin's Point	11/1/2024			1.86	%		3.62	%	$	149	$	76	(1) (3) (4)

(1) Variable rate based on one-month LIBOR of 1.76250% (as of December 31, 2019) plus a fixed margin

(2) Fixed rate

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

(4) Monthly interest-only payment currently required

(5) Monthly fixed principal plus interest payment required

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

(7) Refinanced during the year ended December 31, 2018

(8) Mortgage note payable related to asset sold on February 28, 2019

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

On August 21, 2015, we recorded a fair value adjustment, which represented the fair value of the debt assumed over its principal amount in connection with The Brookwood Apartment Home acquisition. The fair value will be amortized to interest expense over the term of the related mortgages loans using the effective interest method. As of December 31, 2019, the net unamortized mortgage premium was approximately $200,000 and was included as a component of mortgage loans payable in the accompanying consolidated balance sheets.

At December 31, 2019, the weighted average interest rate of all our outstanding indebtedness was 3.87%.

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

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

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Operating Properties

As of December 31, 2019, our wholly-owned interests in multifamily properties were as follows:

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

As four of our multifamily properties are located in the Dallas-Fort Worth area, three properties are located in the Chicago area, two properties are located in Portland, Oregon, two properties are located in  the Atlanta area and two properties are located in the Denver area, our portfolio is currently particularly susceptible to adverse economic developments in these real estate markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for multifamily rentals resulting from the local business climate, could negatively affect our liquidity and adversely affect our ability to fund our ongoing operations.

Acquisition and Asset Management Costs

In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to make payments to our Advisor. During our acquisition stage, we made payments to our Advisor in connection with the acquisition of real estate investments.  In addition, we expect to continue to make payments to our Advisor for the management of our assets and costs incurred by our Advisor in providing services to us.  We describe these payments in more detail in Note 10 of the notes to our consolidated financial statements.

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Operating Expenses

Under our charter, our Advisor must reimburse us the amount by which our aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of our average invested assets or 25% of our net income, unless the Conflicts Committee of the Board of Directors has determined that such excess expenses were justified based on unusual and non-recurring factors.  “Average invested assets” means the average monthly book value of our assets invested, directly or indirectly, in equity interests in and loans secured by real estate during the 12-month period before deducting depreciation, bad debts or other non-cash reserves.  “Total operating expenses” means all expenses paid or incurred by us, as determined under Generally Accepted Accounting Principles ("GAAP"), that are in any way related to our operation, including advisory fees, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and stock exchange listing of our stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of our assets; and (f) acquisition fees, acquisition expenses (including expenses relating to potential investments that we do not close), disposition fees on the resale of property and other expenses connected with the acquisition, disposition and ownership of real estate interests, loans or other property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property).

Operating expenses for the four quarters ended December 31, 2019 did not exceed the charter imposed limitation.

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Distributions

For the year ended December 31, 2019, the Company paid aggregate distributions of $27.2 million, including $12.5 million of distributions paid in cash and $14.7 million of distributions reinvested in shares of common stock through the our distribution reinvestment plan, as follows (dollars in thousands, except per share data):

Authorization Date	Per Common Share		Record Dates	Distribution Date	Distributions reinvested in shares of Common Stock		Net Cash Distributions		Total Aggregate Distributions
December 14, 2018	$	0.00164384	December 29, 2018 through January 30, 2019	January 31, 2019	$	1,717	$	1,412	$	3,129
December 14, 2018		0.00164384	January 31, 2019 through February 27, 2019	February 28, 2019		1,553		1,281		2,834
December 14, 2018		0.00164384	February 28, 2019 through March 28, 2019	March 29, 2019		1,594		1,342		2,936
March 20, 2019		0.00109589	March 29, 2019 through April 29, 2019	April 30, 2019		1,164		985		2,149
March 20, 2019		0.00109589	April 30, 2019 through May 30, 2019	May 31, 2019		1,131		956		2,087
March 20, 2019		0.00109589	May 31, 2019 through June 27, 2019	June 28, 2019		1,012		858		1,870
June 11, 2019		0.00109589	June 28, 2019 through July 30, 2019	July 31, 2019		1,174		996		2,170
June 11, 2019		0.00109589	July 31 2019 through August 29, 2019	August 30, 2019		1,068		909		1,977
June 11, 2019		0.00109589	August 30, 2019 through September 27, 2019	September 30, 2019		1,026		881		1,907
September 10, 2019		0.00109589	September 28, 2019 through October 30, 2019	October 31, 2019		1,159		1,008		2,167
September 10, 2019		0.00109589	October 31, 2019 through November 26, 2019	November 27, 2019		944		834		1,778
September 10, 2019		0.00109589	November 27, 2019 through December 30, 2019	December 31, 2019		1,182		1,057		2,239
					$	14,724	$	12,519	$	27,243

On December 11, 2019, the Company's Board of Directors approved distributions in an amount of $0.001095890 per share of common stock for stockholders of record each day in the period from December 31, 2019 through and including March 30, 2020, payable on January 31, 2020, February 28, 2020 and March 31, 2020.

The following is a reconciliation of total aggregate distributions to total distributions declared for the year ended December 31, 2019 (in thousands):

Total aggregate distributions paid	$	27,243
Less: distribution payable at December 31, 2018		(8,878	)
Add: distribution payable at December 31, 2019		5,993
Total distributions declared	$	24,358

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

Fiscal Year paid	Per Common Share per Day		Distribution invested in shares of Common Stock		Net Cash Distribution		Total Aggregate Distribution
2014	$	0.00071223	$	215	$	114	$	329
2015		0.00164384		8,424		5,654		14,078
2016		0.00164384		20,608		14,025		34,633
2017		0.00163438		20,685		15,095		35,780
2018		0.00163438		20,693		16,175		36,868
2019		0.00123288		14,724		12,519		27,243
			$	85,349	$	63,582	$	148,931

Funds from Operations and Modified Funds from Operations

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

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

(1) acquisition fees and expenses;

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

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

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

(5) impairment charges;

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

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

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

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

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

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

53

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

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

• Acquisition expenses. In evaluating investments in real estate, including both business combinations and investments accounted for under the equity method of accounting, management’s investment models and analysis differentiate costs to acquire the investment from the operations derived from the investment. Under GAAP, acquisition costs related to business combinations are expenses and are capitalized for asset acquisitions. Prior to January 1, 2018, all of our acquisitions were accounted for as business combinations and their related costs were expensed. On January 1, 2018, we adopted Financial Accounting Standards Board Accounting Standards Update 2017-01, and we anticipate that most property acquisitions will be treated as asset acquisitions and the related costs will be capitalized. Acquisition costs will continue to be funded from both the proceeds of debt financing and the proceeds of property dispositions, not from cash flows from operations. We believe that by excluding expensed acquisition costs, MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition expenses include those paid to our Advisor or third parties.

• Adjustments for straight-line rents and amortization of discounts and premiums on debt investments.  In the proper application of GAAP, rental receipts and discounts and premiums on debt investments are allocated to periods using various systematic methodologies. This application will result in income recognition that could be significantly different than underlying contract terms. By adjusting for these items, MFFO provides useful supplemental information on the realized economic impact of lease terms and debt investments and aligns results with management’s analysis of operating performance.

• Adjustments for amortization of above or below market intangible lease assets.  Similar to depreciation and amortization of other real estate related assets that are excluded from FFO, GAAP implicitly assumes that the value of intangibles diminishes predictably over time and that these charges be recognized currently in revenue.  Since real estate values and market lease rates in the aggregate have historically risen or fallen with market conditions, management believes that by excluding these charges, MFFO provides useful supplemental information on the performance of the real estate.

• Impairment charges, gains or losses related to fair-value adjustments for derivatives not qualifying for hedge accounting and gains or losses related to contingent purchase price adjustments.  Each of these items relates to a fair value adjustment, which is based on the impact of current market fluctuations and underlying assessments of general market conditions and specific performance of the holding which may not be directly attributable to current operating performance.  As these gains or losses relate to underlying long-term assets and liabilities, management believes MFFO provides useful supplemental information by focusing on the changes in our core operating fundamentals rather than changes that may reflect anticipated gains or losses. In particular, because GAAP impairment charges are not allowed to be reversed if the underlying fair values improve or because the timing of impairment charges may lag the onset of certain operating consequences, we believe MFFO provides useful supplemental information related to current consequences, benefits and sustainability related to rental rate, occupancy and other core operating fundamentals.

• Adjustment for gains or losses related to early extinguishment of hedges, debt, consolidation or deconsolidation and contingent purchase price.  Similar to extraordinary items excluded from FFO, these adjustments are not related to continuing operations.  By excluding these items, management believes that MFFO provides supplemental information related to sustainable operations that will be more comparable between other reporting periods and to other real estate operators.

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

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

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

The following section presents our calculation of FFO, MFFO and AFFO and provides additional information related to our operations. As a result of the timing of the commencement of our initial public offering and our active real estate operations and the general and administrative expenses incurred in connection with these events, FFO, MFFO and AFFO are not relevant to a discussion comparing operations for the two periods presented.  We expect revenues and expenses to increase in future periods as we acquire additional investments.

	Years Ended
	December 31,
	2019			2018
	(in thousands)
Net loss – GAAP	$	(11,944	)	$	(35,441	)
Net gain on disposition of property		(20,619	)		-
Depreciation expense		39,599			40,611
FFO attributable to common stockholders		7,036			5,170
Adjustments for straight-line rents		266			291
Fair value adjustment for cancelable swap		-			(287	)
Amortization of intangible lease assets		-			813
Debt premium amortization		(113	)		(116	)
Acquisition costs		-			30
MFFO attributable to common stockholders		7,189			5,901
Net gains on disposition of property		20,619			-
AFFO attributable to common stockholders	$	27,808		$	5,901
Basic and diluted loss per common share - GAAP	$	(0.20	)	$	(0.58	)
FFO per share	$	0.12		$	0.08
MFFO per share	$	0.12		$	0.10
AFFO per share	$	0.46		$	0.10
Weighted average shares outstanding		60,728			61,110

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Critical Accounting Policies

We consider these policies critical because they involve significant management judgments and assumptions, they require estimates about matters that are inherently uncertain, and they are important for understanding and evaluating our reported financial results.  These judgments affect the reported amounts of our assets and liabilities and our disclosure of contingent assets and liabilities on the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods.  With different estimates or assumptions, materially different amounts could be reported in our financial statements.  Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.

Real Estate Assets

Depreciation

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

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

Improvements and replacements in excess of $1,000 are capitalized when they have a useful life greater than or equal to one year. The Manager, an affiliate of the Advisor, earns a construction management fee of 5.0% of actual aggregate costs to construct improvements, or to repair, rehab or reconstruct a property. These costs are capitalized along with the related asset. Costs of repairs and maintenance are expensed as incurred.

Real Estate Purchase Price Allocation

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

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

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

We measure the aggregate value of other intangible assets acquired based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued as if vacant. Management's estimates of value are expected to be made using methods similar to those used by independent appraisers (e.g., discounted

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cash flow analysis). Factors to be considered by management in its analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions and costs to execute similar leases.

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

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

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

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

Valuation of Real Estate Assets

We continually monitor events and changes in circumstances that could indicate that the carrying amounts of our real estate and related intangible assets may not be recoverable.  When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets may not be recoverable, we will assess the recoverability of the assets by estimating whether we will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition.  If based on this analysis we do not believe that we will be able to recover the carrying value of the asset, we will record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the asset.

Projections of future cash flows require us to estimate the expected future operating income and expenses related to an asset as well as market and other trends.  The use of inappropriate assumptions in our future cash flows analysis would result in an incorrect assessment of our assets' future cash flows and fair values and could result in the overstatement of the carrying values of our real estate assets and an overstatement of our net income.

Revenue Recognition

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

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

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

Interest income from performing loans receivable are recognized based on the contractual terms of the loan agreement.  Fees related to any buy-down of the interest rate will be deferred as prepaid interest income and amortized over the term of the

57

loan as an adjustment to interest income.  Closing costs related to the purchase of a performing loan held for investment will be amortized using effective yield method over the term of the loan and accreted as an adjustment against interest income.

Adoption of New Accounting Standards

In February 2016, the Financial Accounting Standards board (“FASB”) issued ASU No. 2016-02, "Leases" ("ASU No. 2016-02"), as amended by ASU 2018-10, is intended to improve financial reporting about leasing transactions and requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. In September 2017, FASB issued ASU 2017-13, "Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842)", which provides additional implementation guidance on the previously issued ASU No. 2016-02 Leases (Topic 842).  We adopted these standards as of January 1, 2019, and the adoption did not have a material effect on our consolidated financial statements and disclosures. For operating leases where we are the lessor, the underlying leased asset recognized as real estate on the balance sheet. We have chosen to apply the practical expedient (discussed in ASU No. 2018-11, “Leases: Targeted Improvements”) to nonlease component revenue streams and account for them as a combined component with leasing revenue. We determine if an arrangement is a lease at inception. We elected the package of practical expedients permitted within the new standard, which among other things, allows us to carry forward the historical lease classification. Also allowable under the new standard (ASU No. 2018-11) is the option, which we have elected, to present the operating lease ROU asset and operating lease liabilities as of January 1, 2019 and not restate prior periods. No cumulative impact adjustment was necessary to opening retained earnings as of January 1, 2019. For certain equipment leases, such as copiers, we applied a portfolio approach to effectively account for the operating lease ROU assets and liabilities.

In August 2017, FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities", which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. We adopted the standard on January 1, 2019, and the adoption did not have a significant impact on our consolidated financial statements.

In June 2018, FASB issued ASU 2018-07 “Improvements to Nonemployee Share-Based Payment Accounting” to simplify the accounting for share-based payment transactions for acquiring goods and services from nonemployees by including these payments in the scope of the guidance for share-based payments to employees. We adopted the standard on January 1, 2019, and the adoption did not have a significant impact on our consolidated financial statements.

In July 2018, FASB issued ASU 2018-09, "Codification Improvements." This standard does not prescribe any new accounting guidance, but instead makes minor improvements and clarifications of several different FASB Accounting Standards Codification areas based on comments and suggestions made by various stakeholders. We adopted the standard on January 1, 2019, and the adoption did not have a significant impact on our consolidated financial statements.

In October 2018, FASB issued ASU No. 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes”. ASU No. 2018-16 permits the use of the Overnight Index Swap (“OIS”) Rate based on the Secured Overnight Financing Rate as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to the interest rates on direct Treasury obligations of the U.S. government, the London Interbank Offered Rate (“LIBOR”) and the OIS Rate based on the Federal Funds Effective Rate. For entities that have not already adopted ASU No. 2017-12, the amendments in ASU No. 2018-16 are required to be adopted concurrently with the amendments in ASU No. 2017-12. . We adopted the standard on January 1, 2019, and the adoption did not have a significant impact on our consolidated financial statements.

Accounting Standards Issued But Not Yet Effective

In June 2016, FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses”, which requires measurement and recognition of expected credit losses for financial assets held. ASU No. 2016-13 will be effective for us beginning January 1, 2020. We are continuing to evaluate this guidance; however, we do not expect the adoption of ASU No. 2016-13 to have a significant impact on our consolidated financial statements and disclosures due to the fact that we did not have instruments subject to this guidance at December 31, 2019.

In January 2017, FASB issued ASU No. 2017-04, "Intangibles- Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment", which alters the current goodwill impairment testing procedures. ASU No. 2017-04 will be effective for us beginning January 1, 2020. Early application is permitted. We are evaluating this guidance and assessing the

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impact of this guidance on our consolidated financial statements. Since we have no recorded goodwill, there is no expected impact upon adoption.

In August 2018, FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” This update removes, modifies and adds certain disclosure requirements in FASB ASC 820, “Fair Value Measurement” (“ASC 820”). ASU No. 2018-13 will be effective for us beginning January 1, 2020 and early adoption is permitted.  We are continuing to evaluate this guidance; however, we do not expect the adoption of ASU No. 2018-13 to have a significant impact on our consolidated financial statements.

In November 2018, FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842, Leases. ASU 2018-19 is effective on January 1, 2020, with early adoption permitted. We are evaluating this guidance; however, we do not expect that adoption of ASU 2018-19 will have a significant impact on our consolidated financial statements. Information regarding the adoption of ASC 842 is described above.

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Off-Balance Sheet Arrangements

As of December 31, 2019 and 2018, we did not have any off-balance sheet arrangements or obligations.

Subsequent Events

On January 23, 2020, we filed a Form S-3 with the SEC to register an additional 1.5 million shares under the DRIP.

On February 14, 2020, the Board of Directors suspended the share redemption program with exceptions for redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility. The suspension took effect on March 20, 2020.

On March 11, 2020, the World Health Organization declared the outbreak of a coronavirus (COVID-19) a pandemic. The resulting restrictions on travel and quarantines imposed have had a negative impact on the U.S. economy and business activity globally, the full impact of which is not yet known and may result in an adverse impact to the Company’s investments and operating results.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Omitted as permitted under rules applicable to smaller reporting companies.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

There were no disagreements with our independent registered public accountants during the year ended December 31, 2019.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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

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

Management's Report on Internal Control over Financial Reporting

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

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making this assessment, management used the criteria set forth in the 2013 version of the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon this assessment, management believes that our internal control over financial reporting is effective as of December 31, 2019.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred in the quarter ended December 31, 2019 that has materially affected, or is reasonable likely to materially affect, our internal control over financial reporting.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Code of Conduct and Ethics

We have adopted a Code of Conduct and Ethics that applies to all of our executive officers and directors, including but not limited to, our chief executive officer and chief financial officer. Our Code of Conduct and Ethics may be found at http://www.resourcereit2.com, on the Prospectus/SEC Filings page.

The other information required by this Item is incorporated by reference from our 2020 Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference from our 2020 Proxy Statement.

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

The information required by this Item is incorporated by reference from our 2020 Proxy Statement.

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

The information required by this Item is incorporated by reference from our 2020 Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is incorporated by reference from our 2020 Proxy Statement.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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

(a) Financial Statements

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

(b) Financial Statement Schedules

i. Our financial statement schedules are included in a separate section of this Annual Report on Form 10-K commencing on page F-29.

(c) Exhibits

Exhibit No.	Description
3.1	Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Pre-Effective Amendment No. 3 to the Registration Statement on Form S-11 (No. 333-184476) filed December 20, 2013)
3.2	Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-11 (No. 333-184476) filed October 17, 2012)
4.1	Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates) (incorporated by reference to the Company’s Registration Statement on Form S-11 (No. 333-184476) filed October 17, 2012)
4.2	Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Appendix A to the prospectus included in the Company’s Post-Effective Amendment no. 9 to the Registration Statement on Form S-11 on Form S-3 (No. 333-184476) filed February 16, 2016)
4.3	Description of the Company’s Common Stock Registered Pursuant to Section 12 of the Exchange Act of 1934
10.1	Amended and Restated Advisory Agreement
10.2	First Amendment to Amended and Restated Advisory Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report of Form 10-Q filed November 14, 2014)
10.3	Dealer Manager Agreement, including Form of Selected Dealer Agreement and Form of Placement Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Post-Effective Amendment no. 2 to the Registration Statement on Form S-11 (No. 333-184476) filed October 28, 2014)
10.4	Management Agreement by and among Resource Real Estate Opportunity REIT II, Inc., RRE Opportunity OP II, LP and Resource Real Estate Opportunity Manager II, LLC, dated December 20, 2013 (incorporated by reference to Exhibit 10.3 to the Company's Annual Report on Form 10-K  filed March 30, 2015).
10.5	Second Amendment to Amended and Restated Advisory Agreement between Resource Real Estate Opportunity REIT II, Inc. and Resource Real Estate Opportunity Advisor II, LLC, dated March 24, 2015 (incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K filed March 30, 2015).
10.6	Renewal Agreement by and between Resource Real Estate Opportunity REIT II, Inc. and Resource Real Estate Opportunity Advisor II, LLC, dated December 20, 2019
21.1	Subsidiaries of the Company
23.1	Consent of Grant Thornton
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1	Consent of Duff & Phelps
99.2	Fourth Amended and Restated Share Redemption Program (incorporated by reference to Exhibit 99.2 to the Company’s Annual Report on Form 10-K filed March 22, 2019)
101.1	The following information from the Company's Quarterly Report on Form 10-K for the year ended December 31, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations and Comprehensive (Loss) Income; (iii) Consolidated Statements of Changes in Stockholders' Equity; and (iv) Consolidated Statements of Cash Flows

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ITEM 16.FORM 10-K SUMMARY

None

64

SIGNATURES

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

	RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
March 20, 2020	By:	/s/ Alan F. Feldman
		Alan F. Feldman
		Chief Executive Officer and Director

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

/s/ George Carleton	Director	March 20, 2020
GEORGE CARLETON
/s/ Gary Lichtenstein	Director	March 20, 2020
GARY LICHTENSTEIN
/s/ Thomas J. Ikeler	Director	March 20, 2020
THOMAS J. IKELER
/s/ David Spoont	Director	March 20, 2020
DAVID SPOONT
/s/ Alan F. Feldman	Chief Executive Officer and Director	March 20, 2020
ALAN F. FELDMAN	(Principal Executive Officer)
/s/ Steven R. Saltzman	Chief Financial Officer, Senior Vice President and Treasurer	March 20, 2020
STEVEN R. SALTZMAN	(Principal Financial Officer and Principal Accounting Officer)

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RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

(A Maryland Corporation in the Developmental Stage)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Resource Real Estate Opportunity REIT II, Inc.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Resource Real Estate Opportunity REIT II, Inc. (a Maryland corporation) and subsidiaries (the “Company”) December 31, 2019 and 2018, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2019, and the related notes and schedule included under Item 15(b) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

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

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

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

/s/ GRANT THORNTON LLP

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

Philadelphia, Pennsylvania

March 20, 2020

F-1

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	December 31,
	2019			2018
ASSETS
Investments:
Rental properties, net	$	735,530		$	767,738
Identified intangible assets, net		—			—
Assets held for sale - rental properties		—			42,863
Total investments		735,530			810,601
Cash		39,647			40,175
Restricted cash		6,534			7,813
Subtotal - cash and restricted cash		46,181			47,988
Tenant receivables		107			73
Due from related parties		297			57
Prepaid expenses and other assets		2,147			2,009
Total assets	$	784,262		$	860,728
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Mortgage notes payable, net	$	547,875		$	573,642
Accounts payable and accrued expenses		11,502			12,046
Due to related parties		432			584
Tenant prepayments		634			642
Security deposits		1,513			1,470
Distribution payable		5,993			8,878
Total liabilities		567,949			597,262
Stockholders’ equity:
Preferred stock (par value $.01, 10,000,000 shares authorized, none    issued and outstanding)		—			—
Convertible stock (par value $.01; 50,000 shares authorized,    50,000 issued and outstanding)		1			1
Common stock (par value $.01; 1,000,000,000 shares authorized, 60,094,623    and 61,378,367 issued and outstanding, respectively)		600			612
Additional paid-in capital		528,464			539,493
Accumulated other comprehensive loss		(189	)		(379	)
Accumulated deficit		(312,563	)		(276,261	)
Total stockholders’ equity		216,313			263,466
Total liabilities and stockholders’ equity	$	784,262		$	860,728

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

F-2

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share data)

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

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

F-3

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(in thousands)

	Common Stock						Convertible Stock				Additional Paid-in			Accumulated Other Comprehensive			Accumulated
	Shares			Amount			Shares		Amount		Capital			Loss			Deficit			Total
Balance, at January 1, 2018		60,782		$	606			50	$	1	$	534,683		$	(444	)	$	(204,186	)	$	330,660
Common stock issued through    distribution reinvestment plan		2,397			24			—		—		20,669			—			—			20,693
Distributions declared		—			—					—		-			—			(36,634	)		(36,634	)
Common stock redemptions		(1,800	)		(18	)		—		—		(15,859	)		—			—			(15,877	)
Designated derivatives, fair    value adjustment		—			—			—		—		—			65			—			65
Net loss		—			—			—		—		—						(35,441	)		(35,441	)
Balance, at December 31, 2018		61,379		$	612			50	$	1	$	539,493		$	(379	)	$	(276,261	)	$	263,466
Common stock issued through    distribution reinvestment plan		1,754			18			—		—		14,706			—			—			14,724
Distributions declared		—			—					—		-			—			(24,358	)		(24,358	)
Common stock redemptions		(3,038	)		(30	)		—		—		(25,735	)		—			—			(25,765	)
Designated derivatives, fair    value adjustment		—			—			—		—		—			190			—			190
Net loss		—			—			—		—		—			—			(11,944	)		(11,944	)
Balance, at December 31, 2019		60,095		$	600			50	$	1	$	528,464		$	(189	)	$	(312,563	)	$	216,313

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

F-4

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2019			2018
Cash flows from operating activities:
Net loss	$	(11,944	)	$	(35,441	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Loss on disposal of assets		219			522
Net gain on disposition of property		(20,619	)		-
Casualty (gain) loss		552			-
Depreciation and amortization		39,599			41,424
Amortization of deferred financing costs		1,104			1,318
Amortization of mortgage premiums		(113	)		(116	)
Change in fair value of interest rate caps		-			55
Changes in operating assets and liabilities:
Tenant receivables		(33	)		14
Due from related parties		(240	)		-
Prepaid expenses and other assets		(1	)		(2	)
Due to related parties		(151	)		46
Accounts payable and accrued expenses		535			(2,013	)
Tenant prepayments		16			67
Security deposits		98			158
Net cash provided by operating activities		9,022			6,032
Cash flows from investing activities
Proceeds from disposal of property, net of closing costs		32,882			-
Capital expenditures		(8,156	)		(15,097	)
Net cash provided by (used in) investing activities		24,726			(15,097	)
Cash flows from financing activities:
Redemptions of common stock		(25,765	)		(15,877	)
Payment of deferred financing costs		(445	)		(503	)
Increase in borrowings		8,946			17,439
Repayments on borrowings		(5,760	)		(4,660	)
Purchase of interest rate caps		(11	)		(66	)
Distributions paid on common stock		(12,520	)		(16,175	)
Net cash used in financing activities		(35,555	)		(19,842	)
Net decrease in cash and restricted cash		(1,807	)		(28,907	)
Cash and restricted cash at beginning of year		47,988			76,895
Cash and restricted cash at end of year	$	46,181		$	47,988

The following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheets that sums to the total of such amounts shown on the consolidated statements of cash flows:

	December 31,
	2019		2018
Cash	$	39,647	$	40,175
Restricted cash		6,534		7,813
Total cash and restricted cash shown in the consolidated balance sheets	$	46,181	$	47,988

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

F-5

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2019

NOTE 1 - NATURE OF BUSINESS AND OPERATIONS

Resource Real Estate Opportunity REIT II, Inc. (the “Company”) was organized in Maryland on September 28, 2012.  During the primary portion of its initial public offering, the Company offered up to 100,000,000 shares of common stock for $10 per share, with volume discounts available to certain categories of investors.  The primary portion of the offering closed on February 6, 2016. The Company is currently offering up to 10,000,000 shares pursuant to the Company’s distribution reinvestment plan at a purchase price equal to 95% of the estimated net asset value per share. On January 23, 2020, the Company filed a Registration Statement to offer an additional 1,500,000 shares pursuant to the Company’s distribution reinvestment plan. The Company has adopted a fiscal year ending December 31.

Resource Real Estate Opportunity Advisor II, LLC (the "Advisor”) is a wholly owned subsidiary of Resource Real Estate, LLC (the "Sponsor") and an indirect wholly owned subsidiary of Resource America, Inc. (“RAI”). The Advisor acts as the Company's external advisor and manages the Company's day-to-day operations and its portfolio of real estate investments and provides asset-management, marketing, investor relations and other administrative services on the Company's behalf, all subject to the supervision of the Company's Board of Directors.

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

As of December 31, 2019, a total of 60,094,623 shares, including shares purchased by the Advisor and shares issued through the distribution reinvestment plan, remain outstanding. As of December 31, 2019, the Company had issued 9,826,431 shares valued at $85.3 million pursuant to its distribution reinvestment plan.

The Company’s objective is to take advantage of the Sponsor's dedicated multifamily investing and lending platforms to invest in multifamily assets across the entire spectrum of investments in order to provide stockholders with growing cash flow and increasing asset values. The Company has acquired commercial real estate assets, principally underperforming multifamily rental properties which the Company will renovate and stabilize in order to increase rents, and may acquire, to a lessor extent, real estate related debt.

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

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with the accounting principles generally accepted in the United States of America ("GAAP").

F-6

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

Principles of Consolidation

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

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

N/A - Not Applicable

(1) Property was sold on February 28, 2019

All intercompany accounts and transactions have been eliminated in consolidation.

Segment Reporting

F-7

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

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

Use of Estimates

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

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentration of credit risk, consist of periodic temporary deposits of cash. At December 31, 2019, the Company had $46.1 million of deposits at various banks, $38.7 million of which were over the insurance limit of the Federal Deposit Insurance Corporation.  No losses have been experienced on such deposits.

Rental Properties

The Company records acquired real estate at fair value on their acquisition date. The Company considers the period of future benefit of an asset to determine its appropriate useful life, and depreciates the asset using the straight line method.  The Company's estimated useful lives of its assets by class are as follows:

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

Improvements and replacements in excess of $1,000 are capitalized when they have a useful life greater than or equal to one year. The Manager earns a construction management fee of 5.0% of actual aggregate costs to construct improvements, or to repair, rehab or reconstruct a property. These costs are capitalized along with the related asset. Costs of repairs and maintenance are expensed as incurred.

As of December 31, 2019, the Company's real estate investments located in Texas, Illinois, Colorado, Oregon and Georgia represent approximately 19.6%, 18.9%, 15.6%, 14.1% and 9.1% of the portfolio. This makes it particularly susceptible to adverse economic developments in these real estate markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for multifamily rentals resulting from the local business climate, could negatively affect the Company's liquidity and adversely affect its ability to fund its ongoing operations.

Impairment of Long Lived Assets

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

If impairment exists, due to the inability to recover the carrying value of a property, an impairment loss will be recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative

F-8

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

adjustment to net income. The Company did not recognize any impairment charges during the years ended December 31, 2019 and 2018.

Allocation of Purchase Price of Acquired Assets

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

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

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

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

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

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

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

The determination of the fair value of the assets and liabilities acquired requires the use of significant assumptions with regard to current market rental rates, discount rates and other variables.  The use of inappropriate estimates would result in

F-9

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

an incorrect assessment of the fair value of these assets and liabilities, which could impact the Company's reported net income (loss).

Revenue Recognition

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

The future minimum rental payments to be received from noncancelable operating leases are approximately $41.4 million and $586,000 for the years ending December 31, 2020 and 2021, and none thereafter.

Revenue is primarily derived from the rental of residential housing units for which the Company receives minimum rents and utility reimbursements pursuant to underlying tenant lease agreements.  The Company also receives other ancillary fees for administration of leases, late payments and amenities, which are charged to residents and recognized monthly as earned. The Company elected the practical expedient to not separate lease and non-lease components and has presented property revenues combined based upon the lease being determined the predominant component. The Company also has revenue sharing arrangements of cable income from contracts with cable providers at the Company's properties. Included in accrued expenses and other liabilities on the consolidated balance sheets at December 31, 2019 and 2018 is a $573,000 and $666,000 contract liability related to deferred revenue from contracts with cable providers. The Company recognizes income from these contracts on a straight line basis over the contract period of 10 years to 12 years. During the years ended December 31, 2019 and 2018, approximately $138,000 and $71,100, respectively of revenue from the contract liability was recognized as income.

Tenant Receivables

The Company makes estimates of the collectability of its tenant receivables related to base rents, including straight-line rentals, expense reimbursements and other revenue or income.  The Company specifically analyzes accounts receivable and historical bad debts, tenant creditworthiness, current economic trends when evaluating the adequacy of the allowance for doubtful accounts.  In addition, with respect to tenants in bankruptcy, the Company makes estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectability of the related receivable.  In some cases, the ultimate resolution of these claims can exceed one year.  At December 31, 2019 and 2018, there were allowances for uncollectible receivables of $44,186 and $13,901, respectively.

Income Taxes

The Company elected to be taxed as a REIT, commencing with its taxable year ended December 31, 2014. To maintain its REIT qualification for U.S. federal income tax purposes, the Company is generally required to distribute at least 90% of its taxable net income (excluding net capital gains) to its stockholders as well as comply with other requirements, including certain asset, income and stock ownership tests. As a REIT, the Company is not subject to federal corporate income tax to the extent that it distributes 100% of its REIT taxable income each year. If the Company fails to qualify as a REIT, and does not qualify for certain statutory relief provisions, it is subject to U.S. federal, state and local income taxes and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year in which it fails its REIT qualification. Accordingly, the Company’s failure to qualify as a REIT could have a material adverse impact on its results of operations and amounts available for distribution to its stockholders.

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

F-10

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

The Company may elect to treat certain of its subsidiaries as taxable REIT subsidiaries (“TRS”). In general a TRS may hold assets and engage in activities that the Company cannot hold or engage in directly and generally may engage in any real estate or non-real estate-related business.  A TRS is subject to U.S. federal, state and local corporate income taxes. While a TRS may generate net income, a TRS can declare dividends to the Company which will be included in the Company’s taxable income and necessitate a distribution to its stockholders. Conversely, if the Company retains earnings at a TRS level, no distribution is required and the Company can increase book equity of the consolidated entity. As of December 31, 2019 and 2018, the Company did not treat any of its subsidiaries as a TRS.

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

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

Earnings Per Share

Basic earnings (loss) per share is calculated on the basis of weighted-average common shares outstanding during the year. Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted-average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted to common stock. None of the 50,000 convertible shares (see Note 11) are included in the diluted earnings per share calculations because the necessary conditions for conversion have not been satisfied as of December 31, 2019 (were such date to represent the end of the contingency period).  For the year ended December 31, 2019 and 2018, common shares potentially issuable to settle distributions payable are excluded from the calculation of diluted earnings per share calculations, as their inclusion would be anti-dilutive.

Adoption of New Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, "Leases" ("ASU

No. 2016-02"), which was amended by ASU No. 2018-09 "Codification Improvements" in July 2018. ASU No. 2016-02, as

amended, is intended to improve financial reporting related to leasing transactions and requires organizations that lease assets

to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. In September 2017, the FASB issued ASU No. 2017-13, "Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic

606), Leases (Topic 840), and Leases (Topic 842)", which provides additional implementation guidance on the previously issued ASU No. 2016-02. The Company adopted these standards as of January 1, 2019, and the adoption did not have a material effect on the Company's consolidated financial statements and disclosures. For operating leases where the Company is the lessor, the underlying leased asset is recognized as real estate on the balance sheet. The Company has chosen to apply the practical expedient (discussed in ASU No. 2018-11, “Leases: Targeted Improvements”) to nonlease component revenue streams and account for them as a combined component with leasing revenue. The Company elected the package of practical expedients permitted within the new standard, which among other things, allows the Company to carry forward the historical lease classification. Also allowable under the new standard (ASU No. 2018-11) is the option, which the Company has elected, to present the operating lease ROU asset and operating lease liabilities as of January 1, 2019 and not restate prior periods. No cumulative impact adjustment was necessary to opening retained earnings as of January 1, 2019. For certain equipment leases, such as copiers, the Company applied a portfolio approach to effectively account for the operating lease ROU assets and liabilities.

In August 2017, FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): targeted Improvements to Accounting for Hedging Activities", which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of

F-11

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

hedge effectiveness. The Company adopted the standard on January 1, 2019, and the adoption did not have a significant impact on its consolidated financial statements.

In June 2018, FASB issued ASU 2018-07 “Improvements to Nonemployee Share-Based Payment Accounting” to simplify the accounting for share-based payment transactions for acquiring goods and services from nonemployees by including these payments in the scope of the guidance for share-based payments to employees. The Company adopted the standard on January 1, 2019, and the adoption did not have a significant impact on its consolidated financial statements.

In July 2018, FASB issued ASU 2018-09, "Codification Improvements." This standard does not prescribe any new accounting guidance, but instead makes minor improvements and clarifications of several different FASB Accounting Standards Codification areas based on comments and suggestions made by various stakeholders. The Company adopted the standard on January 1, 2019, and the adoption did not have a significant impact on its consolidated financial statements.

In October 2018, FASB issued ASU No. 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes”. ASU No. 2018-16 permits the use of the Overnight Index Swap (“OIS”) Rate based on the Secured Overnight Financing Rate as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to the interest rates on direct Treasury obligations of the U.S. government, the London Interbank Offered Rate (“LIBOR”) and the OIS Rate based on the Federal Funds Effective Rate. For entities that have not already adopted ASU No. 2017-12, the amendments in ASU No. 2018-16 are required to be adopted concurrently with the amendments in ASU No. 2017-12. . The Company adopted the standard on January 1, 2019, and the adoption did not have a significant impact on its consolidated financial statements.

Accounting Standards Issued But Not Yet Effective

In June 2016, FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses”, which requires measurement and recognition of expected credit losses for financial assets held. ASU No. 2016-13 which will be effective for the Company beginning January 1, 2020. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU No. 2016-13 to have a significant impact on its consolidated financial statements and disclosures due to the fact that the Company did not have instruments subject to this guidance at December 31, 2019.

In January 2017, FASB issued ASU No. 2017-04, "Intangibles- Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment", which alters the current goodwill impairment testing procedures. ASU No. 2017-04 will be effective for the Company beginning January 1, 2020. Early application is permitted. The Company is evaluating this guidance and assessing the impact of this guidance on its consolidated financial statements. Since the Company has no recorded goodwill, there is no expected impact upon adoption.

In August 2018, FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” This update removes, modifies and adds certain disclosure requirements in FASB ASC 820, “Fair Value Measurement” (“ASC 820”). ASU No. 2018-13 will be effective for the Company beginning January 1, 2020 and early adoption is permitted.  The Company is continuing to evaluate this guidance; however, the Company does not expect the adoption of ASU No. 2018-13 to have a significant impact on its consolidated financial statements.

In November 2018, FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842, Leases. ASU 2018-19 is effective on January 1, 2020, with early adoption permitted. The Company is evaluating this guidance; however, it does not expect that adoption of ASU 2018-19 will have a significant impact on its consolidated financial statements. Information regarding the adoption of ASC 842 is described above.

F-12

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION

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

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

NOTE 4 - RESTRICTED CASH

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

	December 31, 2019		December 31, 2018
Real estate taxes	$	3,956	$	5,107
Insurance		877		779
Capital improvements		1,380		1,358
Other		321		569
Total	$	6,534	$	7,813
Unrestricted cash designated for capital expenditures	$	21,706	$	28,021

NOTE 5 - RENTAL PROPERTIES, NET

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

	December 31, 2019			December 31, 2018
Land	$	119,028		$	119,028
Building and improvements		720,420			716,839
Furniture, fixtures and equipment		25,906			23,903
Construction in progress		1,955			490
		867,309			860,260
Less: accumulated depreciation		(131,779	)		(92,522	)
	$	735,530		$	767,738
Assets held for sale - rental properties		-			42,863
	$	735,530		$	810,601

F-13

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

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

F-14

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

NOTE 6 – DISPOSITION OF PROPERTY

The following table presents details of the Company’s disposition activity during the year ended December 31, 2019 (in thousands):

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

(1) Excludes net gain on disposition

NOTE 7 - IDENTIFIED INTANGIBLE ASSETS, NET

Identified intangible assets, net, consist of in-place rental leases.  The gross value of acquired in-place leases totaled $17.3 million and $18.5 millionas of December 31, 2019 and 2018, respectively, which were reported net of accumulated amortization of$17.3 million and $18.5 million, respectively.  For the years ended December 31, 2019 and 2018, amortization expense was $0and $813,000, respectively. Intangible assets were fully amortized as of December 31, 2018.

NOTE 8 - MORTGAGE NOTES PAYABLE, NET

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

	December 31, 2019									December 31, 2018
Collateral	Outstanding borrowings		Premium, net		Deferred Financing Costs, net			Carrying Value		Outstanding borrowings		Premium, net		Deferred Financing Costs, net			Carrying Value
Overton Trails Apartment Homes	$	-	$	—	$	-		$	-	$	29,841	$	—	$	(246	)	$	29,595
Uptown Buckhead		19,264		—		(178	)		19,086		19,651		—		(213	)		19,438
Crosstown at Chapel Hill		42,650		—		(325	)		42,325		42,650		—		(386	)		42,264
The Brookwood - Key Bank		17,063		186		(88	)		17,161		17,477		291		(137	)		17,631
The Brookwood - Capital One		2,566		14		(15	)		2,565		2,613		22		(24	)		2,611
Adair off Addison and Adair    off Addison Apartment Homes		33,210		—		(380	)		32,830		24,629		—		(233	)		24,396
1000 Spalding Crossing		23,737		—		(113	)		23,624		24,195		—		(171	)		24,024
Montclair Terrace		19,958		—		(182	)		19,776		20,312		—		(234	)		20,078
Grand Reserve		47,845		—		(539	)		47,306		47,845		—		(606	)		47,239
Verdant Apartment Homes		36,913		—		(178	)		36,735		37,300		—		(233	)		37,067
Arcadia Apartment Homes		39,782		—		(195	)		39,587		40,200		—		(256	)		39,944
Ravina Apartment Homes		26,241		—		(165	)		26,076		26,951		—		(239	)		26,712
81 Fifty at West Hills Apartment    Homes		51,833		—		(368	)		51,465		52,645		—		(477	)		52,168
The Palmer at Las Colinas		45,700		—		(437	)		45,263		45,700		—		(506	)		45,194
Windbrooke Crossing		37,222		—		(272	)		36,950		37,788		—		(343	)		37,445
Woods of Burnsville		37,744		—		(355	)		37,389		38,250		—		(445	)		37,805
Indigo Creek		40,402		—		(320	)		40,082		40,789		—		(397	)		40,392
Martin's Point		29,944		—		(289	)		29,655		29,990		—		(351	)		29,639
	$	552,074	$	200	$	(4,399	)	$	547,875	$	578,826	$	313	$	(5,497	)	$	573,642

F-15

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

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

	Maturity Date		Margin over LIBOR			Annual Interest Rate			Average Monthly Debt Service		Average Monthly Escrow
Overton Trails Apartment Homes		—		—			—		$	-	$	-	(8)
Uptown Buckhead	7/1/2025			2.22	%		3.98	%	$	104	$	63	(1) (3) (5)
Crosstown at Chapel Hill	7/1/2025			1.77	%		3.53	%	$	142	$	279	(1) (3) (4) (7)
The Brookwood - Key Bank	11/1/2021			—			4.73	%	$	104	$	54	(2) (6)
The Brookwood - Capital One	11/1/2021			—			5.40	%	$	16	$	—	(2) (6)
Adair off Addison and Adair    off Addison Apartment Homes	5/1/2026			1.64	%		3.40	%	$	107	$	81	(1) (3) (9)
1000 Spalding Crossing	1/1/2022			—			3.88	%	$	116	$	51	(2) (4)
Montclair Terrace	6/1/2023			2.45	%		4.21	%	$	107	$	102	(1) (3) (6)
Grand Reserve	5/1/2028			1.72	%		3.48	%	$	157	$	90	(1) (3) (4) (7)
Verdant Apartment Homes	5/1/2023			—			3.89	%	$	176	$	37	(2) (4)
Arcadia Apartment Homes	5/1/2023			—			3.89	%	$	189	$	35	(2) (4)
Ravina Apartment Homes	5/1/2022			—			3.76	%	$	144	$	144	(2) (6)
81 Fifty at West Hills Apartment    Homes	7/1/2023			2.36	%		4.12	%	$	269	$	58	(1) (3) (4)
The Palmer at Las Colinas	9/1/2026			2.11	%		3.87	%	$	166	$	159	(1) (3) (4)
Windbrooke Crossing	1/1/2024			2.69	%		4.45	%	$	201	$	65	(1) (3) (4)
Woods of Burnsville	2/1/2024			2.13	%		3.89	%	$	190	$	84	(1) (3) (4)
Indigo Creek	5/1/2024			1.93	%		3.69	%	$	199	$	52	(1) (3) (4)
Martin's Point	11/1/2024			1.86	%		3.62	%	$	149	$	76	(1) (3) (4)

(1) Variable rate based on one-month LIBOR of 1.76250% (as of December 31, 2019) plus a fixed margin

(2) Fixed rate

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

(4) Monthly interest-only payment currently required

(5) Monthly fixed principal plus interest payment required

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

(7) Originated during the year ended December 31, 2018 through refinancing

(8) Mortgage note payable related to asset sold on February 28, 2019

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

On August 21, 2015, the Company recorded a fair value adjustment, which represented the fair value of the debt assumed over its principal amount in connection with The Brookwood Apartment Home acquisition. The fair value adjustment (premium) is amortized to interest expense over the term of the related mortgages loans using the effective interest method. As of December 31, 2019, the net unamortized mortgage premium of approximately $200,000  was included as a component of mortgage loans payable in the accompanying consolidated balance sheets.

At December 31, 2019, the weighted average interest rate of all the Company’s outstanding indebtedness was 3.87% 

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

As of December 31, 2019 and 2018, the Company had $6.5 million and $7.8 million of restricted cash related to escrow deposits held by mortgage lenders for real estate taxes, insurance and capital reserves (see Note 4).

F-16

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

Annual principal payments on the mortgage notes payable for each of the next five years ending December 31, and thereafter, is as follows (in thousands):

2020	$	7,052
2021		26,891
2022		55,615
2023		146,304
2024		138,676
Thereafter		177,536
	$	552,074

The mortgage notes payable are recourse only with respect to the properties that secure the notes, subject to certain limited standard exceptions, as defined in each mortgage note. The Company has guaranteed the mortgage notes by executing a guarantee with respect to the properties. These exceptions are referred to as “carveouts.” In general, carveouts relate to damages suffered by the lender for a borrower’s failure to pay rents, insurance or condemnation proceeds to lender, failure to pay water, sewer and other public assessments or charges, failure to pay environmental compliance costs or to deliver books and records, in each case as required in the loan documents. The exceptions also require the Company to guarantee payment of audit costs, lender’s enforcement of its rights under the loan documents and payment of the loan if the borrower voluntarily files for bankruptcy or seeks reorganization, or if a related party of the borrower does so with respect to the subsidiary. For the Crosstown at Chapel Hill Mortgage Loan, beginning with the calendar quarter ended December 31, 2017, the property must maintain a certain level of debt service coverage.  The Company was in compliance with all covenants related to this loan as of December 31, 2019.

Deferred financing costs incurred to obtain financing are amortized over the term of the related debt. As of December 31, 2019 and December 31, 2018, accumulated amortization of deferred financing costs was $3.4 million and $2.9 million respectively.  Amortization of deferred financing costs for the next five years ending December 31, and thereafter, are as follows (in thousands):

2020	$	1,052
2021		1,025
2022		862
2023		671
2024		355
Thereafter		434
	$	4,399

NOTE 9 – ACCUMULATED OTHER COMPREHENSIVE LOSS

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

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

F-17

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

NOTE 10 – RELATED PARTY TRANSACTIONS

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

Relationship with the Advisor

Pursuant to the terms of the Advisory Agreement, the Advisor provides the Company with the services of its management team, including its officers, along with appropriate support personnel.  The Advisor will be reimbursed for the Company’s allocable share of costs for Advisor personnel, including allocable personnel salaries and benefits.  Each of the Company’s officers is an employee of the Sponsor or one of its affiliates.  The Company does not have any employees.  The Advisor is not obligated to dedicate any specific portion of its time or the time of its personnel to the Company’s business.  The Advisor is at all times subject to the supervision and oversight of the Company’s Board of Directors and has only such functions and authority as the Company delegates to it.

The Advisory Agreement has a one-year term and renews for an unlimited number of successive one-year terms upon the approval of the Conflicts Committee of the Company's Board of Directors. Under the Advisory Agreement, the Advisor receives fees and is reimbursed for its expenses as set forth below:

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

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

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

Debt financing fees. The Advisor earns a debt financing fee equal to 0.5% of the amount available under any debt financing obtained.

Expense reimbursements. The Company also pays directly or reimburses the Advisor for all of the expenses paid or incurred by the Advisor or its affiliates on behalf of the Company or in connection with providing services to the Company, including the Company’s allocable share of costs for Advisor personnel and overhead, out-of-pocket expenses incurred in connection with the selection and acquisition of properties or other real estate related debt investments, whether or not the Company ultimately acquires the investment. However, the Company will not reimburse the Advisor or its affiliates for employee costs in connection with services for which the Advisor earns acquisition or disposition fees.

Relationship with RAI and C-III

Property loss pool: Until February 28, 2019, the Company's properties participated in a property loss self-insurance pool with other properties directly and indirectly managed by RAI and C-III, which was backed by a catastrophic insurance policy. Substantially all of the receivables from related parties represented insurance deposits held in escrow by RAI and C-III related to the self-insurance pool, which were returned to the Company. The pool covered losses up to $2.5 million, in aggregate, after a $25,000 deductible per incident.  Claims beyond the insurance pool limits were covered by the catastrophic insurance policy, which covered claims up to $250 million, after either a $25,000 or $100,000 deductible per incident, depending on location and/or type of loss.

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

F-18

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

results. Substantially all of the receivables from related parties represent insurance deposits held in escrow by RAI and C-III to the self-insurance pool which, if unused, will be returned to the Company.

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

Directors and officers insurance: The Company participates in a liability insurance program for directors and officers coverage with other C-III managed entities and subsidiaries for coverage up to $100.0 million.

Internal audit fees. RAI performs internal audit services for the Company.

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

Relationship with the Manager

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

Property management fees. The Manager earns a property management fee equal to 4.5% of actual gross cash receipts from the operations of real property investments.

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

Debt servicing fees. The Manager earns a debt servicing fee of 2.75% on payments received from loans held by the Company for investment. No debt servicing fees were earned during the years ended December 31, 2019 and 2018.

Expense reimbursement. During the ordinary course of business, the Manager or other affiliates of RAI may pay certain shared operating expenses on behalf of the Company for which they are reimbursed by the Company.

F-19

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

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

	December 31, 2019		December 31, 2018
Due from related parties:
RAI - self-insurance funds held		33		57
Operating expense reimbursements		264		-
	$	297	$	57
Due to related parties:
Advisor
Operating expense reimbursements		6		133
Manager
Property management fees		328		329
Operating expense reimbursements		96		97
RAI
Internal audit fees		-		25
Properties
Meridian		2		-
	$	432	$	584

	Years Ended
	December 31,
	2019		2018
Fees earned / expenses incurred:
Advisor
Asset management fees (1)	$	9,374	$	9,840
Debt financing fees (2)	$	39	$	78
Operating expense reimbursements (3)	$	3,462	$	3,708
Manager
Property management fees (1)	$	3,834	$	3,888
Construction management fees (4)	$	255	$	859
Construction payroll reimbursements (4)	$	63	$	121
Operating expense reimbursements (3)	$	70	$	201

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

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

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

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

F-20

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

NOTE 11 – EQUITY

Preferred Stock

The Company’s charter authorizes the Company to issue 10,000,000 shares of its $0.01 par value preferred stock. As of both December 31, 2019 and 2018, no shares of preferred stock were issued or outstanding.

Convertible Stock

As of December 31, 2019, the Company had 50,000 shares of $0.01 par value convertible stock outstanding, which are owned by the Advisor. The convertible stock will convert into shares of the Company’s common stock upon the occurrence of (a) the Company having paid distributions to common stockholders that in the aggregate equal 100% of the price at which the Company originally sold the shares plus an amount sufficient to produce a 7% cumulative, non-compounded annual return on the shares at that price; or (b) if the Company lists its common stock on a national securities exchange and, on or after the 31st trading day following the listing, the Company’s value based on the average trading price of its common stock since the listing, plus prior distributions, combine to meet the same 7% return threshold.

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

(A) the lesser of

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

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

(2) the sum of the aggregate issue price of those outstanding shares plus a 7% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, divided by

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

As of December 31, 2019,  no Triggering Events had occurred or were probable to occur.

Common Stock

As of December 31, 2019, the Company had an aggregate of 60,094,623 shares of $0.01 par value common stock outstanding, including the Advisor's additional purchase of 117,778 shares of common stock for $1.1 million, as follows (dollars in thousands):

	Shares			Gross Proceeds
Shares issued through initial public offering		55,791,297		$	556,197
Shares issued through stock distributions		246,365			—
Shares issued through distribution reinvestment plan		9,826,431			85,348
Advisor's initial investment, net of 5,000 share conversion		15,000			150
Total		65,879,093		$	641,695
Shares redeemed and retired		(5,784,470	)
Total shares outstanding		60,094,623

F-21

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

Redemptions

During the year ended December 31, 2019, the Company redeemed shares of common stock as follows (in thousands, except per share data):

Period	Total Number of Shares Redeemed (1)		Average Price Paid per Share		Cumulative Number of Shares Purchased as Part of a Publicly Announced Plan or Program (2)		Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
January 2019		—	$	—		—	(2)
February 2019		—	$	—		—	(2)
March 2019	664		$	8.97	664		(2)
April 2019		—	$	—		—	(2)
May 2019		—	$	—		—	(2)
June 2019		1,671	$	8.34		2,335	(2)
July 2019		—	$	—		—	(2)
August 2019		—	$	—		—	(2)
September 2019	467		$	8.36		2,802	(2)
October 2019		—	$	—		—	(2)
November 2019		—	$	—		—	(2)
December 2019		236	$	8.33		3,038	(2)

(1) All purchases of equity securities by the Company in the year ended December 31, 2019 were made pursuant to the Company's share redemption program.

(2) The Company currently limits the dollar value and number of shares that may be repurchased under the program, as discussed below.

The Company will not redeem in excess of 5% of the weighted-average number of shares outstanding during the 12 month period immediately prior to the effective date of redemption.  Generally, the cash available for redemption will be limited to proceeds from the distribution reinvestment plan plus, if the Company had positive operating cash flow from the previous fiscal year, 1% of all operating cash flow from the previous fiscal year.  These limitations apply to all redemptions, including redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility.

During the year ended December 31, 2019, not all redemption requests were honored. As a result of the 5% limit of shares that may be repurchased under the program, during the year ended December 31, 2019, 48.1% of redemption requests were honored. As a result, the Company had $27.3 million of outstanding and unfilled redemption requests, representing 3,276,329 shares.

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

On February 14, 2020, the Company’s board of directors suspended the share redemption program, with exceptions for redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility. The suspension took effect on March 20, 2020. While the share redemption program is partially suspended, pending and new redemption requests for redemptions submitted other than in connection with a stockholder’s death or qualifying disability will not be honored or retained, but will be cancelled with the ability to resubmit when, if ever, the share redemption program is fully resumed.

F-22

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

Distributions

For the year ended December 31, 2019, the Company paid aggregate distributions of $27.2 million including $12.5 million of distributions paid in cash and $14.7 million of distributions reinvested in shares of common stock through the Company's distribution reinvestment plan, as follows (in thousands):

Authorization Date	Per Common Share		Record Dates	Distribution Date	Distributions reinvested in shares of Common Stock		Net Cash Distributions		Total Aggregate Distributions
December 14, 2018	$	0.00164384	December 29, 2018 through January 30, 2019	January 31, 2019	$	1,717	$	1,412	$	3,129
December 14, 2018		0.00164384	January 31, 2019 through February 27, 2019	February 28, 2019		1,553		1,281		2,834
December 14, 2018		0.00164384	February 28, 2019 through March 28, 2019	March 29, 2019		1,594		1,342		2,936
March 20, 2019		0.00109589	March 29, 2019 through April 29, 2019	April 30, 2019		1,164		985		2,149
March 20, 2019		0.00109589	April 30, 2019 through May 30, 2019	May 31, 2019		1,131		956		2,087
March 20, 2019		0.00109589	May 31, 2019 through June 27, 2019	June 28, 2019		1,012		858		1,870
June 11, 2019		0.00109589	June 28, 2019 through July 30, 2019	July 31, 2019		1,174		996		2,170
June 11, 2019		0.00109589	July 31 2019 through August 29, 2019	August 30, 2019		1,068		909		1,977
June 11, 2019		0.00109589	August 30, 2019 through September 27, 2019	September 30, 2019		1,026		881		1,907
September 10, 2019		0.00109589	September 28, 2019 through October 30, 2019	October 31, 2019		1,159		1,008		2,167
September 10, 2019		0.00109589	October 31, 2019 through November 26, 2019	November 27, 2019		944		834		1,778
September 10, 2019		0.00109589	November 27, 2019 through December 30, 2019	December 31, 2019		1,182		1,057		2,239
					$	14,724	$	12,519	$	27,243

On December 11, 2019, the Company's Board of Directors approved distributions in an amount of $0.001095890 per share of common stock for stockholders of record each day in the period from December 31, 2019 through and including March 30, 2020, payable on January 31, 2020, February 28, 2020 and March 31, 2020.

F-23

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

The following is a reconciliation of total aggregate distributions paid to total distributions declared for the year ended December 31, 2019 (in thousands):

Total aggregate distributions paid	$	27,243
Less: distribution payable at December 31, 2018		(8,878	)
Add: distribution payable at December 31, 2019		5,993
Total distributions declared	$	24,358

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

NOTE 12 - FAIR VALUE MEASURES AND DISCLOSURES

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

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

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

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

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

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

F-24

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

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

	Level 1		Level 2		Level 3		Total
December 31, 2019
Assets:
Interest rate caps	$	—	$	9	$	—	$	9
Cancelable swap		—		—		—		—
	$	—	$	9	$	—	$	9
December 31, 2018
Assets:
Interest rate caps	$	—	$	27	$	—	$	27
Cancelable swap		—		—		—		—
	$	—	$	27	$	—	$	27

Interest rate caps and the cancelable swap are included in Prepaid expenses and other assets on the consolidated balance sheets.

The outstanding balance and estimated fair value of the Company’s mortgage notes payable are as follows (in thousands):

	December 31, 2019				December 31, 2018
	Outstanding Balance		Estimated Fair Value		Outstanding Balance		Estimated Fair Value
Mortgage notes payable	$	552,074	$	545,249	$	578,826	$	580,925

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

NOTE 13 - DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

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

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

F-25

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

Interest Rate Caps

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

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the year ended December 31, 2019, such derivatives were used to hedge the variable cash flows, indexed to USD-London InterBank Offered Rate ("LIBOR"), associated with an existing variable-rate loan agreement.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next 12 months, the Company estimates that an additional $95,018 will be reclassified as an increase to interest expense.

Cancelable swaps

To manage its exposure to interest rate movements, the Company has also entered into a cancelable interest rate swap that was not designated as a hedging instrument. Interest rate swaps involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.  Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements but do not meet the strict hedge accounting requirements.

As of December 31, 2019, the Company had the following outstanding interest rate derivatives (dollars in thousands):

Interest Rate Derivative	Number of Instruments	Notional Amount		Maturity Dates
Derivatives designated as hedging instruments:
Interest rate caps	12	$	408,632	January 1, 2020 through July 1, 2023

F-26

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

Tabular Disclosure of Fair Value of Derivative Instrument on the Balance Sheet

The table below presents the fair value of the Company’s derivative financial instruments on the consolidated balance sheets as of December 31, 2019 and 2018 (in thousands):

Asset Derivatives						Liabilities Derivatives
December 31, 2019			December 31, 2018			December 31, 2019			December 31, 2018
Balance Sheet	Fair Value		Balance Sheet	Fair Value		Balance Sheet	Fair Value		Balance Sheet	Fair Value
Derivatives designated as hedging instruments:
Interest rate caps	$	9	Interest rate caps	$	27	NA	$	—	NA	$	—
Derivatives not designated as hedging instruments:
Cancelable swap	NA		NA	NA		NA	NA		NA	$	—

Interest rate caps and the cancelable swap are included in Prepaid expenses and other assets on the consolidated balance sheets.

The table below presents the effect of the Company's derivative financial instruments on the consolidated statements of operations and comprehensive loss for the years ended December 31, 2019 and 2018 (in thousands):

		Amount of Gain (Loss) Recognized in Income for the Years Ended
Derivatives Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income	December 31, 2019			December 31, 2018
Interest rate caps	Interest expense	$	(285	)	$	(108	)

		Amount of Gain (Loss) Recognized in Income for the Years Ended
Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income	December 31, 2019		December 31, 2018
Cancelable swap	Interest expense	$	—	$	287

	Amount of Gain (Loss) Recognized in OCI on Derivative for the Years Ended						Location of Gain (Loss) Reclassified from Accumulated	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income for the Years Ended
Derivatives in Cash Flow Hedging Relationships	December 31, 2019			December 31, 2018			OCI into Income (Effective Portion)	December 31, 2019			December 31, 2018
Interest rate products	$	(95	)	$	(43	)	Interest expense	$	(285	)	$	(108	)

Credit-risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the company could also be declared in default on its derivative obligations. As of December 31, 2019, the Company has not posted any collateral related to these agreements.

F-27

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

DECEMBER 31, 2019

NOTE 14 - OPERATING EXPENSES

As required under the Company's charter, the Advisor must reimburse the Company the amount by which the aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of the average invested assets or 25% of net income, unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors.  “Average invested assets” means the average monthly book value of assets invested, directly or indirectly, in equity interests in and loans secured by real estate during the 12-month period before deducting depreciation, bad debts or other non-cash reserves.  “Total operating expenses” means all expenses paid or incurred by the Company, as determined under GAAP, that are in any way related to operations, including advisory fees, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and stock exchange listing of stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of assets; and (f) acquisition fees, acquisition expenses (including expenses relating to potential investments that do not close), disposition fees on the resale of property and other expenses connected with the acquisition, disposition and ownership of real estate interests, loans or other property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property).

Operating expenses for the four quarters ended December 31, 2019 did not exceed the charter imposed limitation.

NOTE 15 – SUBSEQUENT EVENTS

On January 23, 2020, the Company filed a Form S-3 with the SEC to register an additional 1.5 million shares under the DRIP.

On February 14, 2020, the Board of Directors suspended the share redemption program with exceptions for redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility. The suspension took effect on March 20, 2020.

On March 11, 2020, the World Health Organization declared the outbreak of a coronavirus (COVID-19) a pandemic. The resulting restrictions on travel and quarantines imposed have had a negative impact on the U.S. economy and business activity globally, the full impact of which is not yet known and may result in an adverse impact to the Company’s investments and operating results.

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

F-28

RESOURCE REAL ESTATE OPPORTUNITY REIT II, Inc.

SCHEDULE III

Real Estate and Accumulated Depreciation

December 31, 2019

(in thousands)

Column A	Column B		Column C		Column D		Column E		Column F			Column G	Column H
Description	Encumbrances		Initial cost to Company		Cost capitalized subsequent to acquisition		Gross Amount at which carried at close of period		Accumulated Depreciation			Date of Construction	Date Acquired
Real estate owned:
Residential	$	-	$	9,149	$	3,425	$	12,574	$	(3,967	)	1980	6/4/2014
Dallas, Texas
Residential		19,264		31,856		5,058		36,914		(7,276	)	1989	3/30/2015
Atlanta, Georgia
Residential		42,650		45,653		7,384		53,037		(10,819	)	1990	5/19/2015
Chapel Hill, North Carolina
Residential		19,629		30,003		7,106		37,109		(7,271	)	1968	8/21/2015
Homewood, Alabama
Residential		33,210		20,667		3,291		23,958		(4,821	)	1979	8/27/2015
Dallas, Texas
Residential		23,737		40,194		5,218		45,412		(8,132	)	1995	9/24/2015
Atlanta Georgia
Residential		19,958		32,130		3,441		35,571		(5,830	)	2004	10/29/2015
Portland, Oregon
Residential		47,845		66,213		5,967		72,180		(11,432	)	1991	12/18/2015
Naperville, Illinois
Residential		36,913		64,181		4,330		68,511		(8,629	)	1997	12/18/2015
Boulder, Colorado
Residential		39,782		59,059		6,036		65,095		(9,959	)	1984	1/22/2016
Centennial, Colorado
Residential		26,241		55,466		6,776		62,242		(10,478	)	2001	3/23/2016
Austin, Texas
Residential		51,833		80,155		5,741		85,896		(11,711	)	1985	5/17/2016
Portland, Oregon
Residential		45,700		68,454		7,796		76,250		(11,192	)	1991	6/28/2016
Irving, Texas
Residential		37,222		47,817		575		48,392		(5,474	)	1986	12/22/2016
Buffalo Grove, Illinois
Residential		37,744		49,775		1,459		51,234		(6,298	)	1984	12/23/2016
Burnsville, Minnesota
Residential		40,402		54,057		1,012		55,069		(5,634	)	1998	4/4/2017
Glendale, Arizona
Residential		29,944		37,205		660		37,865		(2,856	)	1989	10/31/2017
Lombard, Illinois
'	$	552,074	$	792,034	$	75,275	$	867,309	$	(131,779	)

F-29

RESOURCE REAL ESTATE OPPORTUNITY REIT II, Inc.

SCHEDULE III

Real Estate and Accumulated Depreciation

December 31, 2019

(in thousands)

	Years Ended December 31,
	2019			2018
	(in thousands)
Investments in real estate:
Balance at beginning of the year	$	912,534		$	898,729
Additions during the year:		—			—
Acquisitions		—			-
Improvements, etc.		8,156			15,486
Dispositions during the year:		(53,381	)		(1,681	)
Balance at end of year	$	867,309		$	912,534
Accumulated Depreciation:
Balance at beginning of year	$	(101,933	)	$	(61,758	)
Depreciation		(39,599	)		(40,611	)
Disposals		9,753			436
Balance at the end of year	$	(131,779	)	$	(101,933	)

F-30

EX-4.3

Exhibit 4.3

DESCRIPTION OF THE REGISTRANT’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE

SECURITIES EXCHANGE ACT OF 1934

Resource Real Estate Opportunity REIT II, Inc. has shares of its common stock, $0.01 par value per share, registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  References in the following discussion to “we,” “our” and “us” and similar references mean Resource Real Estate Opportunity REIT II, Inc., excluding its subsidiaries, unless the context otherwise requires or otherwise expressly stated, and references to “you” and “your” mean holders of our common stock.

Description of Our Common Stock

The following description of our common stock does not purport to be complete and is subject to and qualified in its entirety by reference to Maryland law and to our charter and bylaws, copies of which are filed as exhibits to the Annual Report on Form 10-K to which this Exhibit 4.3 is a part.

General

Our charter provides that we may issue up to 1,010,050,000 shares of capital stock, of which 1,000,000,000 shares are designated as common stock, par value $0.01 per share, 50,000 shares are designated as convertible stock, par value $0.01 per share and 10,000,000 shares are designated as preferred stock, par value $0.01 per share. In addition, our board of directors may amend our charter to increase or decrease the amount of our authorized shares.

Common Stock

All shares of our common stock have equal rights as to earnings, assets, distributions and voting. When the shares of our common stock are issued in the manner contemplated, they will be duly authorized, validly issued, fully paid and non-assessable. Distributions may be paid to the holders of our common stock, if and when authorized by our board of directors and declared by us out of funds legally available therefore, subject to any preferential rights of any preferred stock that we issue in the future. Holders of shares of our common stock do not have preemptive rights, which means that you will not have an automatic option to purchase any new shares that we issue, nor do holders of our shares have any preference, conversion, exchange, sinking fund, redemption or appraisal rights. In the event of our liquidation, dissolution or winding up, each share of our common stock would be entitled to share ratably in all of our assets that are legally available for distribution after payment of or adequate provision for all our known debts and other liabilities and subject to any preferential rights of holders of preferred stock, if any preferred stock is outstanding at such time. Subject to our charter restrictions on the transfer and ownership of our common stock and except as may be specified otherwise in the terms of any class or series of our common stock, each share of our common stock entitles the holder to one vote on all matters submitted to a vote of stockholders, including the election of our directors. Except as provided with respect to any other class or series of stock, the holders of our common stock possess exclusive voting power. There is no cumulative voting in the election of directors, which means that holders of a majority of our outstanding common shares can elect all of our directors and holders of less than a majority of such shares will be unable to elect any director.

Our board of directors has authorized the issuance of shares of our capital stock without certificates. Information regarding restrictions on the transferability of our shares that, under Maryland law, would otherwise have been required to appear on our share certificates will instead be furnished to stockholders upon request and without charge.

We maintain a stock ledger that contains the name and address of each stockholder and the number of shares that the stockholder holds. With respect to uncertificated stock, we will continue to treat the stockholder registered on our stock ledger as the owner of the shares until the new owner delivers a properly executed form to us, which form we will provide to any registered holder upon request.

1

Convertible Stock

Our authorized capital stock includes 50,000 shares of convertible stock, par value $0.01 per share. We have issued 50,000 of such shares to our advisor in exchange for 5,000 shares of common stock. No additional consideration is due upon the conversion of the convertible stock. There will be no distributions paid on shares of convertible stock. The conversion of the convertible stock into common shares, in satisfaction of our obligation to pay our advisor an incentive fee, will dilute the value of our shares of common stock.

With certain limited exceptions, shares of convertible stock shall not be entitled to vote on any matter, or to receive notice of, or to participate in, any meeting of stockholders of the company at which they are not entitled to vote. However, the affirmative vote of the holders of more than two-thirds of the outstanding shares of convertible stock is required (A) for the adoption of any amendment, alteration or repeal of a provision of the charter or (B) to effect or validate a consolidation with or merger of our company into another entity, that adversely changes the preferences, limitations or relative rights of the shares of convertible stock.

Upon the occurrence of (A) our making total distributions on the then outstanding shares of our common stock equal to the issue price of those shares (that is, the price paid for those shares) plus a 7% cumulative, non-compounded, annual return on the issue price of those outstanding shares; or (B) the listing of the shares of common stock for trading on a national securities exchange, each outstanding share of our convertible stock will convert into the number of shares of our common stock described below. Before we will be able to pay distributions to our stockholders equal to the aggregate issue price of our then outstanding shares plus a 7% cumulative, non-compounded, annual return on the issue price of those outstanding shares, we will need to sell a portion of our assets. Thus, the sale of one or more assets will be a practical prerequisite for conversion under clause (A) above.

Upon the occurrence of either such event, each share of convertible stock shall, unless our advisory agreement with our advisor has been terminated or not renewed on account of a material breach by our advisor, generally be converted into a number of shares of common stock equal to 1/50,000 of the quotient of:

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

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

• (2) the sum of the aggregate issue price of those outstanding shares plus a 7% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, divided by

• (B) the value of the company divided by the number of outstanding shares of common stock, in each case, as of the date of the event triggering the conversion. In the case of conversion upon the listing of our shares, the conversion of the convertible stock will not occur until the 31st trading day after the date of such listing.

However, if our advisory agreement with our advisor expires without renewal or is terminated (other than because of a material breach by our advisor) prior to each such triggering event described in the foregoing paragraph (an “advisory agreement termination”), then upon either such triggering event the holder of the convertible stock will be entitled to a prorated portion of the number of shares of common stock determined by the foregoing calculation, where such proration is based on the percentage of time we were advised by our advisor.

As used above and in our charter, “value of the company” as of a specific date means our actual value as a going concern on the applicable date based on the difference between (A) the actual value of all of our assets as determined in good faith by our board, including a majority of the conflicts committee, and (B) all of our liabilities as set forth on our balance sheet for the period ended immediately prior to the determination date, provided that (1) if such value is being determined in connection with a change of control that establishes our net worth, then the value shall be the net worth established thereby and (2) if such value is being determined in connection with the listing of our common stock for trading on a national securities exchange, then the value shall be the number of outstanding shares of common stock multiplied by the closing price of a single share of common stock, averaged over a period of 30 trading days after the date of listing. If the holder of shares of convertible stock disagrees with the value determined by the board, then each of the holder of the convertible stock and us shall name one appraiser and the two named appraisers shall promptly agree in good faith to the appointment of one other appraiser whose

2

determination of the value of the company shall be final and binding on the parties. The cost of such appraisal shall be shared evenly between us and our advisor.

Our charter provides that if we:

• reclassify or otherwise recapitalize our outstanding common stock (except to change the par value, or to change from no par value to par value, or to subdivide or otherwise split or combine shares); or

• consolidate or merge with another entity in a transaction in which we are either (1) not the surviving entity or (2) the surviving entity but that results in a reclassification or recapitalization of our common stock (except to change the par value, or to change from no par value to par value, or to subdivide or otherwise split or combine shares),

then we or the successor or purchasing business entity must provide that the holder of each share of our convertible stock outstanding at the time one of the above events occurs will continue to have the right to convert the convertible stock upon an event triggering conversion. After one of the above transactions occurs, the convertible stock will be convertible into the kind and amount of stock and other securities and property received by the holders of common stock in the transaction that occurred, such that upon conversion, the holders of convertible stock will realize as nearly as possible the same economic rights and effects as described above in the description of the conversion of our convertible stock. This right will apply to successive reclassifications, recapitalizations, consolidations, and mergers until the convertible stock is converted.

Our board of directors will oversee the conversion of the convertible stock to ensure that any shares of common stock issuable in connection with the conversion is calculated in accordance with the terms of our charter and to evaluate the impact of the conversion on our REIT status. If, in the good faith judgment of our board, full conversion of the convertible stock would jeopardize our status as a REIT, then only such number of shares of convertible stock (or fraction of a share thereof) shall be converted into a number of shares of common stock such that our REIT status would not be jeopardized. The conversion of the remaining shares of convertible stock will be deferred until the earliest date after our board of directors determines that such conversion will not jeopardize our qualification as a REIT. Any such deferral will not otherwise alter the terms of the convertible stock.

Preferred Stock

Our charter authorizes our board of directors to designate and issue one or more classes or series of preferred stock without stockholder approval. A majority of our conflicts committee who do not have an interest in the transaction must approve any issuance of preferred stock. In addition, our charter empowers our conflicts committee to retain its own legal and financial advisors at the expense of the Company. Our board of directors may determine the relative rights, preferences and privileges of each class or series of preferred stock so issued, which may be more beneficial than the rights, preferences and privileges attributable to our common stock. The issuance of preferred stock could have the effect of delaying or preventing a change in control. Our board of directors has no present plans to issue preferred stock but may do so at any time in the future without stockholder approval.

Restriction on Ownership of Shares

Ownership Limit

To maintain our REIT qualification, not more than 50% in value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals (including certain entities treated as individuals under the Internal Revenue Code) during the last half of each taxable year. In addition, at least 100 persons who are independent of us and each other must beneficially own our outstanding shares for at least 335 days per 12-month taxable year or during a proportionate part of a shorter taxable year. We may prohibit certain acquisitions and transfers of shares so as to ensure our continued qualification as a REIT under the Internal Revenue Code. However, we cannot assure you that this prohibition will be effective.

To help ensure that we meet these tests, our charter prohibits any person or group of persons from acquiring, directly or indirectly, beneficial ownership of more than 9.8% of our aggregate outstanding shares unless exempted by our board of directors. Our board of directors may waive this ownership limit with respect to a particular person if the board receives evidence that ownership in excess of the limit will not jeopardize our REIT status. For purposes

3

of this provision, we treat corporations, partnerships and other entities as single persons.

This limitation does not apply to the holder(s) of our convertible stock or the common stock issued upon conversion of our convertible stock. However, our board of directors may defer the timing of the conversion of all or a portion of our convertible stock if it determines that full conversion could jeopardize our qualification as a REIT under then applicable federal income tax laws and regulation. Any such deferral will not otherwise alter the terms of the convertible stock, and such stock will convert at the earliest date after our board of directors determines that such conversion will not jeopardize our qualification as a REIT.

Any attempted transfer of our shares that, if effective, would result in a violation of our ownership limit or would result in our shares being owned by fewer than 100 persons will be null and void and will cause the number of shares causing the violation to be automatically transferred to a trust for the exclusive benefit of one or more charitable beneficiaries. The prohibited transferee will not acquire any rights in the shares. The automatic transfer will be deemed to be effective as of the close of business on the business day prior to the date of the attempted transfer. We will designate a trustee of the trust that will not be affiliated with us or the prohibited transferee. We will also name one or more charitable organizations as a beneficiary of the share trust.

Shares held in trust will remain issued and outstanding shares and will be entitled to the same rights and privileges as all other shares of the same class or series. The prohibited transferee will not benefit economically from any of the shares held in trust, will not have any rights to dividends or distributions and will not have the right to vote or any other rights attributable to the shares held in the trust. The trustee will receive all dividends and distributions on the shares held in trust and will hold such dividends or distributions in trust for the benefit of the charitable beneficiary. The trustee may vote any shares held in trust.

Within 20 days of receiving notice from us that any of our shares have been transferred to the trust for the charitable beneficiary, the trustee will sell those shares to a person designated by the trustee whose ownership of the shares will not violate the above restrictions. Upon the sale, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the prohibited transferee and to the charitable beneficiary as follows. The prohibited transferee will receive the lesser of (i) the price paid by the prohibited transferee for the shares or, if the prohibited transferee did not give value for the shares in connection with the event causing the shares to be held in the trust (e.g., a gift, devise or other similar transaction), the market price (as defined in our charter) of the shares on the day of the event causing the shares to be held in the trust and (ii) the price received by the trustee from the sale or other disposition of the shares. Any net sale proceeds in excess of the amount payable to the prohibited transferee will be paid immediately to the charitable beneficiary. If, prior to our discovery that shares have been transferred to the trust, the shares are sold by the prohibited transferee, then (i) the shares shall be deemed to have been sold on behalf of the trust and (ii) to the extent that the prohibited transferee received an amount for the shares that exceeds the amount he was entitled to receive, the excess shall be paid to the prohibited trustee upon demand.

In addition, shares held in the trust for the charitable beneficiary will be deemed to have been offered for sale to us, or our designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in the transfer to the trust (or, in the case of a devise or gift, the market price at the time of the devise or gift) and (ii) the market price on the date we, or our designee, accept the offer. We will have the right to accept the offer until the trustee has sold the shares. Upon a sale to us, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the prohibited transferee.

Any person who acquires or attempts to acquire shares in violation of the foregoing restrictions or who would have owned the shares that were transferred to any such trust must give us immediate written notice of such event, and any person who proposes or attempts to acquire or receive shares in violation of the foregoing restrictions must give us at least 15 days’ written notice prior to such transaction. In both cases, such persons shall provide to us such other information as we may request in order to determine the effect, if any, of such transfer on our status as a REIT.

The foregoing restrictions will continue to apply until our board of directors determines it is no longer in our best interest to continue to qualify as a REIT. The ownership limit does not apply to any underwriter in an offering of our shares or to a person or persons exempted from the ownership limit by our board of directors based upon appropriate assurances that our qualification as a REIT would not be jeopardized.

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Within 30 days after the end of each taxable year, every owner of 5% or more of our outstanding capital stock will be asked to deliver to us a statement setting forth the number of shares owned directly or indirectly by such person and a description of how such person holds the shares. Each such owner shall also provide us with such additional information as we may request in order to determine the effect, if any, of his or her beneficial ownership on our status as a REIT and to ensure compliance with our ownership limit.

These restrictions could delay, defer or prevent a transaction or change in control of our company that might involve a premium price for our shares of common stock or otherwise be in the best interests of our stockholders.

Suitability Standards and Minimum Purchase Requirements

Our charter provides that, until our common stock is listed on a national securities exchange, to purchase our common stock, the purchaser must represent to us:

(i) that such purchaser (or, in the case of sales to fiduciary accounts, that the beneficiary, the fiduciary account or the grantor or donor who directly or indirectly supplies the funds to purchase the shares if the grantor or donor is the fiduciary) has a minimum annual gross income of $70,000 and a net worth (excluding home, home furnishings and automobiles) of not less than $70,000; or

(ii) that such purchaser (or, in the case of sales to fiduciary accounts, that the beneficiary, the fiduciary account or the grantor or donor who directly or indirectly supplies the funds to purchase the shares if the grantor or donor is the fiduciary) has a net worth (excluding home, home furnishings and automobiles) of not less than $250,000.

Each purchase of shares of common stock shall comply with the requirements regarding minimum initial and subsequent cash investment amounts set forth in our then effective registration statement as such registration statement has been amended or supplemented as of the date of such purchase or any higher or lower applicable state requirements with respect to minimum initial and subsequent cash investment amounts in effect as of the date of the issuance or transfer.  Subsequent purchasers, i.e., potential purchasers of your shares, must also meet the net worth or income standards, and unless you are transferring all of your shares, you may not transfer your shares in a manner that causes you or your transferee to own fewer than the number of shares required to meet the minimum purchase requirements, except for the following transfers without consideration: transfers by gift, transfers by inheritance, intrafamily transfers, family dissolutions, transfers to affiliates and transfers by operation of law. These suitability and minimum purchase requirements are applicable until our shares of common stock are listed on a national securities exchange, and these requirements may make it more difficult for you to sell your shares.

Meetings and Special Voting Requirements

An annual meeting of our stockholders will be held each year, at least 30 days after delivery of our annual report. Special meetings of stockholders may be called only upon the request of a majority of our directors, a majority of our independent directors, our chief executive officer, our president or upon the written request of stockholders holding at least 10% of the shares entitled to be cast on any issue proposed to be considered at the special meeting. Upon receipt of a written request of common stockholders holding at least 10% of the shares entitled to be cast stating the purpose of the special meeting, our secretary will provide all of our stockholders written notice of the meeting and the purpose of such meeting. The meeting must be held not less than 15 days or more than 60 days after the distribution of the notice of the meeting. The presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at any stockholder meeting constitutes a quorum. Unless otherwise provided by the Maryland General Corporation Law or our charter, the affirmative vote of a majority of all votes cast is necessary to take stockholder action. With respect to the election of directors, each candidate nominated for election to the board of directors must receive a majority of the votes present, in person or by proxy, in order to be elected. Therefore, if a nominee receives fewer “for” votes than “withhold” votes in an election, then the nominee will not be elected.

Our charter provides that the concurrence of the board is not required in order for the common stockholders to amend the charter, dissolve the corporation or remove directors. However, we have been advised that Section 2-604

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and Section 3-403 of the Maryland General Corporation Law do require board approval in order to amend our charter or dissolve, respectively. Without the approval of a majority of the shares of common stock entitled to vote on the matter, the board of directors may not:

• amend the charter to adversely affect the rights, preferences and privileges of the common stockholders;

• amend charter provisions relating to director qualifications, fiduciary duties, liability and indemnification, conflicts of interest, investment policies or investment restrictions;

• cause our liquidation or dissolution after our initial investment in property;

• sell all or substantially all of our assets other than in the ordinary course of business; or

• cause our merger or reorganization.

Advance Notice for Stockholder Nominations for Directors and Proposals of New Business

Our bylaws provide that with respect to an annual meeting of stockholders, nominations of individuals for election to the board of directors and the proposal of business to be considered by stockholders may be made only:

• pursuant to our notice of the meeting;

• by the board of directors; or

• by a stockholder who gives notice of the nomination or proposal not less than 90 days prior to the first anniversary of the date of the mailing of the notice for the preceding year’s annual stockholders’ meeting.

Our bylaws contain a similar notice requirement in connection with nominations for directors at a special meeting of stockholders called for the purpose of electing one or more directors. Failure to comply with the notice provisions will make stockholders unable to nominate directors or propose new business. The purpose of requiring stockholders to give us advance notice of nominations and other business is to afford our board of directors a meaningful opportunity to consider the qualifications of the proposed nominees and the advisability of any other proposed business and, to the extent deemed necessary or desirable by our board of directors, to inform stockholders and make recommendations about such qualifications or business, as well as to provide a more orderly procedure for conducting meetings of stockholders.

Inspection of Books and Records

As a part of our books and records, we maintain at our principal office an alphabetical list of the names of our common stockholders, along with their addresses and telephone numbers and the number of shares held by each of them. We update this stockholder list at least quarterly. Except as noted below, the list is available for inspection at our principal office by a common stockholder or his or her designated agent upon request of the stockholder and we will mail this list to any common stockholder within 10 days of receipt of his or her request. We may impose a reasonable charge for expenses incurred in reproducing such list. Stockholders, however, may not sell or use this list for a commercial purpose other than in the interest of the applicant as a stockholder relative to the affairs of our company. The purposes for which stockholders may request this list include matters relating to their voting rights. Each common stockholder who receives a copy of the stockholder list shall keep such list confidential and share such list only with its employees, representatives or agents who agree in writing to maintain the confidentiality of the stockholder list.

If our advisor or our board of directors neglects or refuses to exhibit, produce or mail a copy of the stockholder list as requested, our advisor or board, as the case may be, shall be liable to the common stockholder requesting the list for the costs, including attorneys’ fees, incurred by that stockholder for compelling the production of the stockholder list and any actual damages suffered by any common stockholder for the neglect or refusal to produce the list. It shall be a defense that the actual purpose and reason for the requests for inspection or for a copy of the stockholder list is not for a proper purpose but is instead for the purpose of securing such list of stockholders or other information for the purpose of selling such list or copies thereof, or of using the same for a commercial purpose other than in the interest of the applicant as a stockholder relative to the affairs of our company. We may require that the stockholder requesting the stockholder list represent that the request is not for a commercial purpose

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unrelated to the stockholder’s interest in our company. The remedies provided by our charter to stockholders requesting copies of the stockholder list are in addition to, and do not in any way limit, other remedies available to stockholders under federal law, or the law of any state. As the operations of both RRE Opportunity Holdings II, LLC and our Operating Partnership will be conducted by us, an inspection of the our books and records would include an inspection of the books and records of RRE Opportunity Holdings II, LLC and our Operating Partnership.

Control Share Acquisitions

The Maryland General Corporation Law provides that control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquirer, by officers or by directors who are employees of the corporation are excluded from shares entitled to vote on the matter. Control shares are voting shares of stock that, if aggregated with all other shares owned by the acquirer or with respect to which the acquirer has the right to vote or to direct the voting of (except solely by virtue of revocable proxy) would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting powers:

• one-tenth or more but less than one-third;

• one-third or more but less than a majority; or

• a majority or more of all voting power.

Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A control share acquisition means the acquisition of control shares, but does not include the acquisition of shares (i) under the laws of descent and distribution, (ii) under the satisfaction of a pledge or other security interest created in good faith and not for the purpose of circumventing this subtitle, or (iii) under a merger, consolidation, or share exchange effected under the control share acquisition statute if the corporation is a party to the merger, consolidation, or share exchange.

A person who has made or proposes to make a control share acquisition may compel the board of directors of the corporation to call a special meeting of stockholders to be held within 50 days of the demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the satisfaction of certain conditions, including an undertaking to pay the expenses of the meeting. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting.

If voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the statute, then the corporation may repurchase for fair value any or all of the control shares, except those for which voting rights have previously been approved. The right of the corporation to repurchase control shares is subject to certain conditions and limitations. Fair value is determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquirer or of any meeting of stockholders at which the voting rights of the shares are considered and not approved. If voting rights for control shares are approved at a stockholders meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of these appraisal rights may not be less than the highest price per share paid in the control share acquisition.

The control share acquisition statute does not apply to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or to acquisitions approved or exempted by the charter or bylaws of the corporation.

Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of share of our stock. There can be no assurance that this provision will not be amended or eliminated at any time in the future.

Business Combinations

Under the Maryland General Corporation Law, “business combinations” between a Maryland corporation and

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an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include mergers, consolidations, share exchanges, or, in circumstances specified in the statute, asset transfers or issuances or reclassifications of equity securities. An interested stockholder is defined as:

• any person who beneficially owns 10% or more of the voting power of the corporation’s shares; or

• an affiliate or associate of the corporation who, at any time within the two-year period before the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding voting stock of the corporation.

A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which he or she otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.

After the five-year prohibition, any business combination between the corporation and an interested stockholder generally must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least:

• 80% of the votes entitled to be cast by holders of outstanding voting stock of the corporation; and

• two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected, or held by an affiliate or associate of the interested stockholder.

These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under the Maryland General Corporation Law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.

The statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors before the time that the interested stockholder becomes an interested stockholder. We have opted out of these provisions by resolution of our board of directors. However, our board of directors may, by resolution, opt in to the business combination statute in the future.

Subtitle 8

Subtitle 8 of Title 3 of the Maryland General Corporation Law permits a Maryland corporation with a class of equity securities registered under the Exchange Act, and at least three independent directors to elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors and notwithstanding any contrary provision in the charter or bylaws, to any or all of five provisions:

• a classified board,

• a two-thirds vote requirement for removing a director,

• a requirement that the number of directors be fixed only by vote of the directors,

• a requirement that a vacancy on the board be filled only by the remaining directors and for the remainder of the full term of the directorship in which the vacancy occurred, and

• a majority requirement for the calling of a special meeting of stockholders.

Although our board has no current intention to opt in to any of the above provisions permitted under Maryland law, our charter does not prohibit our board from doing so. Becoming governed by any of these provisions could discourage an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our securities. Note that through provisions in our charter and bylaws unrelated to Subtitle 8, we already vest in our board of directors the exclusive power to fix the number of directors. Our bylaws may be amended by our stockholders or the board of directors.

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Tender Offer by Stockholders

Our charter provides that any tender offer made by a stockholder, including any “mini-tender” offer, must comply with certain notice and disclosure requirements. These procedural requirements with respect to tender offers apply to any widespread solicitation for shares of our stock at firm prices for a limited time period.

In order for one of our stockholders to conduct a tender offer to another stockholder, our charter requires that the stockholder comply with Regulation 14D of the Exchange Act, and provide us with notice of such tender offer at least ten business days before initiating the tender offer. Pursuant to our charter, Regulation 14D would require any stockholder initiating a tender offer to provide:

• specific disclosure to stockholders focusing on the terms of the offer and information about the bidder;

• the ability to allow stockholders to withdraw tendered shares while the offer remains open;

• the right to have tendered shares accepted on a pro rata basis throughout the term of the offer if the offer is for less than all of our shares; and

• that all stockholders of the subject class of shares be treated equally.

In addition to the foregoing, there are certain ramifications to stockholders should they attempt to conduct a noncompliant tender offer. If any stockholder initiates a tender offer without complying with the provisions set forth above, in our sole discretion, we shall have the right to redeem such noncompliant stockholder’s shares and any shares acquired in such tender offer. The noncomplying stockholder shall also be responsible for all of our expenses in connection with that stockholder’s noncompliance.

Restrictions on Roll-Up Transactions

A Roll-up Transaction is a transaction involving the acquisition, merger, conversion or consolidation, directly or indirectly, of us and the issuance of securities of an entity that is created or would survive after the successful completion of a Roll-up Transaction, which we refer to as a Roll-up Entity. This term does not include:

• a transaction involving our securities that have been for at least 12 months listed on a national securities exchange; or

• a transaction involving only our conversion into a trust or association if, as a consequence of the transaction, there will be no significant adverse change in the voting rights of our common stockholders, the term of our existence, the compensation to our advisor or our investment objectives.

In connection with any proposed Roll-up Transaction, an appraisal of all our assets will be obtained from a competent independent appraiser. Our assets will be appraised on a consistent basis, and the appraisal will be based on an evaluation of all relevant information and will indicate the value of our assets as of a date immediately preceding the announcement of the proposed Roll-up Transaction. If the appraisal will be included in a prospectus used to offer the securities of a Roll-Up Entity, the appraisal will be filed with the SEC and, if applicable, the states in which registration of such securities is sought, as an exhibit to the registration statement for the offering. The appraisal will assume an orderly liquidation of assets over a 12-month period. The terms of the engagement of the independent appraiser will clearly state that the engagement is for our benefit and the benefit of our stockholders. A summary of the appraisal, indicating all material assumptions underlying the appraisal, will be included in a report to our stockholders in connection with any proposed Roll-up Transaction.

In connection with a proposed Roll-up Transaction, the person sponsoring the Roll-up Transaction must offer to our common stockholders who vote “no” on the proposal the choice of:

(1) accepting the securities of the Roll-up Entity offered in the proposed Roll-up Transaction; or

(2) one of the following:

(A) remaining as common stockholders of us and preserving their interests in us on the same terms and conditions as existed previously; or

(B) receiving cash in an amount equal to the stockholders’ pro rata share of the appraised value of our net assets.

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We are prohibited from participating in any proposed Roll-up Transaction:

• that would result in our common stockholders having democracy rights in a Roll-up Entity that are less than those provided in our charter and bylaws with respect to the election and removal of directors and the other voting rights of our common stockholders, annual and special meetings of common stockholders, the amendment of our charter and our dissolution;

• that includes provisions that would operate to materially impede or frustrate the accumulation of shares by any purchaser of the securities of the Roll-up Entity, except to the minimum extent necessary to preserve the tax status of the Roll-up Entity, or that would limit the ability of an investor to exercise the voting rights of its securities of the Roll-up Entity on the basis of the number of shares of common stock that such investor has held in us;

• in which investors’ rights of access to the records of the Roll-up Entity would be less than those provided in our charter and described above under “—Inspection of Books and Records”; or

• in which any of the costs of the Roll-up Transaction would be borne by us if the Roll-up Transaction would not be approved by our common stockholders.

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EX-10.1

EXHIBIT 10.1

AMENDED AND RESTATED

ADVISORY AGREEMENT

between

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

and

RESOURCE REAL ESTATE OPPORTUNITY ADVISOR II, LLC

January 9, 2014

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TABLE OF CONTENTS

Page

ARTICLE 1 - DEFINITIONS1

ARTICLE 2 - APPOINTMENT7

ARTICLE 3 - DUTIES OF THE ADVISOR8

3.01 Organizational and Offering Services8

3.02 Acquisition Services8

3.03 Asset Management Services9

3.04 Stockholder Services12

3.05  Other Services12

ARTICLE 4 - AUTHORITY OF ADVISOR12

4.01 General12

4.02 Powers of the Advisor12

4.03 Approval by the Board12

4.04 Modification or Revocation of Authority of Advisor13

ARTICLE 5 - BANK ACCOUNTS13

ARTICLE 6 - RECORDS AND FINANCIAL STATEMENTS13

ARTICLE 7 - LIMITATION ON ACTIVITIES14

ARTICLE 8 - FEES14

8.01 Acquisition Fees14

8.02 Asset Management Fees15

8.03 Disposition Fees15

8.04 Debt Financing Fees16

8.05 Changes to Fee Structure16

8.06 Limitations on an Internalization Transaction16

ARTICLE 9 - EXPENSES17

9.01 General17

9.02 Timing of and Limitations on Reimbursements19

ARTICLE 10 – VOTING AGREEMENT20

ARTICLE 11 - RELATIONSHIP OF ADVISOR AND COMPANY; OTHER ACTIVITIES OF THE ADVISOR20

11.01 Relationship20

11.02 Time Commitment21

11.03 Investment Opportunities and Allocation21

ARTICLE 12 - THE RESOURCE REAL ESTATE OPPORTUNITY NAME21

ARTICLE 13 - TERM AND TERMINATION OF THE AGREEMENT22

13.01 Term22

13.02 Termination by Either Party22

13.03 Payments on Termination22

13.04 Duties of Advisor Upon Termination22

ARTICLE 14 - ASSIGNMENT23

ARTICLE 15 - INDEMNIFICATION AND LIMITATION OF LIABILITY23

15.01 Indemnification23

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15.02 Limitation on Indemnification23

15.03 Limitation on Payment of Expenses24

ARTICLE 16 – GUARANTEE24

ARTICLE 17 - MISCELLANEOUS25

17.01 Notices25

17.02 Modification25

17.03 Severability25

17.04 Construction25

17.05 Entire Agreement25

17.06 Waiver25

17.07 Gender26

17.08 Titles Not to Affect Interpretation26

17.09 Counterparts26

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AMENDED AND RESTATED ADVISORY AGREEMENT

This Amended and Restated Advisory Agreement, dated as of January 9, 2014 (the “Agreement”), is between Resource Real Estate Opportunity REIT II, Inc., a Maryland corporation (the “Company”), and Resource Real Estate Opportunity Advisor II, LLC, a Delaware limited liability company (the “Advisor”).

W I T N E S S E T H

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

WHEREAS, the Advisor is willing to undertake to render such services, subject to the supervision of the Board, on the terms and conditions hereinafter set forth.

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

ARTICLE 1

DEFINITIONS

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

“Acquisition Expenses” means any and all expenses, excluding the fee payable to the Advisor pursuant to Section 8.01, incurred by the Company, the Advisor or any Affiliate of either in connection with the selection, acquisition or development of any property, loan or other potential investment, whether or not acquired or originated, as applicable, including, without limitation, legal fees and expenses, travel and communications expenses, costs of appraisals, nonrefundable option payments on properties or other investments not acquired, accounting fees and expenses, title insurance premiums.

“Acquisition Fees” means the fee payable to the Advisor pursuant to Section 8.01 plus all other fees and commissions, excluding Acquisition Expenses, paid by the Company or any of its Subsidiaries to any Person in connection with making or investing in any Property, Loan or other Permitted Investment or the purchase, development or construction of any Property by the Company or any of its Subsidiaries. Included in the computation of such fees or commissions shall be any real estate commission, selection fee, Development Fee, Construction Fee, nonrecurring management fee, loan fees or points or any fee of a similar nature, however designated. Excluded shall be

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Development Fees and Construction Fees paid to Persons not Affiliated with the Advisor in connection with the actual development and construction of a Property.

“Advisor” means (i) Resource Real Estate Opportunity Advisor II, LLC, a Delaware limited liability company, or (ii) any successor advisor to the Company.

“Affiliate” or “Affiliated” means, with respect to any first Person, any of the following: (i) any other Person directly or indirectly controlling, controlled by, or under common control with such first Person; (ii) any other Person directly or indirectly owning, controlling, or holding with the power to vote 10% or more of the outstanding voting securities of such first Person; (iii) any legal entity for which such first Person acts as an executive officer, director, trustee, or general partner; (iv) any other Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held, with power to vote, by such first Person; and (v) any executive officer, director, trustee, or general partner of such first Person. An entity shall not be deemed to control or be under common control with an Advisor-sponsored program unless (i) the entity owns 10% or more of the voting equity interests of such program or (ii) a majority of the board of directors (or equivalent governing body) of such program is composed of Affiliates of the entity.

“Asset Management Fee” shall have the meaning set forth in Section 8.02.

“Average Invested Assets” means, for a specified period, the average of the aggregate book value of the assets of the Company invested, directly or indirectly, in Properties, Loans and other Permitted Investments secured by real estate before reserves for depreciation or bad debts or other similar non-cash reserves, computed by taking the average of such book values at the end of each month during such period.

“Board” means the board of directors of the Company, as of any particular time.

“Bylaws” means the bylaws of the Company, as amended from time to time.

“Charter” means the articles of incorporation of the Company, as amended from time to time.

“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.

“Company” means Resource Real Estate Opportunity REIT II, Inc., a corporation organized under the laws of the State of Maryland.

“Competitive Brokerage Commission” means a real estate or brokerage commission for the purchase or sale of a Property, Loan or Permitted Investment that is reasonable, customary, and competitive in light of the size, type, and location of the Property, Loan or Permitted Investment.

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“Conflicts Committee” shall have the meaning set forth in the Company’s Charter.

“Construction Fee” means a fee or other remuneration for acting as general contractor and/or construction manager to construct improvements, supervise and coordinate projects or to provide major repairs or rehabilitation on a Property.

“Contract Sales Price” means the total consideration received by the Company or one of its Subsidiaries for the sale of a Property, Loan or other Permitted Investment.

“Cost of Investments” means the sum of (i) with respect to the acquisition or origination of a Property, Loan or other Permitted Investment to be owned by the Company or a Subsidiary, the amount actually paid or allocated to fund the acquisition, origination, development, construction or improvement of the Property, Loan or other Permitted Investment, inclusive of expenses associated with the acquisition or origination of such Property, Loan or other Permitted Investment and the amount of any debt associated with, or used to fund the investment in, such Property, Loan or other Permitted Investment and (ii) with respect to the acquisition or origination of a Property, Loan or other Permitted Investment through any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a partner and which is not deemed a Subsidiary, the portion that is attributable to the Company’s direct or indirect investment in such Joint Venture or partnership of the amount actually paid or allocated to fund the acquisition, origination, development, construction or improvement of the Property, Loan or other Permitted Investment, inclusive of expenses associated with the acquisition or origination of such Property, Loan or other Permitted Investment, plus the amount of any debt associated with, or used to fund the investment in, such Property, Loan or other Permitted Investment.

“Dealer Manager” means (i) Resource Securities, Inc., or (ii) any successor dealer manager to the Company.

“Debt Financing Fee” means the fee payable under Section 8.04.

“Development Fee” means a fee for the packaging of a Property, including negotiating and approving plans, and undertaking to assist in obtaining zoning and necessary variances and necessary financing for the Property, either initially or at a later date.

“Director” means a member of the board of directors of the Company.

“Disposition Fee” shall have the meaning set forth in Section 8.03.

“Distributions” means any distributions of money or other property by the Company to owners of Shares, including distributions that may constitute a return of capital for federal income tax purposes.

“GAAP” means accounting principles generally accepted in the United States.

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“Gross Proceeds” means the aggregate purchase price of all securities sold for the account of the Company through an Offering, without deduction for Organization and Offering Expenses.

“Guaranteed Obligations” shall have the meaning set forth in Article 16.

“Guarantor” means Resource Real Estate, Inc., a Delaware corporation, or any successor thereto or assignee thereof.

“Independent Appraiser” means a person or entity with no material current or prior business or personal relationship with the Advisor or the Directors, who is engaged to a substantial extent in the business of rendering opinions regarding the value of assets of the type held by the Company or its Subsidiaries, and who is a qualified appraiser of real estate as determined by the Board. Membership in a nationally recognized appraisal society such as the American Institute of Real Estate Appraisers (M.A.I.) or the Society of Real Estate Appraisers (S.R.E.A.) shall be conclusive evidence of such qualification.

“Initial Escrow Release Date” shall have the meaning set forth in Section 8.06.

“Initial Public Offering”  means the public offering of Shares registered on Registration Statement No. 333-184476 on Form S-11.

“Internalization Transaction” shall have the meaning set forth in Section 8.06.

“Joint Venture” means any joint venture, limited liability company or other arrangement between the Company and a third party or an Affiliate of the Company that owns, in whole or in part, on behalf of the Company any Properties, Loans or other Permitted Investments.

“Listed” or “Listing” shall have the meaning set forth in the Company’s Charter.  

“Loan Servicer” means an entity that has been retained to perform and carry out loan servicing functions with respect to one or more Loans.

“Loans” means mortgage loans and other types of debt financing investments made by the Company or the Partnership, either directly or indirectly, including through ownership interests in a Joint Venture or partnership, including, without limitation, mezzanine loans, B-notes, bridge loans, convertible mortgages, wraparound mortgage loans, construction mortgage loans, loans on leasehold interests, and participations in such loans.

“NASAA Guidelines” means the NASAA Statement of Policy Regarding Real Estate Investment Trusts as in effect on the date hereof.

“Net Income” means, for any period, the total revenues applicable to such period, less the total expenses applicable to such period excluding additions to reserves for depreciation, bad debts or other similar non-cash reserves; provided, however, Net Income for purposes of calculating total allowable Operating Expenses (as defined

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herein) shall exclude the gain included in the Company’s consolidated accounts arising from the sale of assets.

“Offering” means any offering of the Company’s securities that is registered with the SEC, excluding Shares offered under any employee benefit plan.

“Operating Expenses” means all costs and expenses incurred by the Company, as determined under GAAP, that in any way are related to the operation of the Company or to Company business, including fees paid to the Advisor, but excluding (i) 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 tax incurred in connection with the issuance, distribution, transfer, registration and Listing of the Shares, (ii) interest payments, (iii) taxes, (iv) non-cash expenditures such as depreciation, amortization and bad loan reserves, (v) incentive fees paid in compliance with Section IV.F. of the NASAA Guidelines and (vi) Acquisition Fees, Acquisition Expenses, real estate commissions on the resale of real property, and other expenses connected with the acquisition, disposition, and ownership of real estate interests, loans or other property (other than commissions on the sale of assets other than real property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property.

“Operating Revenue Cash Flows” means the Company’s cash flow from ownership and/or operation of (i) Properties, (ii) Loans, (iii) Permitted Investments, (iv) short-term investments, and (v) interests in Properties, Loans and Permitted Investments owned by any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a partner.

“Organization and Offering Expenses” means all expenses incurred by or on behalf of the Company in connection with or preparing the Company for the offering and distributing of its Shares in an Offering, whether incurred before or after the date of this Agreement, which may include but are not limited to, total underwriting and brokerage discounts and commissions (including fees of the underwriters’ attorneys); placement agent fees and expenses; expenses for printing, engraving and mailing; salaries of employees while engaged in sales activity; charges of transfer agents, registrars, trustees, escrow holders, depositaries and experts; and expenses of obtaining exemption or qualification of the sale of the securities under Federal and state laws, including taxes and fees, accountants’ and attorneys’ fees.

“Partnership” means RRE Opportunity OP II, LP, a Delaware limited partnership formed to own and operate Properties, Loans and other Permitted Investments on behalf of the Company.  

“Permitted Investments” means all investments (other than Properties and Loans)  in which the Company may acquire an interest, either directly or indirectly, including through ownership interests in a Joint Venture or partnership, pursuant to its Charter, Bylaws and the investment objectives and policies adopted by the Board from time to time, other than short-term investments acquired for purposes of cash management.

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“Person” means an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c) (17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or any government or any agency or political subdivision thereof, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

“Property” means any real property or properties transferred or conveyed to the Company or the Partnership, either directly or indirectly, including through ownership interests in a Joint Venture or partnership.  

“Property Manager” means an entity that has been retained to perform and carry out at one or more of the Properties property-management services, excluding persons, entities or independent contractors retained or hired to perform facility management or other services or tasks at a particular Property, the costs for which are passed through to and ultimately paid by the tenant at such Property.

“Registration Statement” means the registration statement filed by the Company with the SEC on Form S-11 (Reg. No. 333-184476), as amended from time to time, in connection with the Initial Public Offering.

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

“Sale” means (i) any transaction or series of transactions whereby: (A) the Company or the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of any Property, Loan or other Permitted Investment or portion thereof, including the transfer of any Property that is the subject of a ground lease, including any event with respect to any Property, Loan or other Permitted Investment that gives rise to a significant amount of insurance proceeds or condemnation awards, and including the issuance by one of the Company’s subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction; (B) the Company or the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of all or substantially all of the interest of the Company or the Partnership in any Joint Venture or any partnership in which it is a partner; or (C) any Joint Venture or any partnership in which the Company or the Partnership is a partner, sells, grants, transfers, conveys, or relinquishes its ownership of any Property, Loan or other Permitted Investment or portion thereof, including any event with respect to any Property, Loan or other Permitted Investment that gives rise to insurance claims or condemnation awards, and including the issuance by such Joint Venture or any partnership or one of its subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction, but (ii) not including any transaction or series of transactions specified in clause (i) (A), (i) (B), or (i) (C) above in which the proceeds of such transaction or series of transactions are reinvested in one or more Properties, Loans or other Permitted Investments within 180 days thereafter.

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“SEC”means the United States Securities and Exchange Commission.

“Settlement” means (i) the prepayment, maturity, workout or other settlement of any Loan or other Permitted Investment or portion thereof owned, directly or indirectly, by (A) the Company or the Partnership or (B) any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a partner, but (ii) not including any transaction or series of transactions specified in clause (i) (A) or (i) (B) above in which the proceeds of such prepayment, maturity, workout or other settlement are reinvested in one or more Properties, Loans or other Permitted Investments within 180 days thereafter.

“Shares” means shares of common stock of the Company, par value $.01 per share.

“Stockholders” means the registered holders of the Shares.

“Subject Shares” shall have the meaning set forth in Section 8.06.

“Subsidiary” means, with respect to any Person (the “parent”), at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership or limited liability company, more than 50% of the general partnership interests or managing member interests are, as of such date, owned, controlled or held, directly or indirectly, by one or more of the parent and its Subsidiaries.

“Termination Date” means the date of termination of the Agreement determined in accordance with Article 13 hereof.

“2%/25% Guidelines” means the requirement pursuant to the NASAA Guidelines that, in any period of four consecutive fiscal quarters, total Operating Expenses not exceed the greater of 2% of the Company’s Average Invested Assets during such 12-month period or 25% of the Company’s Net Income over the same 12-month period.

ARTICLE 2

APPOINTMENT

The Company hereby appoints the Advisor to serve as its advisor and asset manager on the terms and conditions set forth in this Agreement, and the Advisor hereby accepts such appointment.

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ARTICLE 3

DUTIES OF THE ADVISOR

The Advisor is responsible for managing, operating, directing and supervising the operations and administration of the Company and its assets.  The Advisor undertakes to use its best efforts to present to the Company potential investment opportunities, to make investment decisions on behalf of the Company subject to the limitations in the Company’s Charter, the direction and oversight of the Board and Section 4.03 hereof, and to provide the Company with a continuing and suitable investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Board.  Subject to the limitations set forth in this Agreement, including Article 4 hereof, and the continuing and exclusive authority of the Board over the management of the Company, the Advisor shall, either directly or by engaging an Affiliate or third party, perform the following duties:

3.01 Organizational and Offering Services.  The Advisor shall perform all services related to the organization of the Company or any Offering of the Company’s securities, other than services that (i) are to be performed by the Dealer Manager, (ii) the Company elects to perform directly or (iii) would require the Advisor to register as a broker-dealer with the SEC or any state.

3.02 Acquisition Services.

(i)  Serve as the Company’s investment and financial advisor and provide relevant market research and economic and statistical data in connection with the Company’s assets and investment objectives and policies;

(ii)  Subject to Section 4 hereof and the investment objectives and policies of the Company: (a) locate, analyze and select potential investments; (b) structure and negotiate the terms and conditions of transactions pursuant to which investments in Properties, Loans and other Permitted Investments will be made; (c) acquire, originate and dispose of Properties, Loans and other Permitted Investments on behalf of the Company and its Subsidiaries; (d) arrange for financing and refinancing and make other changes in the asset or capital structure of investments in Properties, Loans and other Permitted Investments of the Company and its Subsidiaries; and (e) enter into leases, service contracts and other agreements for Properties, Loans and other Permitted Investments of the Company and its Subsidiaries;

(iii)  Perform due diligence on prospective investments and create due diligence reports summarizing the results of such work;

(iv)  With respect to prospective investments presented to the Board, prepare reports regarding such prospective investments that include recommendations and supporting documentation necessary for the Directors to evaluate the proposed investments;

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(v)  Obtain reports (which may be prepared by the Advisor or its Affiliates), where appropriate, concerning the value of contemplated investments of the Companyand its Subsidiaries;

(vi)  Deliver to or maintain on behalf of the Company copies of all appraisals obtained in connection with the Company’s and its Subsidiaries’ investments; and

(vii)  Negotiate and execute approved investments and other transactions, including prepayments, maturities, workouts and other settlements of Loans and other Permitted Investments of the Company and its Subsidiaries.

3.03 Asset Management Services.

(i)  Real Estate and Related Services:

(a)  Investigate, select and, on behalf of the Company, engage and conduct business with (including enter contracts with) such Persons as the Advisor deems necessary to the proper performance of its obligations as set forth in this Agreement, including but not limited to consultants, accountants, lenders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, developers, construction companies, Property Managers and any and all Persons acting in any other capacity deemed by the Advisor necessary or desirable for the performance of any of the foregoing services;

(b)  Negotiate and service the Company’s and its Subsidiaries’ debt facilities and other financings;

(c)  Monitor applicable markets and obtain reports (which may be prepared by the Advisor or its Affiliates) where appropriate, concerning the value of investments of the Company and its Subsidiaries;

(d)  Monitor and evaluate the performance of each asset of the Company and its Subsidiaries and the Company’s and its Subsidiaries’ overall portfolio of assets, provide daily management services to the Company and perform and supervise the various management and operational functions related to the Company’s and its Subsidiaries’ investments;

(e)  Formulate and oversee the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of Properties, Loans and other Permitted Investments on an overall portfolio basis;

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(f)  Consult with the Company’s officers and the Board and assist the Board in the formulation and implementation of the Company’s financial policies, and, as necessary with respect to investment and borrowing opportunities presented to the Board, furnish the Board with advice and recommendations with respect to the making of investments consistent with the investment objectives and policies of the Company and in connection with any borrowings proposed to be undertaken by the Companyand its Subsidiaries;

(g)  Oversee the performance by the (1) Property Managers of their duties, including collection and proper deposits of rental payments and payment of Property expenses and maintenance and (2) Loan Servicers of their duties, including collection and application of payments, restructurings, workouts, foreclosures and accounting for Loans;

(h)  Conduct periodic on-site property visits to some or all (as the Advisor deems reasonably necessary) of the Properties to inspect the physical condition of the Properties and to evaluate the performance of the Property Managers;

(i)  Review, analyze and comment upon the operating budgets, capital budgets and leasing plans prepared and submitted by each Property Manager and aggregate these property budgets into the Company’s overall budget;

(j)  Coordinate and manage relationships between the Company and its Subsidiaries, on the one hand, and any Joint Venture partners on the other; and

(k) Consult with the Company’s officers and the Board and provide assistance with the evaluation and approval of potential asset disposition, sale and refinancing opportunities that are presented to the Board.

(ii)  Accounting and Other Administrative Services:

(a)  Provide the day-to-day management of the Company and perform and supervise the various administrative functions reasonably necessary for the management of the Company and its Subsidiaries;

(b)  From time to time, or at any time reasonably requested by the Board, make reports to the Board on the Advisor’s performance of services to the Company and its Subsidiaries under this Agreement;

(c)  Make reports to the Conflicts Committee each quarter of the investments that have been made by other programs sponsored by the Advisor or any of its Affiliates, as well as any investments that have been made by the Advisor or any of its Affiliates directly;

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(d)  Provide or arrange for any administrative services and items, legal and other services, office space, office furnishings, personnel and other overhead items necessary and incidental to the Company’s and its Subsidiaries’ businesses and operations;

(e)  Provide financial and operational planning services;

(f)  Maintain accounting and other record-keeping functions at the Company and investment levels, including information concerning the activities of the Company as shall be required to prepare and to file all periodic financial reports, tax returns and any other information required to be filed with the SEC, the Internal Revenue Service and any other regulatory agency;

(g)  Maintain and preserve all appropriate books and records of the Company and its Subsidiaries;

(h)  Provide tax and compliance services and coordinate with appropriate third parties, including the Company’s independent auditors and other consultants, on related tax matters;

(i)  Provide the Company and its Subsidiaries with all necessary cash management services;

(j)  Manage and coordinate with the transfer agent the periodic dividend process and payments to Stockholders;

(k)  Consult with the Company’s officers and the Board and assist the Board in evaluating and obtaining adequate insurance coverage based upon risk management determinations;

(l)  Consult with the Company’s officers and the Board relating to the corporate governance structure and appropriate policies and procedures related thereto;

(m)  Perform all reporting, record keeping, internal controls and similar matters in a manner to allow the Company and its Subsidiaries to comply with applicable law, including federal and state securities laws and the Sarbanes-Oxley Act of 2002, and provide the Company’s officers and the Board with timely updates regarding the Company’s compliance with applicable law;

(n)  Notify the Board of all proposed material transactions before they are completed and get approval where necessary; and

(o)  Do all things necessary to assure its ability to render the services described in this Agreement.

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3.04 Stockholder Services.

(i)  Manage services for and communications with Stockholders, including answering phone calls, preparing and sending written and electronic reports and other communications;

(ii)  Oversee the performance of the transfer agent and registrar;

(iii)  Establish technology infrastructure to assist in providing Stockholder support and service; and

(iv)  Consistent with Section 3.01, the Advisor shall perform the various subscription processing services reasonably necessary for the admission of new Stockholders.

3.05 Other Services.  Except as provided in Article 7, the Advisor shall perform any other services reasonably requested by the Company (acting through the Conflicts Committee).

ARTICLE 4

AUTHORITY OF ADVISOR

4.01 General.  All rights and powers to manage and control the day-to-day business and affairs of the Company and its Subsidiaries shall be vested in the Advisor. The Advisor shall have the power to delegate all or any part of its rights and powers to manage and control the business and affairs of the Company and its Subsidiaries to such officers, employees, Affiliates, agents and representatives of the Advisor or the Company as it may deem appropriate. Any authority delegated by the Advisor to any other Person shall be subject to the limitations on the rights and powers of the Advisor specifically set forth in this Agreement or the Charter.

4.02 Powers of the Advisor.  Subject to the express limitations set forth in this Agreement and the continuing and exclusive authority of the Board over the management of the Company, the power to direct the management, operation and policies of the Company, including making, financing and disposing of investments, shall be vested in the Advisor, which shall have the power by itself and shall be authorized and empowered on behalf and in the name of the Company to carry out any and all of the objectives and purposes of the Company and to perform all acts and enter into and perform all contracts and other undertakings that it may in its sole discretion deem necessary, advisable or incidental thereto to perform its obligations under this Agreement.

4.03 Approval by the Board.  Notwithstanding the foregoing, the Advisor may not take any action on behalf of the Company (or its Subsidiaries) without the prior approval of the Board or duly authorized committees thereof if the Charter or Maryland General Corporation Law require the prior approval of the Board (or if the governing documents or governing law applicable to any Subsidiary require the prior approval of the governing

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body of such Subsidiary).  If the Board or a committee of the Board must approve a proposed investment, financing or disposition or chooses to do so, the Advisor will deliver to the Board or committee, as applicable, all documents required by it to evaluate such investment, financing or disposition.

4.04 Modification or Revocation of Authority of Advisor.  The Board may, at any time upon the giving of notice to the Advisor, modify or revoke the authority or approvals set forth in Article 3 and this Article 4 hereof; provided, however, that such modification or revocation shall be effective upon receipt by the Advisor and shall not be applicable to investment transactions to which the Advisor has committed the Company or its Subsidiaries prior to the date of receipt by the Advisor of such notification.

ARTICLE 5

BANK ACCOUNTS

The Advisor may establish and maintain one or more bank accounts in the name of the Company (and its Subsidiaries) and may collect and deposit into any such account or accounts, and disburse from any such account or accounts, any money on behalf of the Company and its Subsidiaries, under such terms and conditions as the Board (or the governing body of such Subsidiary) may approve, provided that no funds shall be commingled with the funds of the Advisor.  The Advisor shall from time to time render appropriate accountings of such collections and payments to the Board and the independent auditors of the Company.

ARTICLE 6

RECORDS AND FINANCIAL STATEMENTS

The Advisor, in the conduct of its responsibilities to the Company, shall maintain adequate and separate books and records for the Company’s and its Subsidiaries’ operations in accordance with GAAP, which shall be supported by sufficient documentation to ascertain that such books and records are properly and accurately recorded. Such books and records shall be the property of the Company and its Subsidiaries and shall be available for inspection by the Board and by counsel, auditors and other authorized agents of the Company, at any time or from time to time during normal business hours. Such books and records shall include all information necessary to calculate and audit the fees or reimbursements paid under this Agreement. The Advisor shall utilize procedures to attempt to ensure such control over accounting and financial transactions as is reasonably required to protect the Company’s and its Subsidiaries’ assets from theft, error or fraudulent activity. All financial statements that the Advisor delivers to the Company shall be prepared on an accrual basis in accordance with GAAP, except for special financial reports that by their nature require a deviation from GAAP. The Advisor shall liaise with the Company’s officers and independent auditors and shall provide such officers and auditors with the reports and other information that the Company so requests.

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ARTICLE 7

LIMITATION ON ACTIVITIES

Notwithstanding any provision in this Agreement to the contrary, the Advisor shall not take any action that, in its sole judgment made in good faith, would (i) adversely affect the ability of the Company to qualify or continue to qualify as a REIT under the Code, (ii) subject the Company to regulation under the Investment Company Act of 1940, as amended, (iii) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company, its Shares or its other securities, (iv) require the Advisor to register as a broker-dealer with the SEC or any state, (v) violate the Charter or Bylaws, or (vi) violate the governing documents of any Subsidiary of the Company. In the event an action that would violate (i) through (vi) of the preceding sentence but such action has been ordered by the Board, the Advisor shall notify the Board of the Advisor’s judgment of the potential impact of such action and shall refrain from taking such action until it receives further clarification or instructions from the Board.  In such event, the Advisor shall have no liability for acting in accordance with the specific instructions of the Board so given.

ARTICLE 8

FEES

8.01 Acquisition Fees.  As compensation for the investigation, selection, sourcing and acquisition or origination (by purchase, investment or exchange) of Properties, Loans and other Permitted Investments, the Company shall pay an Acquisition Fee to the Advisor for each such investment (whether an acquisition or origination).  With respect to the acquisition or origination of a Property, Loan or other Permitted Investment to be owned by the Company or a Subsidiary, the Acquisition Fee payable to the Advisor shall equal 2.0% of the sum of the amount actually paid or allocated to fund the acquisition, origination, development, construction or improvement of the Property, Loan or other Permitted Investment, inclusive of the Acquisition Expenses associated with such Property, Loan or other Permitted Investment and the amount of any debt associated with, or used to fund the investment in, such Property, Loan or other Permitted Investment. Acquisition Fees will also include any amounts incurred or reserved for capital expenditures that will be used to provide funds for capital improvements and repairs applied to any real property investment acquired where the Company plans to add value.  With respect to the acquisition or origination of a Property, Loan or other Permitted Investment through any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a partner and which is not deemed a Subsidiary, the Acquisition Fee payable to the Advisor shall equal 2.0% of the portion that is attributable to the Company’s direct or indirect investment in such Joint Venture or partnership of the amount actually paid or allocated to fund the acquisition, origination, development, construction or improvement of the Property, Loan or other Permitted Investment, inclusive of the Acquisition Expenses associated with such Property, Loan or other Permitted Investment, plus the amount of any debt associated with, or used to fund

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the investment in, such Property, Loan or other Permitted Investment.  Notwithstanding anything herein to the contrary, the payment of Acquisition Fees by the Company shall be subject to the limitations on Acquisition Fees contained in (and defined in) the Company’s Charter. The Advisor shall submit an invoice to the Company following the closing or closings of each acquisition or origination, accompanied by a computation of the Acquisition Fee. Generally, the Acquisition Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company.However, the Acquisition Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor.  All or any portion of the Acquisition Fees not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.

8.02 Asset Management Fees.  The Company shall pay the Advisor as compensation for the services described in Section 3.03 hereof a monthly fee (the “Asset Management Fee”) in an amount equal to one-twelfth of 1.0% of the Cost of Investments, as of the end of the preceding month.  The Advisor shall submit a monthly invoice to the Company, accompanied by a computation of the Asset Management Fee for the applicable period. Generally, the Asset Management Fee payable to the Advisor shall be paid on the last day of such month, or the first business day following the last day of such month.  However, the Asset Management Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor.  All or any portion of the Asset Management Fees not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.

8.03 Disposition Fees.  If the Advisor or any of its Affiliates provide a substantial amount of services (as determined by the Conflicts Committee) in connection with a Sale, the Advisor or such Affiliate shall receive a fee at the closing (the “Disposition Fee”) equal to the lesser of (i) (A) one-half of the aggregate brokerage commission paid, including the brokerage commission payable pursuant to this clause 8.03(i)(A) or (B) if none is paid, the Competitive Brokerage Commission or (ii) 2.00% of the Contract Sales Price; provided, however, that no Disposition Fee shall be payable to the Advisor for any Sale if such Sale involves the Company selling all or substantially all of its assets in one or more transactions designed to effectuate a business combination transaction (as opposed to a Company liquidation, in which case the Disposition Fee would be payable if the Advisor or an Affiliate provides a substantial amount of services as provided above).  The Company will not pay a disposition fee upon the maturity, prepayment or workout of a loan or other real estate related debt investment; however, if the Company takes ownership of a property as a result of a workout or foreclosure of a loan or the Company provides substantial assistance during the course of a workout, the Company will pay a disposition fee upon the sale of such property or disposition of such loan or other real estate related debt investment. The payment of any Disposition Fees by the Company shall be subject to the limitations contained in the Company’s Charter.  Any Disposition Fee payable under this Section 8.03 may be paid in addition to commissions paid to non-Affiliates, provided that the total commissions (including such Disposition Fee) paid to all Persons by the Company for each Sale shall not exceed an amount equal to the lesser of (i) 6% of the aggregate Contract Sales Price of each Property, Loan or other Permitted Investment or (ii) the Competitive Brokerage Commission for each Property, Loan or

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other Permitted Investment.  The Advisor shall submit an invoice to the Company following the closing or closings of each disposition, accompanied by a computation of the Disposition Fee. Generally, the Disposition Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company.  However, the Disposition Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor.  All or any portion of the Disposition Fees not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.

8.04 Debt Financing Fees.  In the event of any debt financing obtained or assumed by or for the Company or its Subsidiaries (and any Joint Ventures that are not Subsidiaries but for which the Advisor provides substantial services in connection with obtaining such debt financing), the Company will pay to the Advisor a debt financing fee equal to 0.5% of the amount available under the financing.  The Debt Financing Fee includes the reimbursement of the specified cost incurred by the Advisor of engaging third parties to source debt financing, and nothing herein shall prevent the Advisor from entering fee-splitting arrangements with third parties with respect to the Debt Financing Fee.  All or any portion of the Debt Financing Fees not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.  In no event will the Debt Financing Fee be paid more than once in respect of the same debt.  For example, upon refinancing, the Advisor would only receive 0.5% of the incremental amount of additional debt financing obtained in the refinancing.

8.05 Changes to Fee Structure.  In the event of Listing, the Company and the Advisor shall negotiate in good faith to establish a fee structure appropriate for a perpetual-life entity.

8.06 Limitations on an Internalization Transaction.  The Company may not acquire the Advisor or an Affiliate thereof in order to become self-managed, whether by means of a merger, stock acquisition, or asset purchase (an “Internalization Transaction”), unless at least half of the consideration is payable in Shares and held in escrow and not released to the Advisor or an Affiliate thereof (or any transferee of either) until

(i) the average closing price of the Shares over a five-trading-day period on a national securities exchange equals a price that, when combined with prior distributions paid on the Shares issued in a public offering prior to listing and outstanding at the time of the Internalization Transaction (the “Subject Shares”), equals the amount necessary for the holders of the Subject Shares to be deemed to have received in the aggregate the original issue price of the Subject Shares plus a 6% cumulative, non-compounded, annual return on the issue price of the Subject Shares or

(ii) the consideration paid (or net sale proceeds distributed) to holders of the Subject Shares in an acquisition (whether by means of a merger, stock acquisition, asset purchase, or similar transaction) or dissolution of the Company, when combined with prior distributions paid on the Subject Shares equals the

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amount necessary for the holders of the Subject Shares to  have received in the aggregate the original issue price of the Subject Shares plus a 6% cumulative, non-compounded, annual return on the issue price of the Subject Shares.

The date that one of these thresholds is met is the “Initial Escrow Release Date.”  In the event a recapitalization causes some of the Subject Shares to be exchanged or converted into securities that are not listed on a national securities exchange as of the Initial Escrow Release Date, then the shares to be released from escrow shall be reduced to reflect the percentage of Subject Shares (and their equivalents) that are then listed, with the remaining shares in escrow to be subsequently released in proportion to and as the remaining Subject Shares (and their equivalents) become listed.  

Shares held in escrow pursuant to the foregoing shall be entitled to dividends like all other Shares; however, such dividends shall also be placed in escrow and not released until the above thresholds are reached.  If the conditions to break escrow are not met within 10 years of the Internalization Transaction, all shares in the escrow account shall become authorized but unissued shares and all cash in the escrow account shall belong to the Company.  Shares held in escrow shall be voted on any matter in which Stockholders are entitled to vote in the same proportion as all other Shares that vote on the matter.

ARTICLE 9

EXPENSES

9.01 General.  In addition to the compensation paid to the Advisor pursuant to Article 8 hereof, the Company shall pay directly or reimburse the Advisor for all of the expenses paid or incurred by the Advisor or its Affiliates on behalf of the Company or in connection with the services provided to the Company pursuant to this Agreement, including, but not limited to:

(i)  All Organization and Offering Expenses; provided, however, that:

(a) the Company shall not reimburse the Advisor to the extent such reimbursement would cause the total amount spent by the Company on Organization and Offering Expenses (excluding underwriting and brokerage discounts and commissions) to exceed 2.5% of Gross Proceeds raised in an Offering, as of the termination of the Offering;

(b)  within 60 days after the end of the month in which an Offering terminates, the Advisor shall reimburse the Company to the extent the Company incurred Organization and Offering Expenses (excluding underwriting and brokerage discounts and commissions) exceeding 2.5% of Gross Proceeds of raised in an Offering; and

(c)  the Company shall not reimburse the Advisor for any Organization and Offering Expenses that the Conflicts Committee determines are not fair and commercially reasonable to the Company.

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(ii)  Acquisition Fees and Acquisition Expenses incurred in connection with the selection and acquisition of Properties, Loans and other Permitted Investments and Joint Venture opportunities, including such expenses incurred related to assets pursued or considered but not ultimately acquired by the Company or any of its Subsidiaries, provided that, notwithstanding anything herein to the contrary, the payment of Acquisition Feesand Acquisition Expenses by the Company shall be subject to the limitations contained in the Company’s Charter;

(iii)  The actual out-of-pocket cost of goods and services used by the Company and its Subsidiaries and obtained from entities not Affiliated with the Advisor, including travel, meals and lodging expenses incurred by the Advisor in performing duties associated with the acquisition or origination of Properties, Loans or other Permitted Investments;

(iv)  Interest and other costs for borrowed money, including discounts, points and other similar fees;

(v)  Taxes and assessments on income or Properties, taxes as an expense of doing business and any other taxes otherwise imposed on the Company and its Subsidiaries and their business, assets or income;

(vi)  Out-of-pocket costs associated with insurance required in connection with the business of the Company or by its officers and Directors or by its Subsidiaries;

(vii)  Expenses of managing, improving, developing, operating and selling Properties, Loans and other Permitted Investments owned, directly or indirectly, by the Company, as well as expenses of other transactions relating to such Properties, Loans and other Permitted Investments, including but not limited to prepayments, maturities, workouts and other settlements of Loans and other Permitted Investments;

(viii)  All out-of-pocket expenses in connection with payments to the Board and meetings of the Board and Stockholders;

(ix)  Personnel and related employment costs incurred by the Advisor or its Affiliates in performing the services described in Article 3 hereof, including but not limited to reasonable salaries and wages, benefits and overhead of all employees directly involved in the performance of such services, provided that no reimbursement shall be made for costs of such employees of the Advisor or its Affiliates to the extent that such employees perform services for which the Advisor receives Acquisition Fees, Disposition Fees or Debt Financing Fees;

(x)  Out-of-pocket expenses of providing services for and maintaining communications with Stockholders, including the cost of preparation, printing, and mailing annual reports and other Stockholder reports, proxy statements and other reports required by governmental entities;

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(xi)  Audit, accounting and legal fees, and other fees for professional services relating to the operations of the Company and its Subsidiaries and all such fees incurred at the request, or on behalf of, the Board, the Conflicts Committee or any other committee of the Board;

(xii)  Out-of-pocket costs for the Company and its Subsidiaries to comply with all applicable laws, regulations and ordinances;

(xiii)  Expenses connected with payments of Distributions made or caused to be made by the Company to the Stockholders;

(xiv)  Expenses of organizing, redomesticating, merging, liquidating or dissolving the Company or of amending the Charter or the Bylaws; and

(xv)  All other out-of-pocket costs incurred by the Advisor in performing its duties hereunder.

9.02 Timing of and Additional Limitations on Reimbursements.

(i)  Expenses incurred by the Advisor on behalf of the Company and reimbursable pursuant to this Article 9 shall be reimbursed no less than monthly to the Advisor. The Advisor shall prepare a statement documenting the expenses of the Company during each quarter and shall deliver such statement to the Company within 45 days after the end of each quarter.

(ii)  The Company shall not reimburse the Advisor to the extent such reimbursement would cause the total amount spent by the Company on Organization and Offering Expenses to exceed 15% of the Gross Proceeds raised as of the termination of the Offering and provided further that within 60 days after the end of the month in which an Offering terminates, the Advisor shall reimburse the Company to the extent the Company incurred Organization and Offering Expenses exceeding 15% of the Gross Proceeds raised in the completed Offering; the Company shall not reimburse the Advisor for any Organization and Offering Expenses that the Conflicts Committee determines are not fair and commercially reasonable to the Company.

(iii)  Notwithstanding anything else in this Article 9 to the contrary, the expenses enumerated in this Article 9 shall not become reimbursable to the Advisor unless and until the Company has raised $2 million in the Initial Public Offering.

(iv)  Commencing four fiscal quarters after the earlier to occur of (i) the Company’s acquisition of an asset or, (ii) the date that is six months after the commencement of the Initial Public Offering, the following limitation on Operating Expenses shall apply:   The Company shall not reimburse the Advisor at the end of any fiscal quarter for Operating Expenses that in the four consecutive fiscal quarters then ended (the “Expense Year”) exceed (the “Excess Amount”) the greater of 2% of Average Invested Assets or 25% of Net Income (the

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“2%/25% Guidelines”) for such year unless the Conflicts Committee determines that such excess was justified, based on unusual and nonrecurring factors that the Conflicts Committee deems sufficient. If the Conflicts Committee does not approve such excess as being so justified, any Excess Amount paid to the Advisor during a fiscal quarter shall be repaid to the Company. If the Conflicts Committee determines such excess was justified, then, within 60 days after the end of any fiscal quarter of the Company for which total reimbursed Operating Expenses for the Expense Year exceed the 2%/25% Guidelines, the Advisor, at the direction of the Conflicts Committee, shall cause such fact to be disclosed to the Stockholders in writing (or the Company shall disclose such fact to the Stockholders in the next quarterly report of the Company or by filing a Current Report on Form 8-K with the SEC within 60 days of such quarter end), together with an explanation of the factors the Conflicts Committee considered in determining that such excess expenses were justified. The Company will ensure that such determination will be reflected in the minutes of the meetings of the Board. All figures used in the foregoing computation shall be determined in accordance with GAAP applied on a consistent basis.

ARTICLE 10

VOTING AGREEMENT

The Advisor agrees that, with respect to any Shares now or hereinafter owned by it, the Advisor will not vote or consent on matters submitted to the stockholders of the Company regarding (i) the removal of the Advisor or any Affiliate of the Advisor or (ii) any transaction between the Company or its Subsidiaries and the Advisor or any of its Affiliates.  This voting restriction shall survive until such time that the Advisor is both no longer serving as such and is no longer an Affiliate of the Company.

ARTICLE 11

RELATIONSHIP OF ADVISOR AND COMPANY;

OTHER ACTIVITIES OF THE ADVISOR

11.01 Relationship.  The Company and the Advisor are not partners or joint venturers with each other, and nothing in this Agreement shall be construed to make them such partners or joint venturers. Nothing herein contained shall prevent the Advisor from engaging in other activities, including, without limitation, the rendering of advice to other Persons (including other REITs) and the management of other programs advised, sponsored or organized by the Advisor or its Affiliates. Nor shall this Agreement limit or restrict the right of any manager, director, officer, employee or equityholder of the Advisor or its Affiliates to engage in any other business or to render services of any kind to any other Person. The Advisor may, with respect to any investment in which the Company is a participant, also render advice and service to each and every other participant therein. The Advisor shall promptly disclose to the Board the existence of any condition or circumstance, existing or anticipated, of which it has knowledge, that

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creates or could create a conflict of interest between the Advisor’s obligations to the Company and its obligations to or its interest in any other Person.

11.02 Time Commitment.  The Advisor shall, and shall cause its Affiliates and their respective employees, officers and agents to, devote to the Company such time as shall be reasonably necessary to conduct the business and affairs of the Company in an appropriate manner consistent with the terms of this Agreement. The Company acknowledges that the Advisor and its Affiliates and their respective employees, officers and agents may also engage in activities unrelated to the Company and may provide services to Persons other than the Company or any of its Affiliates.

11.03 Investment Opportunities and Allocation.  The Advisor shall be required to use commercially reasonable efforts to present a continuing and suitable investment program to the Company that is consistent with the investment policies and objectives of the Company, but neither the Advisor nor any Affiliate of the Advisor shall be obligated generally to present any particular investment opportunity to the Company even if the opportunity is of character that, if presented to the Company, could be taken by the Company. In the event an investment opportunity is located, the allocation procedure set forth under the caption “Conflicts of Interest – Certain Conflict Resolution Measures – Allocation of Investment Opportunities” in the Registration Statement shall govern the allocation of the opportunity among the Company and Affiliates of the Advisor.

ARTICLE 12

THE RESOURCE REAL ESTATE OPPORTUNITY NAME

The Advisor and its Affiliates have a proprietary interest in the name “RESOURCE REAL ESTATE OPPORTUNITY.”  The Advisor hereby grants to the Company a non-transferable, non-assignable, non-exclusive royalty-free right and license to use the name “RESOURCE REAL ESTATE OPPORTUNITY” during the term of this Agreement. Accordingly, and in recognition of this right, if at any time the Company ceases to retain the Advisor or one of its Affiliates to perform advisory services for the Company, the Company will, promptly after receipt of written request from the Advisor, cease to conduct business under or use the name “RESOURCE REAL ESTATE OPPORTUNITY” or any derivative thereof and the Company shall change its name and the names of any of its subsidiaries to a name that does not contain the name “RESOURCE REAL ESTATE OPPORTUNITY” or any other word or words that might, in the reasonable discretion of the Advisor, be susceptible of indication of some form of relationship between the Company and the Advisor or any its Affiliates.  At such time, the Company will also make any changes to any trademarks, servicemarks or other marks necessary to remove any references to the word “RESOURCE REAL ESTATE OPPORTUNITY.” Consistent with the foregoing, it is specifically recognized that the Advisor or one or more of its Affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist other investment vehicles (including vehicles for investment in real estate) and financial and service organizations having “RESOURCE

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REAL ESTATE OPPORTUNITY” as a part of their name, all without the need for any consent (and without the right to object thereto) by the Company.

ARTICLE 13

TERM AND TERMINATION OF THE AGREEMENT

13.01 Term.  Subject to Section 4.02 hereof, this Agreement shall continue in full force until December 20, 2014.  Thereafter, this Agreement may be renewed for an unlimited number of successive one-year terms upon mutual consent of the parties. The Company (acting through the Conflicts Committee) will evaluate the performance of the Advisor annually before renewing this Agreement, and each such renewal shall be for a term of no more than one year.  Any such renewal must be approved by the Conflicts Committee.

13.02 Termination by Either Party.  This Agreement may be terminated upon 60 days written notice without cause or penalty by either the Company (acting through the Conflicts Committee) or the Advisor.  The provisions of Articles 1, 10, 12, 13, 15 and 17 shall survive termination of this Agreement.

13.03 Payments on Termination . Payments to the Advisor pursuant to this Section 13.03 shall be subject to the 2%/25% Guidelines to the extent applicable.    After the Termination Date, the Advisor shall not be entitled to compensation for further services hereunder except it shall be entitled to receive from the Company within 30 days after the effective date of such termination all unpaid reimbursements of expenses and all earned but unpaid fees payable to the Advisor prior to termination of this Agreement.

13.04 Duties of Advisor Upon Termination. The Advisor shall promptly upon termination:

(i)  pay over to the Company all money collected pursuant to this Agreement, if any, after deducting any accrued compensation and reimbursement for its expenses to which it is then entitled;

(ii)  deliver to the Board a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board;

(iii)  deliver to the Board all assets and documents of the Company then in the custody of the Advisor; and

(iv)  cooperate with the Company to provide an orderly transition of advisory functions.

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ARTICLE 14

ASSIGNMENT

This Agreement may be assigned by the Advisor to an Affiliate with the consent of the Conflicts Committee. The Advisor may assign any rights to receive fees or other payments under this Agreement without obtaining the approval of the Board. This Agreement shall not be assigned by the Company without the consent of the Advisor, except in the case of an assignment by the Company to a corporation or other organization that is a successor to all of the assets, rights and obligations of the Company, in which case such successor organization shall be bound hereunder and by the terms of said assignment in the same manner as the Company is bound by this Agreement.

ARTICLE 15

INDEMNIFICATION AND LIMITATION OF LIABILITY

15.01 Indemnification.  Except as prohibited by the restrictions provided in this Section 15.01, Section 15.02 and Section 15.03, the Company shall indemnify, defend and hold harmless the Advisor and its Affiliates, including their respective officers, directors, equity holders, partners and employees, from all liability, claims, damages or losses arising in the performance of their duties hereunder, and related expenses, including reasonable attorneys’ fees, to the extent such liability, claims, damages or losses and related expenses are not fully reimbursed by insurance. Any indemnification of the Advisor may be made only out of the net assets of the Company and not from Stockholders.

Notwithstanding the foregoing, the Company shall not indemnify the Advisor or its Affiliates for any loss, liability or expense arising from or out of an alleged violation of federal or state securities laws by such party unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged material securities law violations as to the particular indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee; or (iii) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which securities of the Company were offered or sold as to indemnification for violations of securities laws.

15.02 Limitation on Indemnification.  Notwithstanding the foregoing, the Company shall not provide for indemnification of the Advisor or its Affiliates for any liability or loss suffered by any of them, nor shall any of them be held harmless for any loss or liability suffered by the Company, unless all of the following conditions are met:

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(i) The Advisor or its Affiliates have determined, in good faith, that the course of conduct that caused the loss or liability was in the best interests of the Company.

(ii) The Advisor or its Affiliates were acting on behalf of or performing services for the Company.

(iii) Such liability or loss was not the result of  negligence or misconduct by the Advisor or its Affiliates.  

15.03 Limitation on Payment of Expenses.  The Company shall pay or reimburse reasonable legal expenses and other costs incurred by the Advisor or its Affiliates in advance of the final disposition of a proceeding only if (in addition to the procedures required by the Maryland General Corporation Law, as amended from time to time) all of the following are satisfied: (a) the proceeding relates to acts or omissions with respect to the performance of duties or services on behalf of the Company, (b) the legal proceeding was initiated by a third party who is not a stockholder or, if by a stockholder acting in his or her capacity as such, a court of competent jurisdiction approves such advancement and (c)  the Advisor or its Affiliates undertake to repay the amount paid or reimbursed by the Company, together with the applicable legal rate of interest thereon, if it is ultimately determined that the particular indemnitee is not entitled to indemnification.

ARTICLE 16

GUARANTEE

Resource Real Estate, Inc., the ultimate parent company of the Advisor (the “Guarantor”) will in all respects guarantee the due and proper performance of the services to be provided under this Agreement by the Advisor, which guarantee shall extend to include any renewal or amendment to this Agreement, provided Guarantor’s obligations are not materially increased by such renewal or amendment without the Guarantor’s consent, such consent not to be unreasonably withheld.  If the Advisor fails to perform all or any of its obligations, duties, undertakings, and covenants to provide services (collectively, the “Guaranteed Obligations”) under this Agreement (unless relieved from the performance of any part of this Agreement by statute, by the decision of a court or tribunal of competent jurisdiction or by waiver of the Company), upon written notice from the Company, the Guarantor shall perform or cause to be performed such Guaranteed Obligations.  This guarantee is a guarantee of performance of the Guaranteed Obligations and not of payment of any liabilities of the Advisor.  The termination of the Advisor shall constitute a termination of this guarantee.  This guarantee will be applicable to and binding upon the successors and assigns of Guarantor.  

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ARTICLE 17

MISCELLANEOUS

17.01 Notices.  Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is required by the Charter, the Bylaws or is accepted by the party to whom it is given, and shall be given by being delivered by hand or by overnight mail or other overnight delivery service to the addresses set forth herein:

To the Company or the Board:

Resource Real Estate Opportunity REIT II, Inc.

1845 Walnut Street, 18th Floor

Philadelphia, Pennsylvania 19103

Resource Real Estate Opportunity Advisor II, LLC

1845 Walnut Street, 18th Floor

Philadelphia, Pennsylvania 19103

Either party may at any time give notice in writing to the other party of a change in its address for the purposes of this Section 17.01.

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

17.03 Severability.  The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

17.04 Construction.  The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the Commonwealth of Pennsylvania.

17.05 Entire Agreement.  This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.

17.06 Waiver.  Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to

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any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

17.07 Gender.  Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

17.08 Titles Not to Affect Interpretation.  The titles of Articles and Sections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.

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

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of

the date and year first above written.

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

   By:  _/s/ Alan F. Feldman_____________                                                    

         Alan F. Feldman, Chief Executive Officer

RESOURCE REAL ESTATE OPPORTUNITY ADVISOR II, LLC

   By: /s/ Kevin M. Finkel

         Kevin M. Finkel, President

RESOURCE REAL ESTATE, INC., with respect to Article 16

   By:  _/s/ Alan F. Feldman_____________                          

         Alan F. Feldman, Chief Executive Officer

[Signature Page to Advisory Agreement between Resource Real Estate Opportunity REIT II, Inc. and Resource Real Estate Opportunity Advisor II, LLC]

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EX-10.6

EXHIBIT 10.6

RENEWAL AGREEMENT

THIS RENEWAL AGREEMENT, dated as of December 20, 2019 (the “Agreement”), is entered into between Resource Real Estate Opportunity REIT II, Inc., a Maryland corporation (the “Company”), and Resource Real Estate Opportunity Advisor II, LLC a Delaware limited liability company (the “Advisor”).

WHEREAS, the Company and the Advisor were initially parties to that certain Advisory Agreement dated December 20, 2013;

WHEREAS, on January 9, 2014 the parties entered into the Amended and Restated Advisory Agreement which was subsequently amended pursuant to that certain First Amendment to Amended and Restated Advisory Agreement dated October 6, 2014 and that certain Second Amendment to Amended and Restated Advisory Agreement dated March 24, 2015 (the “Advisory Agreement”);

WHEREAS, the Advisory Agreement had an initial one-year term, subject to an unlimited number of successive one-year renewals;

WHEREAS, the Company and the Advisor renewed the Advisory Agreement for an additional year on each of December 20, 2015, December 20, 2016, December 20, 2017 and December 20, 2018;

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

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

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

1. Term. In accordance with the provisions of Section 13.01 of the Advisory Agreement, the term of the Advisory Agreement is hereby renewed for an additional one-year term, and notwithstanding the language in Section 13.01 of the Advisory Agreement, is acknowledged and agreed by the Parties to be a one-year term commencing December 20, 2019 and ending December 19, 2020.

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

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

4. Construction; Consent to Jurisdiction.This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws. Any suit involving any dispute or matter arising under this Agreement may only be brought in the federal or state courts located in the State of Delaware. Each of the parties hereto consents to the exercise of personal jurisdiction by such courts with respect to all such proceedings. EACH OF THE PARTIES HERETO HEREBY KNOWINGLY AND VOLUNTARILY WAIVES ANY AND ALL RIGHTS TO A JURY TRIAL, TO THE FULLEST EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST, IN ANY PROCEEDING, CLAIM, COUNTER-CLAIM OR OTHER ACTION INVOLVING ANY DISPUTE OR MATTER ARISING UNDER THIS AGREEMENT.

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

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

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
By:	/s/ Alan F. Feldman
	Alan F. Feldman, Chief Executive Officer
RESOURCE REAL ESTATE OPPORTUNITY ADVISOR II, LLC
By:	/s/ George E. Carleton
	George E. Carleton, President and Chief Operating Officer

EX-21.1

EXHIBIT 21.1

Subsidiaries of the Registrant

Subsidiaries

RRE Opportunity Holdings II, LLC

RRE Opportunity OP II, LP

RRE Bear Creek Holdings, LLC

RRE Oak Hill Holdings, LLC

RRE Buckhead Holdings, LLC

RRE Farrington Holdings, LLC

RRE Mayfair Chateau Holdings, LLC

RRE Fairways of Bent Tree Holdings, LLC

RRE Spalding Crossing Holdings, LLC

RRE Montclair Terrace Holdings, LLC

RRE Grand Reserve Holdings, LLC

RRE Canterwood Holdings, LLC

RRE Fox Ridge Holdings, LLC

RRE Riverlodge Holdings, LLC

RRE Breckenridge Holdings, LLC

RRE Santa Rosa Holdings, LLC

RRE Windbrooke Holdings, LLC

RRE Woods Holdings, LLC

RRE Indigo Creek Holdings, LLC

RRE Martin's Point Holdings, LLC

The subsidiaries listed above are all incorporated in the State of Delaware.  

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated March 20, 2020, with respect to the consolidated financial statements included in the Annual Report of Resource Real Estate Opportunity REIT II, Inc. on Form 10-K for the year ended December 31, 2019. We consent to the incorporation by reference of said report in the Registration Statement of Resource Real Estate Opportunity REIT II, Inc. on Form S-3 (File No. 333-236040).

/s/ GRANT THORNTON LLP

Philadelphia, Pennsylvania

March 20, 2020

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Alan F. Feldman, certify that:

1) I have reviewed this annual report on Form 10-K for the year ended December 31, 2019 of Resource Real Estate Opportunity REIT II, Inc.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

March 20, 2020By:     /s/ Alan F. Feldman

Alan F. Feldman

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Steven R. Saltzman, certify that:

1) I have reviewed this annual report on Form 10-K for the year ended December 31, 2019 of Resource Real Estate Opportunity REIT II, Inc.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

March 20, 2020By:     /s/ Steven R. Saltzman

Steven R. Saltzman

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Resource Real Estate Opportunity REIT II, Inc. (“the Company”) on Form 10-K for the year ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Alan F. Feldman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

March 20, 2020By:     /s/ Alan F. Feldman

Alan F. Feldman

Chief Executive Officer

(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Resource Real Estate Opportunity REIT II, Inc. (“the Company”) on Form 10-K for the year ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Steven R. Saltzman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

March 20, 2020By:     /s/ Steven R. Saltzman

Steven R. Saltzman

Chief Financial Officer

(Principal Financial Officer)

EX-99.1

EXHIBIT 99.1

CONSENT OF INDEPENDENT VALUATION EXPERT

We hereby consent to the reference to our name and description of our role in the valuation process of Resource Real Estate Opportunity REIT II, Inc. ("the Company") being included or incorporated by reference to the Company's Registration Statement on Form S-3 (File No. 333-236040) and the related prospectus, included therein, by being filed on an Annual Report on Form 10K, to be filed on the date hereof. In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the Securities Act of 1933, as amended.

/s/ Duff & Phelps, LLC

Duff & Phelps, LLC

March 20, 2020

EX-99.2

EXHIBIT 99.2

FOURTH AMENDED AND RESTATED SHARE REDEMPTION PROGRAM

The board of directors of Resource Real Estate Opportunity REIT II, Inc., a Maryland corporation (the “Company”), has adopted a Fourth Amended and Restated Share Redemption Program (the “SRP”), the terms and conditions of which are set forth below. Capitalized terms shall have the same meaning as set forth in the Company’s charter unless otherwise defined herein.

1.Qualifying Stockholders. “Qualifying Stockholders” are holders, including authorized representatives of holders, of the Company’s shares of Common Stock (the “Shares”) who purchased their Shares directly from the Company and the transferees described in paragraph 5(b).

2.Share Redemption. Subject to the terms and conditions of this SRP, including the limitations on redemptions set forth in paragraph 4 and the procedures for redemption set forth in paragraph 5, the Company will redeem such number of Shares as requested by a Qualifying Stockholder on a periodic basis as determined from time to time by the board of directors and no less frequently than annually. The board of directors reserves the right in its sole discretion at any time to reject any request for redemption.

3.Redemption Price.

(a)Unless the Shares are being redeemed in connection with a stockholder’s death, Qualifying Disability (as defined in paragraph 7) or confinement to a long-term care facility (subject to the limitations set forth in paragraph 8), the Company will redeem Shares for Qualifying Stockholders at a purchase price equal to 95.0% of the Company’s most recent NAV per Share as of the applicable Redemption Date.

(b)The purchase price per Share for redemptions sought upon a Qualifying Stockholder’s death, Qualifying Disability, or confinement to a long-term care facility (provided that the condition causing such Qualifying Disability was not preexisting on the date that such person became a stockholder or that the stockholder was not confined to a long-term care facility on the date the person became a stockholder) will be equal to the Company’s most recent NAV per Share as of the applicable Redemption Date.  

4.Limitations on Redemption. Notwithstanding anything contained in this SRP to the contrary, the Company’s obligation to redeem Shares pursuant to paragraphs 2 and 6 hereof is limited by each of the following:

(a)Only the Shares held by Qualifying Stockholders are eligible for redemption.

(b)The Company has no obligation to redeem Shares if the redemption would violate the restrictions on distributions under Maryland General Corporation Law, as amended

1

from time to time, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.

(c)The Company will generally engage a third party to conduct a Uniform Commercial Code (“UCC”) search to ensure that no liens or encumbrances are held against the Shares presented for redemption. The Company will cover the cost for these searches. Shares that are not subject to liens or encumbrances will be eligible for redemption following the completion of the UCC search. The Company will not redeem Shares that are subject to liens or other encumbrances until the stockholder presents evidence that such liens or encumbrances have been removed.

(d)The Company will not redeem in excess of 5% of the weighted-average number of Shares outstanding during the 12-month period immediately prior to the effective date of redemption. The board of directors will determine at least quarterly whether the Company has sufficient excess cash to repurchase Shares. Generally, the cash available for redemption will be limited to proceeds from the distribution reinvestment plan plus, if the Company had positive operating cash flow from the previous fiscal year, 1% of all operating cash flow from the previous fiscal year.

5.Procedures for Redemption.

(a)A Qualifying Stockholder who wishes to have Shares redeemed must mail or deliver to the Company a written request on a form provided by the Company and executed by the stockholder, its trustee or authorized agent. An estate, heir or beneficiary that wishes to have Shares redeemed following the death of a stockholder must mail or deliver to the Company a written request on a form provided by the Company, including evidence acceptable to the board of directors of the death of the stockholder, and executed by the executor or executrix of the estate, the heir or beneficiary, or their trustee or authorized agent. A stockholder requesting the redemption of his or her Shares due to a Qualifying Disability or confinement to a long-term care facility must mail or deliver to the Company a written request on a form provided by the Company, including the evidence and documentation described below. If the Shares are to be redeemed under the conditions outlined herein, the Company will forward the documents necessary to affect the redemption, including any signature guaranty the Company may require. A request for redemption may be withdrawn in whole or in part by a stockholder in writing at any time prior to redemption.

(b)The Qualifying Stockholder or his or her estate, heir or beneficiary must certify to the Company that the stockholder acquired the Shares to be repurchased either (1) directly from the Company or (2) from the original investor by way of (i) a bona fide gift not for value to, or for the benefit of, a member of the investor’s immediate or extended family (including the investor’s spouse, parents, siblings, children or grandchildren and including relatives by marriage), (ii) through a transfer to a custodian, trustee or other fiduciary for the account of the investor or members of the investor’s immediate or extended family in connection with an estate planning transaction, including by bequest or inheritance upon death or (iii) operation of law.

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(c)The effective date of any redemption will be no earlier than the last day of the calendar month preceding the quarterly determination by the board of directors of the availability of funds for redemption (the “Redemption Date”). The Shares approved for redemption will accrue no distributions after the Redemption Date. In making the determination of the availability of funds for redemption, the board of directors will consider only properly completed redemption requests that the Company received on or before the last day of the calendar month preceding the determination of the availability of funds for redemption. Payment for the Shares so approved for redemption, assuming sufficient funds for redemption and the satisfaction of all necessary conditions, will be made no later than 15 days after the date of the directors’ action to determine the Shares approved for redemption.

(d)If the Company cannot accommodate a redemption request, the stockholder or his or her estate, heir or beneficiary can (1) withdraw the request for redemption, or (2) ask that the Company honor the request at such time, if any, when the limitations no longer prevent redemption. Such pending requests will be 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, Qualifying Disability, or confinement to a long-term care facility; next, pro rata as to redemptions to stockholders who demonstrate, in the discretion of the board of directors, other involuntary, exigent circumstances, such as bankruptcy; next, pro rata as to redemptions to stockholders subject to a mandatory distribution requirement under their IRAs; and, finally, pro rata as to other redemption requests. The advisor and its affiliates will defer their own redemption requests, if any, until all other requests for redemption have been met.

(e)A Qualifying Stockholder or his estate, heir or beneficiary may present to the Company fewer than all of the Shares then owned for redemption, except that the minimum number of Shares that must be presented for redemption shall be at least 25% of the holder’s Shares. Notwithstanding the foregoing, as little as 10% of a Qualifying Stockholder’s Shares may be presented for redemption if such redemption request is made within 270 days of the event giving rise to the special circumstances described in this sentence, where redemption is being requested (1) on behalf of a deceased stockholder; (2) by a stockholder with a Qualifying Disability or upon confinement to a long-term care facility; (3) by a stockholder due to other involuntary, exigent circumstances, such as bankruptcy; or (4) by a stockholder due to a mandatory distribution under such stockholder’s IRA; provided, however, that any future redemption request by such stockholder must present for redemption at least 25% of such stockholder’s remaining Shares.

(f)Except in the case of redemptions due to a mandatory distribution under a stockholder’s IRA, the Company will treat a redemption request that would cause the stockholder to own fewer than 250 Shares as a request to redeem all of such stockholder’s Shares, and the Company will vary from pro rata treatment of redemptions as necessary to avoid having stockholders holding fewer than 250 Shares.

(g)Subject to the restrictions in the Operating Partnership’s limited partnership agreement and any other applicable agreement, the Company may cause the Operating Partnership to offer to its limited partners (other than the Company’s subsidiaries) a partnership unit redemption program equivalent to the SRP. Any units redeemed under the

3

partnership unit redemption program will be redeemed upon terms substantially equivalent to the redemption terms of the SRP and will be treated as Shares for purposes of calculating the annual limitation on the number of Shares that may be redeemed under the SRP.

(h)Any Shares purchased by the Company pursuant to the SRP will be cancelled. Neither the Company’s advisor, nor any member of the board of directors of the Company nor any of their affiliates will receive any fee on the repurchase of Shares by the Company pursuant to the SRP. The foregoing provisions regarding the SRP in no way limit the Company’s ability to repurchase Shares from stockholders by any other legally available means.

6.Special Provisions upon a Stockholder’s Death, Qualifying Disability or Confinement to a Long-term Care Facility. The Company will treat redemption requests made upon a stockholder’s death, Qualifying Disability or confinement to a long-term care facility differently, as follows:

(a)Except as specifically set forth in this paragraph 6, redemptions upon a stockholder’s death, Qualifying Disability or confinement to a long-term care facility are subject to the same limitations and terms and conditions as other redemptions, including the limitations on redemptions set forth in paragraph 4 and the redemption request procedures set forth in paragraph 5.

(b)Subject to the conditions and limitations described herein, the Company will redeem Shares at the price described in paragraph 3(b) upon the death of a Qualifying Stockholder who is a natural person, including Shares held by such stockholder through a revocable grantor trust or an IRA or other retirement or profit-sharing plan, after receiving written notice from the estate of the stockholder, the recipient of the Shares through bequest or inheritance, or, in the case of a revocable grantor trust, the trustee of such trust, who shall have the sole ability to request redemption on behalf of the trust. The Company must receive the written notice within 270 days after the death of the Qualifying Stockholder. If spouses are joint registered holders of Shares, the request to redeem the Shares may be made if either of the registered holders dies. If the Qualifying Stockholder is not a natural person, such as a trust other than a revocable grantor trust, partnership, corporation or other similar entity, these special redemption rights upon death do not apply.

(c)Subject to the conditions and limitations described herein, the Company will redeem Shares at the price described in paragraph 3(b) held by a Qualifying Stockholder who is a natural person, including Shares held by such stockholder through a revocable grantor trust or an IRA or other retirement or profit-sharing plan, with a Qualifying Disability or upon confinement to a long-term care facility, after receiving written notice from such stockholder, provided that the condition causing the Qualifying Disability was not preexisting on the date that the person became a stockholder or that the stockholder seeking redemption was not confined to a long-term care facility on the date the person became a stockholder. The Company must receive written notice within 270 days after the determination of such stockholder’s Qualifying Disability or, with respect to redemptions sought upon a stockholder’s confinement to a long-term care facility, within 270 days of the earlier of (1) the one-year anniversary of the stockholder’s admittance to the long-term care facility or (2) the date of the determination of the

4

stockholder’s indefinite confinement to the long-term care facility by a licensed physician. If the stockholder is not a natural person, such as a trust (other than a revocable grantor trust), partnership, corporation or other similar entity, these special redemption rights do not apply.

7.Qualifying Disability Determinations. In order for a disability to entitle a stockholder to the special redemption terms described in paragraphs 5 and 6 (a “Qualifying Disability”), (1) the stockholder would have to receive a determination of disability based upon a physical or mental condition or impairment arising after the date the stockholder acquired the Shares to be redeemed, and (2) such determination of disability would have to be made by the governmental agency responsible for reviewing the disability retirement benefits that the stockholder could be eligible to receive (the “Applicable Government Agency”). The Applicable Government Agencies are limited to the following: (i) if the stockholder paid Social Security taxes and, therefore, could be eligible to receive Social Security disability benefits, then the applicable governmental agency would be the Social Security Administration or the agency charged with responsibility for administering Social Security disability benefits at that time if other than the Social Security Administration; (ii) if the stockholder did not pay Social Security taxes and, therefore, could not be eligible to receive Social Security disability benefits, but the stockholder could be eligible to receive disability benefits under the Civil Service Retirement System (“CSRS”), then the applicable governmental agency would be the U.S. Office of Personnel Management or the agency charged with responsibility for administering CSRS benefits at that time if other than the Office of Personnel Management; or (iii) if the stockholder did not pay Social Security taxes and therefore could not be eligible to receive Social Security benefits but suffered a disability that resulted in the stockholder’s discharge from military service under conditions that were other than dishonorable and, therefore, could be eligible to receive military disability benefits, then the applicable governmental agency would be the Department of Veterans Affairs or the agency charged with the responsibility for administering military disability benefits at that time if other than the Department of Veterans Affairs.

Disability determinations by governmental agencies for purposes other than those listed above, including but not limited to worker’s compensation insurance, administration or enforcement of the Rehabilitation Act or Americans with Disabilities Act, or waiver of insurance premiums would not entitle a stockholder to the special redemption terms described above. Redemption requests following an award by the applicable governmental agency of disability benefits would have to be accompanied by (1) the investor’s initial application for disability benefits and (2) a Social Security Administration Notice of Award, a U.S. Office of Personnel Management determination of disability under CSRS, a Department of Veterans Affairs Administration record of disability related discharge or such other documentation issued by the applicable governmental agency that the Company would deem acceptable and would demonstrate an award of the disability benefits.

We understand that the following disabilities do not entitle a worker to Social Security disability benefits: (i) disabilities occurring after the legal retirement age; (ii) temporary disabilities; and (iii) disabilities that do not render a worker incapable of performing substantial gainful activity.

5

Therefore, such disabilities would not qualify for the special redemption terms, except in the limited circumstances when the investor would be awarded disability benefits by the other “applicable governmental agencies” described above. However, where a stockholder requests the redemption of his or her Share due to a disability, and such stockholder does not have a “Qualifying Disability” under the terms described above, the board of directors may redeem the stockholder’s Shares in its sole discretion on the special terms available for a Qualifying Disability.

8.Stockholder Confinement to Long-term Care Facility. With respect to redemptions sought upon a Qualifying Stockholder’s confinement to a long-term care facility, a “long-term care facility” shall mean an institution that: (1) either (a) is approved by Medicare as a provider of skilled nursing care or (b) is licensed as a skilled nursing home by the state or territory in which it is located (it must be within the United States, Puerto Rico, or U.S. Virgin Islands) and (2) meets all of the following requirements: (a) its main function is to provide skilled, intermediate or custodial nursing care; (b) it provides continuous room and board to three or more persons; (c) it is supervised by a registered nurse or licensed practical nurse; (d) it keeps daily medical records of all medication dispensed; and (e) its primary service is other than to provide housing for residents. Where a stockholder seeks redemption of his or her Shares due to confinement to a long-term care facility, the stockholder must submit a written statement from a licensed physician certifying either (1) the stockholder’s continuous and continuing confinement to a long-term care facility over the course of the last year or (2) that the licensed physician has determined that the stockholder will be indefinitely confined to a long-term care facility. Notwithstanding the above, where a stockholder requests redemption of his or her Shares due to confinement to a long-term care facility, and such stockholder does not meet the definition set forth above, the board of directors may redeem the stockholder’s Shares in its sole discretion on the special terms available for confinement to a long-term care facility.

9.Termination, Suspension or Amendment of the SRP by the Company. The board of directors, in its sole discretion, may suspend, terminate or amend the SRP upon 30 days’ notice if it determines that such suspension, termination or amendment is in the Company’s best interest. The board of directors may also reduce the number of Shares purchased under the SRP if it determines the funds otherwise available to fund the SRP are needed for other purposes. These limitations apply to all redemptions, including redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility. The SRP is intended to provide interim liquidity for Qualifying Stockholders until a secondary market develops for the Shares. The SRP will terminate if the Shares are listed for trading on a national securities exchange.

10.Address for Notice of Redemption Requests. Qualifying Stockholders who desire to redeem their Shares must provide written notice to the Company on the form provided by the Company.

11.Liability of the Company. The Company shall not be liable for any act done in good faith or for any good faith omission to act.

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XML

Identified Intangible Assets, Net (Details) - Acquired in-place leases - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Finite-Lived Intangible Assets [Line Items]
Gross value of leases	$ 17,300,000	$ 18,500,000
Acquired in-place leases, accumulated amortization	17,300,000	18,500,000
Amortization expense	$ 0	$ 813,000

XML

Restricted Cash (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash	$ 6,534	$ 7,813
Unrestricted cash designated for capital expenditures	21,706	28,021
Real Estate Taxes
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash	3,956	5,107
Insurance
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash	877	779
Capital Improvements
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash	1,380	1,358
Other
Restricted Cash and Cash Equivalents Items [Line Items]
Restricted cash	$ 321	$ 569

XML

Mortgage Notes Payable, Net - Deferred Finance Costs (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Debt Disclosure [Abstract]
2020	$ 1,052
2021	1,025
2022	862
2023	671
2024	355
Thereafter	434
Total deferred finance costs	$ 4,399

XML

Operating Expenses (Details)	12 Months Ended
	Dec. 31, 2019
Other Income And Expenses [Abstract]
Operating support from advisor, required reimbursement when threshold exceeded, commencement period	12 months
Limitation on total operating expenses, percentage of average invested assets for the four most recently completed fiscal quarter	2.00%
Limitation on total operating expenses, percentage of net income for the four most recently completed fiscal quarter	25.00%

XML

Rental Properties, Net (Tables)

12 Months Ended

Dec. 31, 2019

Real Estate [Abstract]

Schedule of Investments in Rental Properties

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

	December 31, 2019			December 31, 2018
Land	$	119,028		$	119,028
Building and improvements		720,420			716,839
Furniture, fixtures and equipment		25,906			23,903
Construction in progress		1,955			490
		867,309			860,260
Less: accumulated depreciation		(131,779	)		(92,522	)
	$	735,530		$	767,738
Assets held for sale - rental properties		-			42,863
	$	735,530		$	810,601

XML

Derivatives and Hedging Activities

12 Months Ended

Dec. 31, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivatives and Hedging Activities

NOTE 13 - DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

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

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

Interest Rate Caps

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

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the year ended December 31, 2019, such derivatives were used to hedge the variable cash flows, indexed to USD-London InterBank Offered Rate ("LIBOR"), associated with an existing variable-rate loan agreement.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next 12 months, the Company estimates that an additional $95,018 will be reclassified as an increase to interest expense.

Cancelable swaps

To manage its exposure to interest rate movements, the Company has also entered into a cancelable interest rate swap that was not designated as a hedging instrument. Interest rate swaps involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.  Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements but do not meet the strict hedge accounting requirements.

As of December 31, 2019, the Company had the following outstanding interest rate derivatives (dollars in thousands):

Interest Rate Derivative	Number of Instruments	Notional Amount		Maturity Dates
Derivatives designated as hedging instruments:
Interest rate caps	12	$	408,632	January 1, 2020 through July 1, 2023

Tabular Disclosure of Fair Value of Derivative Instrument on the Balance Sheet

The table below presents the fair value of the Company’s derivative financial instruments on the consolidated balance sheets as of December 31, 2019 and 2018 (in thousands):

Asset Derivatives						Liabilities Derivatives
December 31, 2019			December 31, 2018			December 31, 2019			December 31, 2018
Balance Sheet	Fair Value		Balance Sheet	Fair Value		Balance Sheet	Fair Value		Balance Sheet	Fair Value
Derivatives designated as hedging instruments:
Interest rate caps	$	9	Interest rate caps	$	27	NA	$	—	NA	$	—
Derivatives not designated as hedging instruments:
Cancelable swap	NA		NA	NA		NA	NA		NA	$	—

Interest rate caps and the cancelable swap are included in Prepaid expenses and other assets on the consolidated balance sheets.

The table below presents the effect of the Company's derivative financial instruments on the consolidated statements of operations and comprehensive loss for the years ended December 31, 2019 and 2018 (in thousands):

		Amount of Gain (Loss) Recognized in Income for the Years Ended
Derivatives Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income	December 31, 2019			December 31, 2018
Interest rate caps	Interest expense	$	(285	)	$	(108	)

		Amount of Gain (Loss) Recognized in Income for the Years Ended
Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income	December 31, 2019		December 31, 2018
Cancelable swap	Interest expense	$	—	$	287

	Amount of Gain (Loss) Recognized in OCI on Derivative for the Years Ended						Location of Gain (Loss) Reclassified from Accumulated	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income for the Years Ended
Derivatives in Cash Flow Hedging Relationships	December 31, 2019			December 31, 2018			OCI into Income (Effective Portion)	December 31, 2019			December 31, 2018
Interest rate products	$	(95	)	$	(43	)	Interest expense	$	(285	)	$	(108	)

Credit-risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the company could also be declared in default on its derivative obligations. As of December 31, 2019, the Company has not posted any collateral related to these agreements.

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with the accounting principles generally accepted in the United States of America ("GAAP").

Principles of Consolidation

Principles of Consolidation

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

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

N/A - Not Applicable

(1) Property was sold on February 28, 2019

All intercompany accounts and transactions have been eliminated in consolidation.

Segment Reporting

Segment Reporting

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

Use of Estimates

Use of Estimates

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

Concentration of Credit Risk

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentration of credit risk, consist of periodic temporary deposits of cash. At December 31, 2019, the Company had $46.1 million of deposits at various banks, $38.7 million of which were over the insurance limit of the Federal Deposit Insurance Corporation.  No losses have been experienced on such deposits.

Rental Properties

Rental Properties

The Company records acquired real estate at fair value on their acquisition date. The Company considers the period of future benefit of an asset to determine its appropriate useful life, and depreciates the asset using the straight line method.  The Company's estimated useful lives of its assets by class are as follows:

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

Improvements and replacements in excess of $1,000 are capitalized when they have a useful life greater than or equal to one year. The Manager earns a construction management fee of 5.0% of actual aggregate costs to construct improvements, or to repair, rehab or reconstruct a property. These costs are capitalized along with the related asset. Costs of repairs and maintenance are expensed as incurred.

As of December 31, 2019, the Company's real estate investments located in Texas, Illinois, Colorado, Oregon and Georgia represent approximately 19.6%, 18.9%, 15.6%, 14.1% and 9.1% of the portfolio. This makes it particularly susceptible to adverse economic developments in these real estate markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for multifamily rentals resulting from the local business climate, could negatively affect the Company's liquidity and adversely affect its ability to fund its ongoing operations.

Impairment of Long Lived Assets

Impairment of Long Lived Assets

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

If impairment exists, due to the inability to recover the carrying value of a property, an impairment loss will be recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income. The Company did not recognize any impairment charges during the years ended December 31, 2019 and 2018.

Allocation of Purchase Price of Acquired Assets

Allocation of Purchase Price of Acquired Assets

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

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

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

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

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

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

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

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

Revenue Recognition

Revenue Recognition

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

The future minimum rental payments to be received from noncancelable operating leases are approximately $41.4 million and $586,000 for the years ending December 31, 2020 and 2021, and none thereafter.

Revenue is primarily derived from the rental of residential housing units for which the Company receives minimum rents and utility reimbursements pursuant to underlying tenant lease agreements.  The Company also receives other ancillary fees for administration of leases, late payments and amenities, which are charged to residents and recognized monthly as earned. The Company elected the practical expedient to not separate lease and non-lease components and has presented property revenues combined based upon the lease being determined the predominant component. The Company also has revenue sharing arrangements of cable income from contracts with cable providers at the Company's properties. Included in accrued expenses and other liabilities on the consolidated balance sheets at December 31, 2019 and 2018 is a $573,000 and $666,000 contract liability related to deferred revenue from contracts with cable providers. The Company recognizes income from these contracts on a straight line basis over the contract period of 10 years to 12 years. During the years ended December 31, 2019 and 2018, approximately $138,000 and $71,100, respectively of revenue from the contract liability was recognized as income.

Tenant Receivables

Tenant Receivables

The Company makes estimates of the collectability of its tenant receivables related to base rents, including straight-line rentals, expense reimbursements and other revenue or income.  The Company specifically analyzes accounts receivable and historical bad debts, tenant creditworthiness, current economic trends when evaluating the adequacy of the allowance for doubtful accounts.  In addition, with respect to tenants in bankruptcy, the Company makes estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectability of the related receivable.  In some cases, the ultimate resolution of these claims can exceed one year.  At December 31, 2019 and 2018, there were allowances for uncollectible receivables of $44,186 and $13,901, respectively.

Income Taxes

Income Taxes

The Company elected to be taxed as a REIT, commencing with its taxable year ended December 31, 2014. To maintain its REIT qualification for U.S. federal income tax purposes, the Company is generally required to distribute at least 90% of its taxable net income (excluding net capital gains) to its stockholders as well as comply with other requirements, including certain asset, income and stock ownership tests. As a REIT, the Company is not subject to federal corporate income tax to the extent that it distributes 100% of its REIT taxable income each year. If the Company fails to qualify as a REIT, and does not qualify for certain statutory relief provisions, it is subject to U.S. federal, state and local income taxes and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year in which it fails its REIT qualification. Accordingly, the Company’s failure to qualify as a REIT could have a material adverse impact on its results of operations and amounts available for distribution to its stockholders.

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

The Company may elect to treat certain of its subsidiaries as taxable REIT subsidiaries (“TRS”). In general a TRS may hold assets and engage in activities that the Company cannot hold or engage in directly and generally may engage in any real estate or non-real estate-related business.  A TRS is subject to U.S. federal, state and local corporate income taxes. While a TRS may generate net income, a TRS can declare dividends to the Company which will be included in the Company’s taxable income and necessitate a distribution to its stockholders. Conversely, if the Company retains earnings at a TRS level, no distribution is required and the Company can increase book equity of the consolidated entity. As of December 31, 2019 and 2018, the Company did not treat any of its subsidiaries as a TRS.

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

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

Earnings Per Share

Earnings Per Share

Basic earnings (loss) per share is calculated on the basis of weighted-average common shares outstanding during the year. Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted-average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted to common stock. None of the 50,000 convertible shares (see Note 11) are included in the diluted earnings per share calculations because the necessary conditions for conversion have not been satisfied as of December 31, 2019 (were such date to represent the end of the contingency period).  For the year ended December 31, 2019 and 2018, common shares potentially issuable to settle distributions payable are excluded from the calculation of diluted earnings per share calculations, as their inclusion would be anti-dilutive.

Adoption of New Accounting Standards

Adoption of New Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, "Leases" ("ASU

No. 2016-02"), which was amended by ASU No. 2018-09 "Codification Improvements" in July 2018. ASU No. 2016-02, as

amended, is intended to improve financial reporting related to leasing transactions and requires organizations that lease assets

to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. In September 2017, the FASB issued ASU No. 2017-13, "Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic

606), Leases (Topic 840), and Leases (Topic 842)", which provides additional implementation guidance on the previously issued ASU No. 2016-02. The Company adopted these standards as of January 1, 2019, and the adoption did not have a material effect on the Company's consolidated financial statements and disclosures. For operating leases where the Company is the lessor, the underlying leased asset is recognized as real estate on the balance sheet. The Company has chosen to apply the practical expedient (discussed in ASU No. 2018-11, “Leases: Targeted Improvements”) to nonlease component revenue streams and account for them as a combined component with leasing revenue. The Company elected the package of practical expedients permitted within the new standard, which among other things, allows the Company to carry forward the historical lease classification. Also allowable under the new standard (ASU No. 2018-11) is the option, which the Company has elected, to present the operating lease ROU asset and operating lease liabilities as of January 1, 2019 and not restate prior periods. No cumulative impact adjustment was necessary to opening retained earnings as of January 1, 2019. For certain equipment leases, such as copiers, the Company applied a portfolio approach to effectively account for the operating lease ROU assets and liabilities.

In August 2017, FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): targeted Improvements to Accounting for Hedging Activities", which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. The Company adopted the standard on January 1, 2019, and the adoption did not have a significant impact on its consolidated financial statements.

In June 2018, FASB issued ASU 2018-07 “Improvements to Nonemployee Share-Based Payment Accounting” to simplify the accounting for share-based payment transactions for acquiring goods and services from nonemployees by including these payments in the scope of the guidance for share-based payments to employees. The Company adopted the standard on January 1, 2019, and the adoption did not have a significant impact on its consolidated financial statements.

In July 2018, FASB issued ASU 2018-09, "Codification Improvements." This standard does not prescribe any new accounting guidance, but instead makes minor improvements and clarifications of several different FASB Accounting Standards Codification areas based on comments and suggestions made by various stakeholders. The Company adopted the standard on January 1, 2019, and the adoption did not have a significant impact on its consolidated financial statements.

In October 2018, FASB issued ASU No. 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes”. ASU No. 2018-16 permits the use of the Overnight Index Swap (“OIS”) Rate based on the Secured Overnight Financing Rate as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to the interest rates on direct Treasury obligations of the U.S. government, the London Interbank Offered Rate (“LIBOR”) and the OIS Rate based on the Federal Funds Effective Rate. For entities that have not already adopted ASU No. 2017-12, the amendments in ASU No. 2018-16 are required to be adopted concurrently with the amendments in ASU No. 2017-12. . The Company adopted the standard on January 1, 2019, and the adoption did not have a significant impact on its consolidated financial statements.

Accounting Standards Issued But Not Yet Effective

In June 2016, FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses”, which requires measurement and recognition of expected credit losses for financial assets held. ASU No. 2016-13 which will be effective for the Company beginning January 1, 2020. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU No. 2016-13 to have a significant impact on its consolidated financial statements and disclosures due to the fact that the Company did not have instruments subject to this guidance at December 31, 2019.

In January 2017, FASB issued ASU No. 2017-04, "Intangibles- Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment", which alters the current goodwill impairment testing procedures. ASU No. 2017-04 will be effective for the Company beginning January 1, 2020. Early application is permitted. The Company is evaluating this guidance and assessing the impact of this guidance on its consolidated financial statements. Since the Company has no recorded goodwill, there is no expected impact upon adoption.

In August 2018, FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” This update removes, modifies and adds certain disclosure requirements in FASB ASC 820, “Fair Value Measurement” (“ASC 820”). ASU No. 2018-13 will be effective for the Company beginning January 1, 2020 and early adoption is permitted.  The Company is continuing to evaluate this guidance; however, the Company does not expect the adoption of ASU No. 2018-13 to have a significant impact on its consolidated financial statements.

In November 2018, FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842, Leases. ASU 2018-19 is effective on January 1, 2020, with early adoption permitted. The Company is evaluating this guidance; however, it does not expect that adoption of ASU 2018-19 will have a significant impact on its consolidated financial statements. Information regarding the adoption of ASC 842 is described above.

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Rental Properties, Net

12 Months Ended

Dec. 31, 2019

Real Estate [Abstract]

Rental Properties, Net

NOTE 5 - RENTAL PROPERTIES, NET

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

	December 31, 2019			December 31, 2018
Land	$	119,028		$	119,028
Building and improvements		720,420			716,839
Furniture, fixtures and equipment		25,906			23,903
Construction in progress		1,955			490
		867,309			860,260
Less: accumulated depreciation		(131,779	)		(92,522	)
	$	735,530		$	767,738
Assets held for sale - rental properties		-			42,863
	$	735,530		$	810,601

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

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Accumulated Other Comprehensive Loss

12 Months Ended

Dec. 31, 2019

Equity [Abstract]

Accumulated Other Comprehensive Loss

NOTE 9 – ACCUMULATED OTHER COMPREHENSIVE LOSS

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

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

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Derivatives and Hedging Activities (Tables)

12 Months Ended

Dec. 31, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Outstanding Interest Rate Derivatives

As of December 31, 2019, the Company had the following outstanding interest rate derivatives (dollars in thousands):

Interest Rate Derivative	Number of Instruments	Notional Amount		Maturity Dates
Derivatives designated as hedging instruments:
Interest rate caps	12	$	408,632	January 1, 2020 through July 1, 2023

Fair Value of Derivative Financial Instruments and Balance Sheet Classification

The table below presents the fair value of the Company’s derivative financial instruments on the consolidated balance sheets as of December 31, 2019 and 2018 (in thousands):

Asset Derivatives						Liabilities Derivatives
December 31, 2019			December 31, 2018			December 31, 2019			December 31, 2018
Balance Sheet	Fair Value		Balance Sheet	Fair Value		Balance Sheet	Fair Value		Balance Sheet	Fair Value
Derivatives designated as hedging instruments:
Interest rate caps	$	9	Interest rate caps	$	27	NA	$	—	NA	$	—
Derivatives not designated as hedging instruments:
Cancelable swap	NA		NA	NA		NA	NA		NA	$	—

Effect of Derivative Financial Instruments on The Consolidated Statements of Operations and Comprehensive Loss

The table below presents the effect of the Company's derivative financial instruments on the consolidated statements of operations and comprehensive loss for the years ended December 31, 2019 and 2018 (in thousands):

		Amount of Gain (Loss) Recognized in Income for the Years Ended
Derivatives Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income	December 31, 2019			December 31, 2018
Interest rate caps	Interest expense	$	(285	)	$	(108	)

		Amount of Gain (Loss) Recognized in Income for the Years Ended
Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income	December 31, 2019		December 31, 2018
Cancelable swap	Interest expense	$	—	$	287

	Amount of Gain (Loss) Recognized in OCI on Derivative for the Years Ended						Location of Gain (Loss) Reclassified from Accumulated	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income for the Years Ended
Derivatives in Cash Flow Hedging Relationships	December 31, 2019			December 31, 2018			OCI into Income (Effective Portion)	December 31, 2019			December 31, 2018
Interest rate products	$	(95	)	$	(43	)	Interest expense	$	(285	)	$	(108	)

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Accumulated Other Comprehensive Loss (Tables)

12 Months Ended

Dec. 31, 2019

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Loss

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

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

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Summary of Significant Accounting Policies - Estimated Useful Lives (Details)	12 Months Ended
	Dec. 31, 2019
Buildings
Property, Plant and Equipment [Line Items]
Real estate investments, useful life	27 years 6 months
Building improvements | Minimum
Property, Plant and Equipment [Line Items]
Real estate investments, useful life	5 years
Building improvements | Maximum
Property, Plant and Equipment [Line Items]
Real estate investments, useful life	27 years 6 months
Furniture and fixtures | Minimum
Property, Plant and Equipment [Line Items]
Real estate investments, useful life	3 years
Furniture and fixtures | Maximum
Property, Plant and Equipment [Line Items]
Real estate investments, useful life	5 years

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Consolidated Balance Sheets (Parentheticals) - $ / shares	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	1,000,000,000	1,000,000,000
Common stock, shares issued (in shares)	60,094,623	61,378,367
Common stock, shares outstanding (in shares)	60,094,623	61,378,367
Convertible Stock
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	50,000	50,000
Common stock, shares issued (in shares)	50,000	50,000
Common stock, shares outstanding (in shares)	50,000	50,000	50,000

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Consolidated Statements of Cash Flows (Parentheticals) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Statement Of Cash Flows [Abstract]
Cash	$ 39,647	$ 40,175
Restricted cash	6,534	7,813
Subtotal - cash and restricted cash	$ 46,181	$ 47,988	$ 76,895

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Derivatives and Hedging Activities - Narrative (Details)	Dec. 31, 2019 USD ($)
Derivative Instruments And Hedging Activities Disclosure [Abstract]
Estimated loss that will be reclassified to interest expense	$ 95,018

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Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Balance, beginning of period	$ 263,466	$ 330,660
Unrealized loss on designated derivatives	190	65
Balance, end of period	216,313	263,466
Accumulated Net Gain (Loss) from Cash Flow Hedges Attributable to Parent
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Balance, beginning of period	(379)	(444)
Reclassification adjustment for realized loss on designated derivatives	268	130
Unrealized loss on designated derivatives	(78)	(65)
Balance, end of period	$ (189)	$ (379)

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Equity - Common Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Class of Stock [Line Items]
Common stock, shares outstanding (in shares)	60,094,623	61,378,367
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, outstanding	$ 600	$ 612
Shares Issued (in shares)	60,094,623	61,378,367
Gross Proceeds	$ 641,695
Shares issued before redemption and retirement (in shares)	65,879,093
Share redeemed and retired (in shares)	(5,784,470)
Shares issued through initial public offering
Class of Stock [Line Items]
Shares Issued (in shares)	55,791,297
Gross Proceeds	$ 556,197
Shares issued through stock distributions
Class of Stock [Line Items]
Shares Issued (in shares)	246,365
Gross Proceeds	$ 0
Shares issued through distribution reinvestment plan
Class of Stock [Line Items]
Shares Issued (in shares)	9,826,431
Gross Proceeds	$ 85,348
Advisor's initial investment, net of 5,000 share conversion
Class of Stock [Line Items]
Shares Issued (in shares)	15,000
Gross Proceeds	$ 150
Conversion of stock (in shares)	5,000
Advisor
Class of Stock [Line Items]
Common stock, shares outstanding (in shares)	117,778
Common stock, outstanding	$ 1,100

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Disposition of Property

12 Months Ended

Dec. 31, 2019

Discontinued Operations And Disposal Groups [Abstract]

Disposition of Property

NOTE 6 – DISPOSITION OF PROPERTY

The following table presents details of the Company’s disposition activity during the year ended December 31, 2019 (in thousands):

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

(1) Excludes net gain on disposition

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Related Party Transactions

12 Months Ended

Dec. 31, 2019

Related Party Transactions [Abstract]

Related Party Transactions

NOTE 10 – RELATED PARTY TRANSACTIONS

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

Relationship with the Advisor

Pursuant to the terms of the Advisory Agreement, the Advisor provides the Company with the services of its management team, including its officers, along with appropriate support personnel.  The Advisor will be reimbursed for the Company’s allocable share of costs for Advisor personnel, including allocable personnel salaries and benefits.  Each of the Company’s officers is an employee of the Sponsor or one of its affiliates.  The Company does not have any employees.  The Advisor is not obligated to dedicate any specific portion of its time or the time of its personnel to the Company’s business.  The Advisor is at all times subject to the supervision and oversight of the Company’s Board of Directors and has only such functions and authority as the Company delegates to it.

The Advisory Agreement has a one-year term and renews for an unlimited number of successive one-year terms upon the approval of the Conflicts Committee of the Company's Board of Directors. Under the Advisory Agreement, the Advisor receives fees and is reimbursed for its expenses as set forth below:

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

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

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

Debt financing fees. The Advisor earns a debt financing fee equal to 0.5% of the amount available under any debt financing obtained.

Expense reimbursements. The Company also pays directly or reimburses the Advisor for all of the expenses paid or incurred by the Advisor or its affiliates on behalf of the Company or in connection with providing services to the Company, including the Company’s allocable share of costs for Advisor personnel and overhead, out-of-pocket expenses incurred in connection with the selection and acquisition of properties or other real estate related debt investments, whether or not the Company ultimately acquires the investment. However, the Company will not reimburse the Advisor or its affiliates for employee costs in connection with services for which the Advisor earns acquisition or disposition fees.

Relationship with RAI and C-III

Property loss pool: Until February 28, 2019, the Company's properties participated in a property loss self-insurance pool with other properties directly and indirectly managed by RAI and C-III, which was backed by a catastrophic insurance policy. Substantially all of the receivables from related parties represented insurance deposits held in escrow by RAI and C-III related to the self-insurance pool, which were returned to the Company. The pool covered losses up to $2.5 million, in aggregate, after a $25,000 deductible per incident.  Claims beyond the insurance pool limits were covered by the catastrophic insurance policy, which covered claims up to $250 million, after either a $25,000 or $100,000 deductible per incident, depending on location and/or type of loss.

Beginning March 1, 2019, the Company now participates (with other properties directly or indirectly managed by RAI and C-III) only in the catastrophic insurance policy, which covers claims up to $250.0 million, after either a $25,000 or a $100,000 deductible per incident, depending on the location and/or type of loss. Therefore, unforeseen or catastrophic losses in excess of the Company's insured limits could have a material adverse effect on the Company's financial condition and operating results. Substantially all of the receivables from related parties represent insurance deposits held in escrow by RAI and C-III to the self-insurance pool which, if unused, will be returned to the Company.

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

Directors and officers insurance: The Company participates in a liability insurance program for directors and officers coverage with other C-III managed entities and subsidiaries for coverage up to $100.0 million.

Internal audit fees. RAI performs internal audit services for the Company.

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

Relationship with the Manager

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

Property management fees. The Manager earns a property management fee equal to 4.5% of actual gross cash receipts from the operations of real property investments.

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

Debt servicing fees. The Manager earns a debt servicing fee of 2.75% on payments received from loans held by the Company for investment. No debt servicing fees were earned during the years ended December 31, 2019 and 2018.

Expense reimbursement. During the ordinary course of business, the Manager or other affiliates of RAI may pay certain shared operating expenses on behalf of the Company for which they are reimbursed by the Company.

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

	December 31, 2019		December 31, 2018
Due from related parties:
RAI - self-insurance funds held		33		57
Operating expense reimbursements		264		-
	$	297	$	57
Due to related parties:
Advisor
Operating expense reimbursements		6		133
Manager
Property management fees		328		329
Operating expense reimbursements		96		97
RAI
Internal audit fees		-		25
Properties
Meridian		2		-
	$	432	$	584

	Years Ended
	December 31,
	2019		2018
Fees earned / expenses incurred:
Advisor
Asset management fees (1)	$	9,374	$	9,840
Debt financing fees (2)	$	39	$	78
Operating expense reimbursements (3)	$	3,462	$	3,708
Manager
Property management fees (1)	$	3,834	$	3,888
Construction management fees (4)	$	255	$	859
Construction payroll reimbursements (4)	$	63	$	121
Operating expense reimbursements (3)	$	70	$	201

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

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

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

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

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Summary of Significant Accounting Policies (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Property, Plant and Equipment [Line Items]
Deposits at various banks	$ 46,100,000
Cash, uninsured amount	38,700,000
Improvements and replacements in excess of threshold, capitalized amount	$ 1,000
Improvements and replacements, useful life greater than or equal to one year, capitalization threshold (in years)	1 year
Management fee (as percent)	5.00%
Impairment of real estate	$ 0	$ 0
Future minimum rental payments to be received from noncancelable operating leases, current	41,400,000
Future minimum rental payments to be received from noncancelable operating leases, in two years	586,000
Future minimum rental payments to be received from noncancelable operating leases, thereafter	$ 0
Resolution of claims	1 year
Allowance for uncollectible receivables	$ 44,186	$ 13,901
Minimum distribution percentage of taxable net income excluding net capital gains	90.00%
Distribution percentage of taxable net income not subject to federal corporate income tax	100.00%
Number of years entity may be precluded from REIT qualifications	4 years
Common stock, shares outstanding (in shares)	60,094,623	61,378,367
Convertible Stock
Property, Plant and Equipment [Line Items]
Common stock, shares outstanding (in shares)	50,000	50,000	50,000
ASU No 2014-09
Property, Plant and Equipment [Line Items]
Revenue recognized from contract with customer liability	$ 138,000	$ 71,100
Minimum | ASU No 2014-09
Property, Plant and Equipment [Line Items]
Revenue recognized over straight line basis term	10 years
Maximum | ASU No 2014-09
Property, Plant and Equipment [Line Items]
Revenue recognized over straight line basis term	12 years
Accounts Payable And Accrued Liabilities | ASU No 2014-09
Property, Plant and Equipment [Line Items]
Contract with customer liability	$ 573,000	$ 666,000
Texas | Geographic concentration risk
Property, Plant and Equipment [Line Items]
Real estate investment	19.60%
Illinois | Geographic concentration risk
Property, Plant and Equipment [Line Items]
Real estate investment	18.90%
Colorado | Geographic concentration risk
Property, Plant and Equipment [Line Items]
Real estate investment	15.60%
Oregon | Geographic concentration risk
Property, Plant and Equipment [Line Items]
Real estate investment	14.10%
Georgia | Geographic concentration risk
Property, Plant and Equipment [Line Items]
Real estate investment	9.10%

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Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Investments:
Rental properties, net	$ 735,530	$ 767,738
Identified intangible assets, net	0	0
Assets held for sale - rental properties	0	42,863
Total investments	735,530	810,601
Cash	39,647	40,175
Restricted cash	6,534	7,813
Subtotal - cash and restricted cash	46,181	47,988
Tenant receivables	107	73
Due from related parties	297	57
Prepaid expenses and other assets	2,147	2,009
Total assets	784,262	860,728
Liabilities:
Mortgage notes payable, net	547,875	573,642
Accounts payable and accrued expenses	11,502	12,046
Due to related parties	432	584
Tenant prepayments	634	642
Security deposits	1,513	1,470
Distribution payable	5,993	8,878
Total liabilities	567,949	597,262
Stockholders’ equity:
Preferred stock (par value $.01, 10,000,000 shares authorized, none issued and outstanding)	0	0
Common stock, outstanding	600	612
Additional paid-in capital	528,464	539,493
Accumulated other comprehensive loss	(189)	(379)
Accumulated deficit	(312,563)	(276,261)
Total stockholders’ equity	216,313	263,466
Total liabilities and stockholders’ equity	784,262	860,728
Convertible Stock
Stockholders’ equity:
Common stock, outstanding	1	1
Total stockholders’ equity	$ 1	$ 1

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Cash flows from operating activities:
Net loss	$ (11,944)	$ (35,441)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Loss on disposal of assets	219	522
Net gain on disposition of property	(20,619)	0
Casualty (gain) loss	552
Depreciation and amortization	39,599	41,424
Amortization of deferred financing costs	1,104	1,318
Amortization of mortgage premiums	(113)	(116)
Change in fair value of interest rate caps		55
Changes in operating assets and liabilities:
Tenant receivables	(33)	14
Due from related parties	(240)
Prepaid expenses and other assets	(1)	(2)
Due to related parties	(151)	46
Accounts payable and accrued expenses	535	(2,013)
Tenant prepayments	16	67
Security deposits	98	158
Net cash provided by operating activities	9,022	6,032
Cash flows from investing activities
Proceeds from disposal of property, net of closing costs	32,882
Capital expenditures	(8,156)	(15,097)
Net cash provided by (used in) investing activities	24,726	(15,097)
Cash flows from financing activities:
Redemptions of common stock	(25,765)	(15,877)
Payment of deferred financing costs	(445)	(503)
Increase in borrowings	8,946	17,439
Repayments on borrowings	(5,760)	(4,660)
Purchase of interest rate caps	(11)	(66)
Distributions paid on common stock	(12,520)	(16,175)
Net cash used in financing activities	(35,555)	(19,842)
Net decrease in cash and restricted cash	(1,807)	(28,907)
Cash and restricted cash at beginning of year	47,988	76,895
Cash and restricted cash at end of year	$ 46,181	$ 47,988

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Fair Value Measures and Disclosures (Tables)

12 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

Assets Measured at Fair Value on a Recurring Basis

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

	Level 1		Level 2		Level 3		Total
December 31, 2019
Assets:
Interest rate caps	$	—	$	9	$	—	$	9
Cancelable swap		—		—		—		—
	$	—	$	9	$	—	$	9
December 31, 2018
Assets:
Interest rate caps	$	—	$	27	$	—	$	27
Cancelable swap		—		—		—		—
	$	—	$	27	$	—	$	27

Carrying Amounts and Fair Values of Mortgage Notes Payable

The outstanding balance and estimated fair value of the Company’s mortgage notes payable are as follows (in thousands):

	December 31, 2019				December 31, 2018
	Outstanding Balance		Estimated Fair Value		Outstanding Balance		Estimated Fair Value
Mortgage notes payable	$	552,074	$	545,249	$	578,826	$	580,925

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Mortgage Notes Payable, Net (Tables)

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Summary of Mortgage Notes Payable

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

	December 31, 2019									December 31, 2018
Collateral	Outstanding borrowings		Premium, net		Deferred Financing Costs, net			Carrying Value		Outstanding borrowings		Premium, net		Deferred Financing Costs, net			Carrying Value
Overton Trails Apartment Homes	$	-	$	—	$	-		$	-	$	29,841	$	—	$	(246	)	$	29,595
Uptown Buckhead		19,264		—		(178	)		19,086		19,651		—		(213	)		19,438
Crosstown at Chapel Hill		42,650		—		(325	)		42,325		42,650		—		(386	)		42,264
The Brookwood - Key Bank		17,063		186		(88	)		17,161		17,477		291		(137	)		17,631
The Brookwood - Capital One		2,566		14		(15	)		2,565		2,613		22		(24	)		2,611
Adair off Addison and Adair    off Addison Apartment Homes		33,210		—		(380	)		32,830		24,629		—		(233	)		24,396
1000 Spalding Crossing		23,737		—		(113	)		23,624		24,195		—		(171	)		24,024
Montclair Terrace		19,958		—		(182	)		19,776		20,312		—		(234	)		20,078
Grand Reserve		47,845		—		(539	)		47,306		47,845		—		(606	)		47,239
Verdant Apartment Homes		36,913		—		(178	)		36,735		37,300		—		(233	)		37,067
Arcadia Apartment Homes		39,782		—		(195	)		39,587		40,200		—		(256	)		39,944
Ravina Apartment Homes		26,241		—		(165	)		26,076		26,951		—		(239	)		26,712
81 Fifty at West Hills Apartment    Homes		51,833		—		(368	)		51,465		52,645		—		(477	)		52,168
The Palmer at Las Colinas		45,700		—		(437	)		45,263		45,700		—		(506	)		45,194
Windbrooke Crossing		37,222		—		(272	)		36,950		37,788		—		(343	)		37,445
Woods of Burnsville		37,744		—		(355	)		37,389		38,250		—		(445	)		37,805
Indigo Creek		40,402		—		(320	)		40,082		40,789		—		(397	)		40,392
Martin's Point		29,944		—		(289	)		29,655		29,990		—		(351	)		29,639
	$	552,074	$	200	$	(4,399	)	$	547,875	$	578,826	$	313	$	(5,497	)	$	573,642

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

	Maturity Date		Margin over LIBOR			Annual Interest Rate			Average Monthly Debt Service		Average Monthly Escrow
Overton Trails Apartment Homes		—		—			—		$	-	$	-	(8)
Uptown Buckhead	7/1/2025			2.22	%		3.98	%	$	104	$	63	(1) (3) (5)
Crosstown at Chapel Hill	7/1/2025			1.77	%		3.53	%	$	142	$	279	(1) (3) (4) (7)
The Brookwood - Key Bank	11/1/2021			—			4.73	%	$	104	$	54	(2) (6)
The Brookwood - Capital One	11/1/2021			—			5.40	%	$	16	$	—	(2) (6)
Adair off Addison and Adair    off Addison Apartment Homes	5/1/2026			1.64	%		3.40	%	$	107	$	81	(1) (3) (9)
1000 Spalding Crossing	1/1/2022			—			3.88	%	$	116	$	51	(2) (4)
Montclair Terrace	6/1/2023			2.45	%		4.21	%	$	107	$	102	(1) (3) (6)
Grand Reserve	5/1/2028			1.72	%		3.48	%	$	157	$	90	(1) (3) (4) (7)
Verdant Apartment Homes	5/1/2023			—			3.89	%	$	176	$	37	(2) (4)
Arcadia Apartment Homes	5/1/2023			—			3.89	%	$	189	$	35	(2) (4)
Ravina Apartment Homes	5/1/2022			—			3.76	%	$	144	$	144	(2) (6)
81 Fifty at West Hills Apartment    Homes	7/1/2023			2.36	%		4.12	%	$	269	$	58	(1) (3) (4)
The Palmer at Las Colinas	9/1/2026			2.11	%		3.87	%	$	166	$	159	(1) (3) (4)
Windbrooke Crossing	1/1/2024			2.69	%		4.45	%	$	201	$	65	(1) (3) (4)
Woods of Burnsville	2/1/2024			2.13	%		3.89	%	$	190	$	84	(1) (3) (4)
Indigo Creek	5/1/2024			1.93	%		3.69	%	$	199	$	52	(1) (3) (4)
Martin's Point	11/1/2024			1.86	%		3.62	%	$	149	$	76	(1) (3) (4)

(1) Variable rate based on one-month LIBOR of 1.76250% (as of December 31, 2019) plus a fixed margin

(2) Fixed rate

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

(4) Monthly interest-only payment currently required

(5) Monthly fixed principal plus interest payment required

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

(7) Originated during the year ended December 31, 2018 through refinancing

(8) Mortgage note payable related to asset sold on February 28, 2019

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

Schedule of Annual Principal Payments

Annual principal payments on the mortgage notes payable for each of the next five years ending December 31, and thereafter, is as follows (in thousands):

2020	$	7,052
2021		26,891
2022		55,615
2023		146,304
2024		138,676
Thereafter		177,536
	$	552,074

Amortization of Deferred Financing Costs

Amortization of deferred financing costs for the next five years ending December 31, and thereafter, are as follows (in thousands):

2020	$	1,052
2021		1,025
2022		862
2023		671
2024		355
Thereafter		434
	$	4,399

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Related Party Transactions - Narrative (Details) - USD ($)		12 Months Ended
	Mar. 01, 2019	Dec. 31, 2019	Dec. 31, 2018	Apr. 23, 2017
Related Party Transaction [Line Items]
Insurance pool, loss limit		$ 2,500,000
General liability pool, deductible amount per incident				$ 25,000
Catastrophic insurance, losses in excess of insurance pool, limit	$ 250,000,000	250,000,000
Loss covered in excess of insurance pool, limit		76,000,000
Directors and officers insurance
Related Party Transaction [Line Items]
Insurance coverage limit		100,000,000
Minimum
Related Party Transaction [Line Items]
Catastrophic insurance, deductible amount per incident	25,000	25,000
Maximum
Related Party Transaction [Line Items]
Catastrophic insurance, deductible amount per incident	$ 100,000	$ 100,000
Advisor
Related Party Transaction [Line Items]
Term of Advisory Agreement		1 year
Advisory Agreement, renewal period		1 year
Acquisition fee (as percent)		2.00%
Disposition fee as a percentage of the aggregate brokerage commission paid		50.00%
Disposition fee (as percent)		2.00%
Debt financing fee (as percent)		0.50%
Manager
Related Party Transaction [Line Items]
Property management fee (as percent)		4.50%
Construction management fee (as percent)		5.00%
Debt servicing fee (as percent)		2.75%
Debt servicing fee		$ 0	$ 0

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Equity - Redemptions (Details) - USD ($) $ / shares in Units, $ in Millions	1 Months Ended												12 Months Ended
	Dec. 31, 2019	Nov. 30, 2019	Oct. 31, 2019	Sep. 30, 2019	Aug. 31, 2019	Jul. 31, 2019	Jun. 30, 2019	May 31, 2019	Apr. 30, 2019	Mar. 31, 2019	Feb. 28, 2019	Jan. 31, 2019	Dec. 31, 2019
Equity [Abstract]
Total Number of Shares Redeemed (in shares)	236,000	0	0	467,000	0	0	1,671,000	0	0	664,000	0	0
Average Price Paid per Share (in dollars per share)	$ 8.33	$ 0	$ 0	$ 8.36	$ 0	$ 0	$ 8.34	$ 0	$ 0	$ 8.97	$ 0	$ 0	$ 8.33
Cumulative Number of Shares Purchased as Part of a Publicly Announced Plan or Program (in shares)	3,038,000	0	0	2,802,000	0	0	2,335,000	0	0	664,000	0	0
Maximum redemption of stock based on weighted-average number of shares outstanding (as percent)													5.00%
Measurement period for weighting the average number of shares available for redemption													12 months
Percentage of operating cash flow from prior fiscal year available for stock redemption (as percent)													1.00%
Redemption request honored, percent													48.10%
Outstanding and unfilled redemption value	$ 27.3												$ 27.3
Outstanding and unfilled redemption shares	3,276,329												3,276,329
Changes that do not require stockholder approval													30 days

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Derivatives and Hedging Activities - Outstanding Interest Rate Derivatives (Details) - Derivatives Designated as Hedging Instruments $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($) derivative_contract
Number of Instruments
Interest rate caps | derivative_contract	12
Notional Amount
Interest rate caps | $	$ 408,632
Minimum
Notional Amount
Maturity Dates	Jan. 01, 2020
Maximum
Notional Amount
Maturity Dates	Jul. 01, 2023

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Mortgage Notes Payable, Net - Annual Principal Payments on Mortgage Notes Payable (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Debt Disclosure [Abstract]
2020	$ 7,052
2021	26,891
2022	55,615
2023	146,304
2024	138,676
Thereafter	177,536
Total principal payments	$ 552,074

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Disposition of Property - Summary of Details of Disposition Activity (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Net Gain on Disposition	$ 20,619	$ 0
Overton Trails | Texas
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Contract Sales Price	64,000
Net Gain on Disposition	20,619
Revenue Attributable to Property Sold	1,143
Net Loss to Property Sold	$ (249)

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Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Non-cash financing and investing activities:
Distributions on common stock declared but not yet paid	$ 5,993	$ 8,878
Stock issued pursuant to distribution reinvestment plan	14,724	20,693
Accruals for construction in process	1,955	424
Repayments on borrowings through refinancing	24,469	72,845
Escrow deposits funded through refinancing	580
Non-cash activity related to sales:
Mortgage notes payable settled directly with proceeds from sale of rental property	29,497
Cash paid during the period for:
Interest	$ 24,930	$ 25,508

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Subsequent Events - Additional Information (Details) shares in Millions	Jan. 23, 2020 shares
Subsequent Event
Subsequent Event [Line Items]
Additional shares under distribution reinvestment plan	1.5

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Operating Expenses

12 Months Ended

Dec. 31, 2019

Other Income And Expenses [Abstract]

Operating Expenses

NOTE 14 - OPERATING EXPENSES

As required under the Company's charter, the Advisor must reimburse the Company the amount by which the aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of the average invested assets or 25% of net income, unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors.  “Average invested assets” means the average monthly book value of assets invested, directly or indirectly, in equity interests in and loans secured by real estate during the 12-month period before deducting depreciation, bad debts or other non-cash reserves.  “Total operating expenses” means all expenses paid or incurred by the Company, as determined under GAAP, that are in any way related to operations, including advisory fees, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and stock exchange listing of stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of assets; and (f) acquisition fees, acquisition expenses (including expenses relating to potential investments that do not close), disposition fees on the resale of property and other expenses connected with the acquisition, disposition and ownership of real estate interests, loans or other property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property).

Operating expenses for the four quarters ended December 31, 2019 did not exceed the charter imposed limitation.

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Schedule of Wholly-Owned Subsidiaries

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

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

N/A - Not Applicable

(1) Property was sold on February 28, 2019

Schedule of Estimated Useful Lives

The Company's estimated useful lives of its assets by class are as follows:

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

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Disposition of Property (Tables)

12 Months Ended

Dec. 31, 2019

Discontinued Operations And Disposal Groups [Abstract]

Summary of Details of Disposition Activity

The following table presents details of the Company’s disposition activity during the year ended December 31, 2019 (in thousands):

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

(1) Excludes net gain on disposition

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Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Revenues:
Rental income	$ 85,681	$ 87,256
Expenses:
Rental operating - expenses	13,205	14,411
Rental operating - payroll	7,682	7,943
Rental operating - real estate taxes	11,316	11,992
Subtotal - Rental operating expenses	32,203	34,346
Acquisition costs	0	30
Management fees	13,208	13,728
General and administrative	7,586	8,155
Loss on disposal of assets	219	522
Depreciation and amortization expense	39,599	41,424
Total expenses	92,815	98,205
Loss before net gain on disposition	(7,134)	(10,949)
Net gain on disposition of property	20,619	0
Income (loss) before other income (expense)	13,485	(10,949)
Other income (expense):
Interest income	223	157
Insurance proceeds in excess of cost basis	225	115
Interest expense	(25,877)	(24,764)
Net loss	(11,944)	(35,441)
Other comprehensive income (loss):
Designated derivatives, fair value adjustment	190	65
Comprehensive loss	$ (11,754)	$ (35,376)
Weighted average common shares outstanding, basic and diluted	60,728	61,110
Basic and diluted net loss per common share	$ (0.20)	$ (0.58)

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Nature of Business and Operations (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2019	Jan. 23, 2020	Nov. 30, 2019	Oct. 31, 2019	Sep. 30, 2019	Aug. 31, 2019	Jul. 31, 2019	Jun. 30, 2019	May 31, 2019	Apr. 30, 2019	Mar. 31, 2019	Feb. 28, 2019	Jan. 31, 2019	Dec. 31, 2018	Sep. 28, 2012
Class of Stock [Line Items]
Common stock, shares authorized (in shares)	1,000,000,000													1,000,000,000
Common stock, initial public offering price (in dollars per share)	$ 8.33		$ 0	$ 0	$ 8.36	$ 0	$ 0	$ 8.34	$ 0	$ 0	$ 8.97	$ 0	$ 0
Common stock, shares issued (in shares)	60,094,623													61,378,367
Issuance of common stock	$ 641,695
Shares issued through initial public offering
Class of Stock [Line Items]
Common stock, shares authorized (in shares)															100,000,000
Common stock, initial public offering price (in dollars per share)															$ 10
Shares issued through the distribution reinvestment plan (in shares)	60,094,623
Common stock, shares issued (in shares)	55,791,297
Issuance of common stock	$ 556,197
Shares issued through distribution reinvestment plan
Class of Stock [Line Items]
Common stock, shares authorized (in shares)	10,000,000
Common stock, purchase price percentage equal to estimated net asset value per share	95.00%
Common stock, shares issued (in shares)	9,826,431
Issuance of common stock	$ 85,348
Shares issued through distribution reinvestment plan | Subsequent Event
Class of Stock [Line Items]
Common stock, shares authorized (in shares)		1,500,000

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Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2019

Related Party Transactions [Abstract]

Fees Earned/Expenses Incurred and Amounts Payable to Related Parties

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

	December 31, 2019		December 31, 2018
Due from related parties:
RAI - self-insurance funds held		33		57
Operating expense reimbursements		264		-
	$	297	$	57
Due to related parties:
Advisor
Operating expense reimbursements		6		133
Manager
Property management fees		328		329
Operating expense reimbursements		96		97
RAI
Internal audit fees		-		25
Properties
Meridian		2		-
	$	432	$	584

	Years Ended
	December 31,
	2019		2018
Fees earned / expenses incurred:
Advisor
Asset management fees (1)	$	9,374	$	9,840
Debt financing fees (2)	$	39	$	78
Operating expense reimbursements (3)	$	3,462	$	3,708
Manager
Property management fees (1)	$	3,834	$	3,888
Construction management fees (4)	$	255	$	859
Construction payroll reimbursements (4)	$	63	$	121
Operating expense reimbursements (3)	$	70	$	201

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

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

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

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

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Nature of Business and Operations

12 Months Ended

Dec. 31, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Nature of Business and Operations

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2019

NOTE 1 - NATURE OF BUSINESS AND OPERATIONS

Resource Real Estate Opportunity REIT II, Inc. (the “Company”) was organized in Maryland on September 28, 2012.  During the primary portion of its initial public offering, the Company offered up to 100,000,000 shares of common stock for $10 per share, with volume discounts available to certain categories of investors.  The primary portion of the offering closed on February 6, 2016. The Company is currently offering up to 10,000,000 shares pursuant to the Company’s distribution reinvestment plan at a purchase price equal to 95% of the estimated net asset value per share. On January 23, 2020, the Company filed a Registration Statement to offer an additional 1,500,000 shares pursuant to the Company’s distribution reinvestment plan. The Company has adopted a fiscal year ending December 31.

Resource Real Estate Opportunity Advisor II, LLC (the "Advisor”) is a wholly owned subsidiary of Resource Real Estate, LLC (the "Sponsor") and an indirect wholly owned subsidiary of Resource America, Inc. (“RAI”). The Advisor acts as the Company's external advisor and manages the Company's day-to-day operations and its portfolio of real estate investments and provides asset-management, marketing, investor relations and other administrative services on the Company's behalf, all subject to the supervision of the Company's Board of Directors.

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

As of December 31, 2019, a total of 60,094,623 shares, including shares purchased by the Advisor and shares issued through the distribution reinvestment plan, remain outstanding. As of December 31, 2019, the Company had issued 9,826,431 shares valued at $85.3 million pursuant to its distribution reinvestment plan.

The Company’s objective is to take advantage of the Sponsor's dedicated multifamily investing and lending platforms to invest in multifamily assets across the entire spectrum of investments in order to provide stockholders with growing cash flow and increasing asset values. The Company has acquired commercial real estate assets, principally underperforming multifamily rental properties which the Company will renovate and stabilize in order to increase rents, and may acquire, to a lessor extent, real estate related debt.

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

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Fair Value Measures and Disclosures

12 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value Measures and Disclosures

NOTE 12 - FAIR VALUE MEASURES AND DISCLOSURES

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

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

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

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

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

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

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

	Level 1		Level 2		Level 3		Total
December 31, 2019
Assets:
Interest rate caps	$	—	$	9	$	—	$	9
Cancelable swap		—		—		—		—
	$	—	$	9	$	—	$	9
December 31, 2018
Assets:
Interest rate caps	$	—	$	27	$	—	$	27
Cancelable swap		—		—		—		—
	$	—	$	27	$	—	$	27

Interest rate caps and the cancelable swap are included in Prepaid expenses and other assets on the consolidated balance sheets.

The outstanding balance and estimated fair value of the Company’s mortgage notes payable are as follows (in thousands):

	December 31, 2019				December 31, 2018
	Outstanding Balance		Estimated Fair Value		Outstanding Balance		Estimated Fair Value
Mortgage notes payable	$	552,074	$	545,249	$	578,826	$	580,925

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

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Restricted Cash

12 Months Ended

Dec. 31, 2019

Cash And Cash Equivalents [Abstract]

Restricted Cash

NOTE 4 - RESTRICTED CASH

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

	December 31, 2019		December 31, 2018
Real estate taxes	$	3,956	$	5,107
Insurance		877		779
Capital improvements		1,380		1,358
Other		321		569
Total	$	6,534	$	7,813
Unrestricted cash designated for capital expenditures	$	21,706	$	28,021

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Mortgage Notes Payable, Net

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Mortgage Notes Payable, Net

NOTE 8 - MORTGAGE NOTES PAYABLE, NET

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

	December 31, 2019									December 31, 2018
Collateral	Outstanding borrowings		Premium, net		Deferred Financing Costs, net			Carrying Value		Outstanding borrowings		Premium, net		Deferred Financing Costs, net			Carrying Value
Overton Trails Apartment Homes	$	-	$	—	$	-		$	-	$	29,841	$	—	$	(246	)	$	29,595
Uptown Buckhead		19,264		—		(178	)		19,086		19,651		—		(213	)		19,438
Crosstown at Chapel Hill		42,650		—		(325	)		42,325		42,650		—		(386	)		42,264
The Brookwood - Key Bank		17,063		186		(88	)		17,161		17,477		291		(137	)		17,631
The Brookwood - Capital One		2,566		14		(15	)		2,565		2,613		22		(24	)		2,611
Adair off Addison and Adair    off Addison Apartment Homes		33,210		—		(380	)		32,830		24,629		—		(233	)		24,396
1000 Spalding Crossing		23,737		—		(113	)		23,624		24,195		—		(171	)		24,024
Montclair Terrace		19,958		—		(182	)		19,776		20,312		—		(234	)		20,078
Grand Reserve		47,845		—		(539	)		47,306		47,845		—		(606	)		47,239
Verdant Apartment Homes		36,913		—		(178	)		36,735		37,300		—		(233	)		37,067
Arcadia Apartment Homes		39,782		—		(195	)		39,587		40,200		—		(256	)		39,944
Ravina Apartment Homes		26,241		—		(165	)		26,076		26,951		—		(239	)		26,712
81 Fifty at West Hills Apartment    Homes		51,833		—		(368	)		51,465		52,645		—		(477	)		52,168
The Palmer at Las Colinas		45,700		—		(437	)		45,263		45,700		—		(506	)		45,194
Windbrooke Crossing		37,222		—		(272	)		36,950		37,788		—		(343	)		37,445
Woods of Burnsville		37,744		—		(355	)		37,389		38,250		—		(445	)		37,805
Indigo Creek		40,402		—		(320	)		40,082		40,789		—		(397	)		40,392
Martin's Point		29,944		—		(289	)		29,655		29,990		—		(351	)		29,639
	$	552,074	$	200	$	(4,399	)	$	547,875	$	578,826	$	313	$	(5,497	)	$	573,642

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

	Maturity Date		Margin over LIBOR			Annual Interest Rate			Average Monthly Debt Service		Average Monthly Escrow
Overton Trails Apartment Homes		—		—			—		$	-	$	-	(8)
Uptown Buckhead	7/1/2025			2.22	%		3.98	%	$	104	$	63	(1) (3) (5)
Crosstown at Chapel Hill	7/1/2025			1.77	%		3.53	%	$	142	$	279	(1) (3) (4) (7)
The Brookwood - Key Bank	11/1/2021			—			4.73	%	$	104	$	54	(2) (6)
The Brookwood - Capital One	11/1/2021			—			5.40	%	$	16	$	—	(2) (6)
Adair off Addison and Adair    off Addison Apartment Homes	5/1/2026			1.64	%		3.40	%	$	107	$	81	(1) (3) (9)
1000 Spalding Crossing	1/1/2022			—			3.88	%	$	116	$	51	(2) (4)
Montclair Terrace	6/1/2023			2.45	%		4.21	%	$	107	$	102	(1) (3) (6)
Grand Reserve	5/1/2028			1.72	%		3.48	%	$	157	$	90	(1) (3) (4) (7)
Verdant Apartment Homes	5/1/2023			—			3.89	%	$	176	$	37	(2) (4)
Arcadia Apartment Homes	5/1/2023			—			3.89	%	$	189	$	35	(2) (4)
Ravina Apartment Homes	5/1/2022			—			3.76	%	$	144	$	144	(2) (6)
81 Fifty at West Hills Apartment    Homes	7/1/2023			2.36	%		4.12	%	$	269	$	58	(1) (3) (4)
The Palmer at Las Colinas	9/1/2026			2.11	%		3.87	%	$	166	$	159	(1) (3) (4)
Windbrooke Crossing	1/1/2024			2.69	%		4.45	%	$	201	$	65	(1) (3) (4)
Woods of Burnsville	2/1/2024			2.13	%		3.89	%	$	190	$	84	(1) (3) (4)
Indigo Creek	5/1/2024			1.93	%		3.69	%	$	199	$	52	(1) (3) (4)
Martin's Point	11/1/2024			1.86	%		3.62	%	$	149	$	76	(1) (3) (4)

(1) Variable rate based on one-month LIBOR of 1.76250% (as of December 31, 2019) plus a fixed margin

(2) Fixed rate

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

(4) Monthly interest-only payment currently required

(5) Monthly fixed principal plus interest payment required

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

(7) Originated during the year ended December 31, 2018 through refinancing

(8) Mortgage note payable related to asset sold on February 28, 2019

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

On August 21, 2015, the Company recorded a fair value adjustment, which represented the fair value of the debt assumed over its principal amount in connection with The Brookwood Apartment Home acquisition. The fair value adjustment (premium) is amortized to interest expense over the term of the related mortgages loans using the effective interest method. As of December 31, 2019, the net unamortized mortgage premium of approximately $200,000  was included as a component of mortgage loans payable in the accompanying consolidated balance sheets.

At December 31, 2019, the weighted average interest rate of all the Company’s outstanding indebtedness was 3.87% 

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

As of December 31, 2019 and 2018, the Company had $6.5 million and $7.8 million of restricted cash related to escrow deposits held by mortgage lenders for real estate taxes, insurance and capital reserves (see Note 4).

Annual principal payments on the mortgage notes payable for each of the next five years ending December 31, and thereafter, is as follows (in thousands):

2020	$	7,052
2021		26,891
2022		55,615
2023		146,304
2024		138,676
Thereafter		177,536
	$	552,074

The mortgage notes payable are recourse only with respect to the properties that secure the notes, subject to certain limited standard exceptions, as defined in each mortgage note. The Company has guaranteed the mortgage notes by executing a guarantee with respect to the properties. These exceptions are referred to as “carveouts.” In general, carveouts relate to damages suffered by the lender for a borrower’s failure to pay rents, insurance or condemnation proceeds to lender, failure to pay water, sewer and other public assessments or charges, failure to pay environmental compliance costs or to deliver books and records, in each case as required in the loan documents. The exceptions also require the Company to guarantee payment of audit costs, lender’s enforcement of its rights under the loan documents and payment of the loan if the borrower voluntarily files for bankruptcy or seeks reorganization, or if a related party of the borrower does so with respect to the subsidiary. For the Crosstown at Chapel Hill Mortgage Loan, beginning with the calendar quarter ended December 31, 2017, the property must maintain a certain level of debt service coverage.  The Company was in compliance with all covenants related to this loan as of December 31, 2019.

Deferred financing costs incurred to obtain financing are amortized over the term of the related debt. As of December 31, 2019 and December 31, 2018, accumulated amortization of deferred financing costs was $3.4 million and $2.9 million respectively.  Amortization of deferred financing costs for the next five years ending December 31, and thereafter, are as follows (in thousands):

2020	$	1,052
2021		1,025
2022		862
2023		671
2024		355
Thereafter		434
	$	4,399

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Equity - Preferred Stock and Convertible Stock (Details)	12 Months Ended
	Dec. 31, 2019 event $ / shares shares	Dec. 31, 2018 $ / shares shares	Dec. 31, 2017 shares
Class of Stock [Line Items]
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, par value (in dollars per share) | $ / shares	$ 0.01	$ 0.01
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, shares outstanding (in shares)	60,094,623	61,378,367
Common stock, par value (in dollars per share) | $ / shares	$ 0.01	$ 0.01
Non-compounded annual return, option 2 (as percent)	7.00%
Number of possible triggering events | event	2
Conversion basis	0.00002
Converted if the lesser of, option 2 (as percent)	15.00%
Number of triggering events | event	0
Advisor
Class of Stock [Line Items]
Common stock, shares outstanding (in shares)	117,778
Convertible Stock
Class of Stock [Line Items]
Common stock, shares outstanding (in shares)	50,000	50,000	50,000
Common stock, par value (in dollars per share) | $ / shares	$ 0.01	$ 0.01
Common stock, conversion terms, percent of paid distributions equal to price at which shares were originally sold	100.00%
Percent of annual return on shares at price equal to distributions paid	7.00%
Convertible Stock | Advisor
Class of Stock [Line Items]
Common stock, shares outstanding (in shares)	50,000
Common stock, par value (in dollars per share) | $ / shares	$ 0.01

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Fair Value Measures and Disclosures (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Outstanding Balance | Mortgage notes payable
Assets:
Mortgage notes payable	$ 552,074	$ 578,826
Estimated Fair Value | Mortgage notes payable
Assets:
Mortgage notes payable	545,249	580,925
Fair Value, Measurements, Recurring
Assets:
Assets at fair value	9	27
Fair Value, Measurements, Recurring | Interest Rate Caps
Assets:
Derivative asset	9	27
Level 1 | Fair Value, Measurements, Recurring
Assets:
Assets at fair value	0	0
Level 1 | Fair Value, Measurements, Recurring | Interest Rate Caps
Assets:
Derivative asset	0	0
Level 1 | Fair Value, Measurements, Recurring | Cancelable Swap
Assets:
Derivative asset	0	0
Level 2 | Fair Value, Measurements, Recurring
Assets:
Assets at fair value	9	27
Level 2 | Fair Value, Measurements, Recurring | Interest Rate Caps
Assets:
Derivative asset	9	27
Level 3 | Fair Value, Measurements, Recurring
Assets:
Assets at fair value	0	0
Level 3 | Fair Value, Measurements, Recurring | Interest Rate Caps
Assets:
Derivative asset	0	0
Level 3 | Fair Value, Measurements, Recurring | Cancelable Swap
Assets:
Derivative asset	$ 0	$ 0

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Derivatives and Hedging Activities - Gain (Loss) Recognized in Income (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Interest Rate Caps | Derivatives Designated as Hedging Instruments | Interest Expense
Derivative Instruments Gain Loss [Line Items]
Amount of Gain (Loss) Recognized in Income	$ (285)	$ (108)
Cancelable Swap | Derivatives Not Designated as Hedging Instruments | Interest Expense
Derivative Instruments Gain Loss [Line Items]
Amount of Gain (Loss) Recognized in Income		287
Interest Rate Products | Derivatives Designated as Hedging Instruments
Derivative Instruments Gain Loss [Line Items]
Amount of Gain (Loss) Recognized in OCI on Derivative	(95)	(43)
Interest Rate Products | Derivatives Designated as Hedging Instruments | Interest Expense
Derivative Instruments Gain Loss [Line Items]
Amount of Gain (Loss) Reclassified from Accumulated OCI into Income	$ (285)	$ (108)

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Schedule III Real Estate and Accumulated Depreciation - Reconciliations (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Investments in real estate:
Balance at beginning of the year	$ 912,534	$ 898,729
Improvements, etc.	8,156	15,486
Dispositions during the year:	(53,381)	(1,681)
Balance at end of year	867,309	912,534
Accumulated Depreciation:
Balance at beginning of year	(101,933)	(61,758)
Depreciation	(39,599)	(40,611)
Disposals	9,753	436
Balance at the end of year	$ (131,779)	$ (101,933)

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Mortgage Notes Payable, Net - Summary of Mortgage Notes Payable (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Outstanding borrowings		$ 552,074
Deferred Financing Costs, net		(4,399)
Carrying Value		547,875	$ 573,642
Mortgage notes payable
Debt Instrument [Line Items]
Outstanding borrowings		552,074	578,826
Premium, net		(200)	(313)
Deferred Financing Costs, net		(4,399)	(5,497)
Carrying Value		547,875	573,642
Mortgage notes payable | Overton Trails Apartment Homes
Debt Instrument [Line Items]
Outstanding borrowings			29,841
Deferred Financing Costs, net			(246)
Carrying Value			29,595
Mortgage notes payable | Uptown Buckhead
Debt Instrument [Line Items]
Outstanding borrowings		19,264	19,651
Deferred Financing Costs, net		(178)	(213)
Carrying Value		$ 19,086	19,438
Maturity Date	[1],[2],[3]	Jul. 01, 2025
Annual Interest Rate	[1],[2],[3]	3.98%
Average Monthly Debt Service	[1],[2],[3]	$ 104
Average Monthly Escrow	[1],[2],[3]	$ 63
Mortgage notes payable | Uptown Buckhead | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[1],[2],[3]	2.22%
Mortgage notes payable | Crosstown at Chapel Hill
Debt Instrument [Line Items]
Outstanding borrowings		$ 42,650	42,650
Deferred Financing Costs, net		(325)	(386)
Carrying Value		$ 42,325	42,264
Maturity Date	[2],[3],[4],[5]	Jul. 01, 2025
Annual Interest Rate	[2],[3],[4],[5]	3.53%
Average Monthly Debt Service	[2],[3],[4],[5]	$ 142
Average Monthly Escrow	[2],[3],[4],[5]	$ 279
Mortgage notes payable | Crosstown at Chapel Hill | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[2],[3],[4],[5]	1.77%
Mortgage notes payable | The Brookwood - Key Bank
Debt Instrument [Line Items]
Outstanding borrowings		$ 17,063	17,477
Premium, net		(186)	(291)
Deferred Financing Costs, net		(88)	(137)
Carrying Value		$ 17,161	17,631
Maturity Date	[6],[7]	Nov. 01, 2021
Annual Interest Rate	[6],[7]	4.73%
Average Monthly Debt Service	[6],[7]	$ 104
Average Monthly Escrow	[6],[7]	54
Mortgage notes payable | The Brookwood - Capital One
Debt Instrument [Line Items]
Outstanding borrowings		2,566	2,613
Premium, net		(14)	(22)
Deferred Financing Costs, net		(15)	(24)
Carrying Value		$ 2,565	2,611
Maturity Date	[6],[7]	Nov. 01, 2021
Annual Interest Rate	[6],[7]	5.40%
Average Monthly Debt Service	[6],[7]	$ 16
Mortgage notes payable | Adair off Addison and Adair off Addison Apartment Homes
Debt Instrument [Line Items]
Outstanding borrowings		33,210	24,629
Deferred Financing Costs, net		(380)	(233)
Carrying Value		$ 32,830	24,396
Maturity Date	[2],[3],[8]	May 01, 2026
Annual Interest Rate	[2],[3],[8]	3.40%
Average Monthly Debt Service	[2],[3],[8]	$ 107
Average Monthly Escrow	[2],[3],[8]	$ 81
Mortgage notes payable | Adair off Addison and Adair off Addison Apartment Homes | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[2],[3],[8]	1.64%
Mortgage notes payable | 1000 Spalding Crossing
Debt Instrument [Line Items]
Outstanding borrowings		$ 23,737	24,195
Deferred Financing Costs, net		(113)	(171)
Carrying Value		$ 23,624	24,024
Maturity Date	[4],[7]	Jan. 01, 2022
Annual Interest Rate	[4],[7]	3.88%
Average Monthly Debt Service	[4],[7]	$ 116
Average Monthly Escrow	[4],[7]	51
Mortgage notes payable | Ravina Apartment Homes
Debt Instrument [Line Items]
Outstanding borrowings		26,241	26,951
Deferred Financing Costs, net		(165)	(239)
Carrying Value		$ 26,076	26,712
Maturity Date	[6],[7]	May 01, 2022
Annual Interest Rate	[6],[7]	3.76%
Average Monthly Debt Service	[6],[7]	$ 144
Average Monthly Escrow	[6],[7]	144
Mortgage notes payable | Verdant Apartment Homes
Debt Instrument [Line Items]
Outstanding borrowings		36,913	37,300
Deferred Financing Costs, net		(178)	(233)
Carrying Value		$ 36,735	37,067
Maturity Date	[4],[7]	May 01, 2023
Annual Interest Rate	[4],[7]	3.89%
Average Monthly Debt Service	[4],[7]	$ 176
Average Monthly Escrow	[4],[7]	37
Mortgage notes payable | Arcadia Apartment Homes
Debt Instrument [Line Items]
Outstanding borrowings		39,782	40,200
Deferred Financing Costs, net		(195)	(256)
Carrying Value		$ 39,587	39,944
Maturity Date	[4],[7]	May 01, 2023
Annual Interest Rate	[4],[7]	3.89%
Average Monthly Debt Service	[4],[7]	$ 189
Average Monthly Escrow	[4],[7]	35
Mortgage notes payable | Grand Reserve
Debt Instrument [Line Items]
Outstanding borrowings		47,845	47,845
Deferred Financing Costs, net		(539)	(606)
Carrying Value		$ 47,306	47,239
Maturity Date	[2],[3],[4],[5]	May 01, 2028
Annual Interest Rate	[2],[3],[4],[5]	3.48%
Average Monthly Debt Service	[2],[3],[4],[5]	$ 157
Average Monthly Escrow	[2],[3],[4],[5]	$ 90
Mortgage notes payable | Grand Reserve | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[2],[3],[4],[5]	1.72%
Mortgage notes payable | Montclair Terrace
Debt Instrument [Line Items]
Outstanding borrowings		$ 19,958	20,312
Deferred Financing Costs, net		(182)	(234)
Carrying Value		$ 19,776	20,078
Maturity Date	[2],[3],[6]	Jun. 01, 2023
Annual Interest Rate	[2],[3],[6]	4.21%
Average Monthly Debt Service	[2],[3],[6]	$ 107
Average Monthly Escrow	[2],[3],[6]	$ 102
Mortgage notes payable | Montclair Terrace | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[2],[3],[6]	2.45%
Mortgage notes payable | 81 Fifty at West Hills Apartment Homes
Debt Instrument [Line Items]
Outstanding borrowings		$ 51,833	52,645
Deferred Financing Costs, net		(368)	(477)
Carrying Value		$ 51,465	52,168
Maturity Date	[2],[3],[4]	Jul. 01, 2023
Annual Interest Rate	[2],[3],[4]	4.12%
Average Monthly Debt Service	[2],[3],[4]	$ 269
Average Monthly Escrow	[2],[3],[4]	$ 58
Mortgage notes payable | 81 Fifty at West Hills Apartment Homes | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[2],[3],[4]	2.36%
Mortgage notes payable | The Palmer at Las Colinas
Debt Instrument [Line Items]
Outstanding borrowings		$ 45,700	45,700
Deferred Financing Costs, net		(437)	(506)
Carrying Value		$ 45,263	45,194
Maturity Date	[2],[3],[4]	Sep. 01, 2026
Annual Interest Rate	[2],[3],[4]	3.87%
Average Monthly Debt Service	[2],[3],[4]	$ 166
Average Monthly Escrow	[2],[3],[4]	$ 159
Mortgage notes payable | The Palmer at Las Colinas | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[2],[3],[4]	2.11%
Mortgage notes payable | Windbrooke Crossing
Debt Instrument [Line Items]
Outstanding borrowings		$ 37,222	37,788
Deferred Financing Costs, net		(272)	(343)
Carrying Value		$ 36,950	37,445
Maturity Date	[2],[3],[4]	Jan. 01, 2024
Annual Interest Rate	[2],[3],[4]	4.45%
Average Monthly Debt Service	[2],[3],[4]	$ 201
Average Monthly Escrow	[2],[3],[4]	$ 65
Mortgage notes payable | Windbrooke Crossing | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[2],[3],[4]	2.69%
Mortgage notes payable | Woods of Burnsville
Debt Instrument [Line Items]
Outstanding borrowings		$ 37,744	38,250
Deferred Financing Costs, net		(355)	(445)
Carrying Value		$ 37,389	37,805
Maturity Date	[2],[3],[4]	Feb. 01, 2024
Annual Interest Rate	[2],[3],[4]	3.89%
Average Monthly Debt Service	[2],[3],[4]	$ 190
Average Monthly Escrow	[2],[3],[4]	$ 84
Mortgage notes payable | Woods of Burnsville | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[2],[3],[4]	2.13%
Mortgage notes payable | Indigo Creek
Debt Instrument [Line Items]
Outstanding borrowings		$ 40,402	40,789
Deferred Financing Costs, net		(320)	(397)
Carrying Value		$ 40,082	40,392
Maturity Date	[2],[3],[4]	May 01, 2024
Annual Interest Rate	[2],[3],[4]	3.69%
Average Monthly Debt Service	[2],[3],[4]	$ 199
Average Monthly Escrow	[2],[3],[4]	$ 52
Mortgage notes payable | Indigo Creek | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[2],[3],[4]	1.93%
Mortgage notes payable | Martin's Point
Debt Instrument [Line Items]
Outstanding borrowings		$ 29,944	29,990
Deferred Financing Costs, net		(289)	(351)
Carrying Value		$ 29,655	$ 29,639
Maturity Date	[2],[3],[4]	Nov. 01, 2024
Annual Interest Rate	[2],[3],[4]	3.62%
Average Monthly Debt Service	[2],[3],[4]	$ 149
Average Monthly Escrow	[2],[3],[4]	$ 76
Mortgage notes payable | Martin's Point | LIBOR
Debt Instrument [Line Items]
Margin over LIBOR	[2],[3],[4]	1.86%

[1] Monthly fixed principal plus interest payment required

[2] Variable rate based on one-month LIBOR of 1.76250% (as of December 31, 2019) plus a fixed margin

[3] Variable rate hedged with interest rate cap cash flow hedge

[4] Monthly interest-only payment currently required

[5] Originated during the year ended December 31, 2018 through refinancing

[6] Fixed monthly payment of principal and interest payment required

[7] Fixed rate

[8] Originated during the year ended December 31, 2019 through refinancing

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Rental Properties, Net - Schedule of Investments in Rental Properties (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Rental Properties, Net:
Land	$ 119,028	$ 119,028
Building and improvements	720,420	716,839
Furniture, fixtures and equipment	25,906	23,903
Construction in progress	1,955	490
Rental properties, gross	867,309	860,260
Less: accumulated depreciation	(131,779)	(92,522)
Rental properties, net	735,530	767,738
Assets held for sale - rental properties	0	42,863
Total investments in rental properties	$ 735,530	$ 810,601

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Schedule III Real Estate and Accumulated Depreciation

12 Months Ended

Dec. 31, 2019

Real Estate And Accumulated Depreciation Disclosure [Abstract]

Schedule III Real Estate and Accumulated Depreciation

Column A	Column B		Column C		Column D		Column E		Column F			Column G	Column H
Description	Encumbrances		Initial cost to Company		Cost capitalized subsequent to acquisition		Gross Amount at which carried at close of period		Accumulated Depreciation			Date of Construction	Date Acquired
Real estate owned:
Residential	$	-	$	9,149	$	3,425	$	12,574	$	(3,967	)	1980	6/4/2014
Dallas, Texas
Residential		19,264		31,856		5,058		36,914		(7,276	)	1989	3/30/2015
Atlanta, Georgia
Residential		42,650		45,653		7,384		53,037		(10,819	)	1990	5/19/2015
Chapel Hill, North Carolina
Residential		19,629		30,003		7,106		37,109		(7,271	)	1968	8/21/2015
Homewood, Alabama
Residential		33,210		20,667		3,291		23,958		(4,821	)	1979	8/27/2015
Dallas, Texas
Residential		23,737		40,194		5,218		45,412		(8,132	)	1995	9/24/2015
Atlanta Georgia
Residential		19,958		32,130		3,441		35,571		(5,830	)	2004	10/29/2015
Portland, Oregon
Residential		47,845		66,213		5,967		72,180		(11,432	)	1991	12/18/2015
Naperville, Illinois
Residential		36,913		64,181		4,330		68,511		(8,629	)	1997	12/18/2015
Boulder, Colorado
Residential		39,782		59,059		6,036		65,095		(9,959	)	1984	1/22/2016
Centennial, Colorado
Residential		26,241		55,466		6,776		62,242		(10,478	)	2001	3/23/2016
Austin, Texas
Residential		51,833		80,155		5,741		85,896		(11,711	)	1985	5/17/2016
Portland, Oregon
Residential		45,700		68,454		7,796		76,250		(11,192	)	1991	6/28/2016
Irving, Texas
Residential		37,222		47,817		575		48,392		(5,474	)	1986	12/22/2016
Buffalo Grove, Illinois
Residential		37,744		49,775		1,459		51,234		(6,298	)	1984	12/23/2016
Burnsville, Minnesota
Residential		40,402		54,057		1,012		55,069		(5,634	)	1998	4/4/2017
Glendale, Arizona
Residential		29,944		37,205		660		37,865		(2,856	)	1989	10/31/2017
Lombard, Illinois
'	$	552,074	$	792,034	$	75,275	$	867,309	$	(131,779	)

	Years Ended December 31,
	2019			2018
	(in thousands)
Investments in real estate:
Balance at beginning of the year	$	912,534		$	898,729
Additions during the year:		—			—
Acquisitions		—			-
Improvements, etc.		8,156			15,486
Dispositions during the year:		(53,381	)		(1,681	)
Balance at end of year	$	867,309		$	912,534
Accumulated Depreciation:
Balance at beginning of year	$	(101,933	)	$	(61,758	)
Depreciation		(39,599	)		(40,611	)
Disposals		9,753			436
Balance at the end of year	$	(131,779	)	$	(101,933	)

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Restricted Cash (Tables)

12 Months Ended

Dec. 31, 2019

Cash And Cash Equivalents [Abstract]

Summary of Components of Restricted Cash

A summary of the components of restricted cash follows (in thousands):

	December 31, 2019		December 31, 2018
Real estate taxes	$	3,956	$	5,107
Insurance		877		779
Capital improvements		1,380		1,358
Other		321		569
Total	$	6,534	$	7,813
Unrestricted cash designated for capital expenditures	$	21,706	$	28,021

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Derivatives and Hedging Activities - Fair Value of Derivative Financial Instruments and Balance Sheet Classification (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Derivatives Designated as Hedging Instruments
Derivative [Line Items]
Liabilities Derivatives, Fair Value	$ 0	$ 0
Derivatives Designated as Hedging Instruments | Interest Rate Caps
Derivative [Line Items]
Asset Derivatives, Fair Value	$ 9	27
Derivatives Not Designated as Hedging Instruments | Cancelable Swap
Derivative [Line Items]
Liabilities Derivatives, Fair Value		$ 0

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Schedule III Real Estate and Accumulated Depreciation - Schedule of Real Estate Owned (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2017
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		$ 552,074
Initial cost to Company		792,034
Cost capitalized subsequent to acquisition		75,275
Gross Amount at which carried at close of period	$ 912,534	867,309	$ 898,729
Accumulated Depreciation	$ (101,933)	(131,779)	$ (61,758)
Residential, Dallas, Texas
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		0
Initial cost to Company		9,149
Cost capitalized subsequent to acquisition		3,425
Gross Amount at which carried at close of period		12,574
Accumulated Depreciation		(3,967)
Date of Construction	1980
Date Acquired	Jun. 04, 2014
Residential, Fort Worth, Texas
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		19,264
Initial cost to Company		31,856
Cost capitalized subsequent to acquisition		5,058
Gross Amount at which carried at close of period		36,914
Accumulated Depreciation		(7,276)
Date of Construction	1989
Date Acquired	Mar. 30, 2015
Residential, Chapel Hill, North Carolina
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		42,650
Initial cost to Company		45,653
Cost capitalized subsequent to acquisition		7,384
Gross Amount at which carried at close of period		53,037
Accumulated Depreciation		(10,819)
Date of Construction	1990
Date Acquired	May 19, 2015
Residential, Homewood, Alabama
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		19,629
Initial cost to Company		30,003
Cost capitalized subsequent to acquisition		7,106
Gross Amount at which carried at close of period		37,109
Accumulated Depreciation		(7,271)
Date of Construction	1968
Date Acquired	Aug. 21, 2015
Residential, Dallas, Texas, Property 2
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		33,210
Initial cost to Company		20,667
Cost capitalized subsequent to acquisition		3,291
Gross Amount at which carried at close of period		23,958
Accumulated Depreciation		(4,821)
Date of Construction	1979
Date Acquired	Aug. 27, 2015
Residential, Atlanta, Georgia, Property 2
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		23,737
Initial cost to Company		40,194
Cost capitalized subsequent to acquisition		5,218
Gross Amount at which carried at close of period		45,412
Accumulated Depreciation		(8,132)
Date of Construction	1995
Date Acquired	Sep. 24, 2015
Residential, Portland, Oregon
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		19,958
Initial cost to Company		32,130
Cost capitalized subsequent to acquisition		3,441
Gross Amount at which carried at close of period		35,571
Accumulated Depreciation		(5,830)
Date of Construction	2004
Date Acquired	Oct. 29, 2015
Residential, Naperville, Illinois
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		47,845
Initial cost to Company		66,213
Cost capitalized subsequent to acquisition		5,967
Gross Amount at which carried at close of period		72,180
Accumulated Depreciation		(11,432)
Date of Construction	1991
Date Acquired	Dec. 18, 2015
Residential, Boulder, Colorado
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		36,913
Initial cost to Company		64,181
Cost capitalized subsequent to acquisition		4,330
Gross Amount at which carried at close of period		68,511
Accumulated Depreciation		(8,629)
Date of Construction	1997
Date Acquired	Dec. 18, 2015
Residential, Centennial, Colorado
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		39,782
Initial cost to Company		59,059
Cost capitalized subsequent to acquisition		6,036
Gross Amount at which carried at close of period		65,095
Accumulated Depreciation		(9,959)
Date of Construction	1984
Date Acquired	Jan. 22, 2016
Residential, Austin, Texas
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		26,241
Initial cost to Company		55,466
Cost capitalized subsequent to acquisition		6,776
Gross Amount at which carried at close of period		62,242
Accumulated Depreciation		(10,478)
Date of Construction	2001
Date Acquired	Mar. 23, 2016
Residential, Portland, Oregon, Property 2
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		51,833
Initial cost to Company		80,155
Cost capitalized subsequent to acquisition		5,741
Gross Amount at which carried at close of period		85,896
Accumulated Depreciation		(11,711)
Date of Construction	1985
Date Acquired	May 17, 2016
Residential, Irving, Texas
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		45,700
Initial cost to Company		68,454
Cost capitalized subsequent to acquisition		7,796
Gross Amount at which carried at close of period		76,250
Accumulated Depreciation		(11,192)
Date of Construction	1991
Date Acquired	Jun. 28, 2016
Residential, Buffalo Grove, Illinois
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		37,222
Initial cost to Company		47,817
Cost capitalized subsequent to acquisition		575
Gross Amount at which carried at close of period		48,392
Accumulated Depreciation		(5,474)
Date of Construction	1986
Date Acquired	Dec. 22, 2016
Residential, Burnsville, Minnesota
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		37,744
Initial cost to Company		49,775
Cost capitalized subsequent to acquisition		1,459
Gross Amount at which carried at close of period		51,234
Accumulated Depreciation		(6,298)
Date of Construction	1984
Date Acquired	Dec. 23, 2016
Residential, Glendale, Arizona
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		40,402
Initial cost to Company		54,057
Cost capitalized subsequent to acquisition		1,012
Gross Amount at which carried at close of period		55,069
Accumulated Depreciation		(5,634)
Date of Construction	1998
Date Acquired	Apr. 04, 2017
Residential, Lombard, Illinois
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Encumbrances		29,944
Initial cost to Company		37,205
Cost capitalized subsequent to acquisition		660
Gross Amount at which carried at close of period		37,865
Accumulated Depreciation		$ (2,856)
Date of Construction	1989
Date Acquired	Oct. 31, 2017

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Mortgage Notes Payable, Net - Narrative (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Weighted average interest rate (as percent)	3.87%
Restricted cash related to escrow deposits	$ 6,500,000	$ 7,800,000
Accumulated amortization of deferred financing costs	3,400,000	$ 2,900,000
The Brookwood
Debt Instrument [Line Items]
Net unamortized fair value of debt assumed adjustment	$ 200,000

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Rental Properties, Net - Additional Information (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Rental Properties, Net:
Depreciation expense	$ 39.6	$ 40.6

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Subsequent Events

12 Months Ended

Dec. 31, 2019

Subsequent Events [Abstract]

Subsequent Events

NOTE 15 – SUBSEQUENT EVENTS

On January 23, 2020, the Company filed a Form S-3 with the SEC to register an additional 1.5 million shares under the DRIP.

On February 14, 2020, the Board of Directors suspended the share redemption program with exceptions for redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility. The suspension took effect on March 20, 2020.

On March 11, 2020, the World Health Organization declared the outbreak of a coronavirus (COVID-19) a pandemic. The resulting restrictions on travel and quarantines imposed have had a negative impact on the U.S. economy and business activity globally, the full impact of which is not yet known and may result in an adverse impact to the Company’s investments and operating results.

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

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Supplemental Cash Flow Information (Tables)

12 Months Ended

Dec. 31, 2019

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

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

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

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Summary of Significant Accounting Policies - Subsidiaries (Details)	Dec. 31, 2019 unit
Adair off Addison
Property, Plant and Equipment [Line Items]
Number of Units	152
Uptown Buckhead
Property, Plant and Equipment [Line Items]
Number of Units	216
Crosstown at Chapel Hill
Property, Plant and Equipment [Line Items]
Number of Units	411
The Brookwood
Property, Plant and Equipment [Line Items]
Number of Units	274
Adair off Addison Apartment Homes
Property, Plant and Equipment [Line Items]
Number of Units	200
Montclair Terrace
Property, Plant and Equipment [Line Items]
Number of Units	188
1000 Spalding Apartment Homes
Property, Plant and Equipment [Line Items]
Number of Units	252
Grand Reserve
Property, Plant and Equipment [Line Items]
Number of Units	319
Verdant Apartment Homes
Property, Plant and Equipment [Line Items]
Number of Units	216
Arcadia Apartment Homes
Property, Plant and Equipment [Line Items]
Number of Units	300
Ravina Apartment Homes
Property, Plant and Equipment [Line Items]
Number of Units	498
81 Fifty at West Hills Apartment Homes
Property, Plant and Equipment [Line Items]
Number of Units	357
The Palmer at Las Colinas
Property, Plant and Equipment [Line Items]
Number of Units	476
Windbrooke Crossing
Property, Plant and Equipment [Line Items]
Number of Units	236
The Woods of Burnsville
Property, Plant and Equipment [Line Items]
Number of Units	400
Indigo Creek
Property, Plant and Equipment [Line Items]
Number of Units	408
Martin's Point
Property, Plant and Equipment [Line Items]
Number of Units	256

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Equity (Tables)

12 Months Ended

Dec. 31, 2019

Equity [Abstract]

Schedule of Common Stock

As of December 31, 2019, the Company had an aggregate of 60,094,623 shares of $0.01 par value common stock outstanding, including the Advisor's additional purchase of 117,778 shares of common stock for $1.1 million, as follows (dollars in thousands):

	Shares			Gross Proceeds
Shares issued through initial public offering		55,791,297		$	556,197
Shares issued through stock distributions		246,365			—
Shares issued through distribution reinvestment plan		9,826,431			85,348
Advisor's initial investment, net of 5,000 share conversion		15,000			150
Total		65,879,093		$	641,695
Shares redeemed and retired		(5,784,470	)
Total shares outstanding		60,094,623

During the year ended December 31, 2019, the Company redeemed shares of common stock as follows (in thousands, except per share data):

Period	Total Number of Shares Redeemed (1)		Average Price Paid per Share		Cumulative Number of Shares Purchased as Part of a Publicly Announced Plan or Program (2)		Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
January 2019		—	$	—		—	(2)
February 2019		—	$	—		—	(2)
March 2019	664		$	8.97	664		(2)
April 2019		—	$	—		—	(2)
May 2019		—	$	—		—	(2)
June 2019		1,671	$	8.34		2,335	(2)
July 2019		—	$	—		—	(2)
August 2019		—	$	—		—	(2)
September 2019	467		$	8.36		2,802	(2)
October 2019		—	$	—		—	(2)
November 2019		—	$	—		—	(2)
December 2019		236	$	8.33		3,038	(2)

(1) All purchases of equity securities by the Company in the year ended December 31, 2019 were made pursuant to the Company's share redemption program.

(2) The Company currently limits the dollar value and number of shares that may be repurchased under the program, as discussed below.

Schedule of Distributions

For the year ended December 31, 2019, the Company paid aggregate distributions of $27.2 million including $12.5 million of distributions paid in cash and $14.7 million of distributions reinvested in shares of common stock through the Company's distribution reinvestment plan, as follows (in thousands):

Authorization Date	Per Common Share		Record Dates	Distribution Date	Distributions reinvested in shares of Common Stock		Net Cash Distributions		Total Aggregate Distributions
December 14, 2018	$	0.00164384	December 29, 2018 through January 30, 2019	January 31, 2019	$	1,717	$	1,412	$	3,129
December 14, 2018		0.00164384	January 31, 2019 through February 27, 2019	February 28, 2019		1,553		1,281		2,834
December 14, 2018		0.00164384	February 28, 2019 through March 28, 2019	March 29, 2019		1,594		1,342		2,936
March 20, 2019		0.00109589	March 29, 2019 through April 29, 2019	April 30, 2019		1,164		985		2,149
March 20, 2019		0.00109589	April 30, 2019 through May 30, 2019	May 31, 2019		1,131		956		2,087
March 20, 2019		0.00109589	May 31, 2019 through June 27, 2019	June 28, 2019		1,012		858		1,870
June 11, 2019		0.00109589	June 28, 2019 through July 30, 2019	July 31, 2019		1,174		996		2,170
June 11, 2019		0.00109589	July 31 2019 through August 29, 2019	August 30, 2019		1,068		909		1,977
June 11, 2019		0.00109589	August 30, 2019 through September 27, 2019	September 30, 2019		1,026		881		1,907
September 10, 2019		0.00109589	September 28, 2019 through October 30, 2019	October 31, 2019		1,159		1,008		2,167
September 10, 2019		0.00109589	October 31, 2019 through November 26, 2019	November 27, 2019		944		834		1,778
September 10, 2019		0.00109589	November 27, 2019 through December 30, 2019	December 31, 2019		1,182		1,057		2,239
					$	14,724	$	12,519	$	27,243

The following is a reconciliation of total aggregate distributions paid to total distributions declared for the year ended December 31, 2019 (in thousands):

Total aggregate distributions paid	$	27,243
Less: distribution payable at December 31, 2018		(8,878	)
Add: distribution payable at December 31, 2019		5,993
Total distributions declared	$	24,358

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with the accounting principles generally accepted in the United States of America ("GAAP").

Principles of Consolidation

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

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

N/A - Not Applicable

(1) Property was sold on February 28, 2019

All intercompany accounts and transactions have been eliminated in consolidation.

Segment Reporting

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

Use of Estimates

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

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentration of credit risk, consist of periodic temporary deposits of cash. At December 31, 2019, the Company had $46.1 million of deposits at various banks, $38.7 million of which were over the insurance limit of the Federal Deposit Insurance Corporation.  No losses have been experienced on such deposits.

Rental Properties

The Company records acquired real estate at fair value on their acquisition date. The Company considers the period of future benefit of an asset to determine its appropriate useful life, and depreciates the asset using the straight line method.  The Company's estimated useful lives of its assets by class are as follows:

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

Improvements and replacements in excess of $1,000 are capitalized when they have a useful life greater than or equal to one year. The Manager earns a construction management fee of 5.0% of actual aggregate costs to construct improvements, or to repair, rehab or reconstruct a property. These costs are capitalized along with the related asset. Costs of repairs and maintenance are expensed as incurred.

As of December 31, 2019, the Company's real estate investments located in Texas, Illinois, Colorado, Oregon and Georgia represent approximately 19.6%, 18.9%, 15.6%, 14.1% and 9.1% of the portfolio. This makes it particularly susceptible to adverse economic developments in these real estate markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for multifamily rentals resulting from the local business climate, could negatively affect the Company's liquidity and adversely affect its ability to fund its ongoing operations.

Impairment of Long Lived Assets

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

If impairment exists, due to the inability to recover the carrying value of a property, an impairment loss will be recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income. The Company did not recognize any impairment charges during the years ended December 31, 2019 and 2018.

Allocation of Purchase Price of Acquired Assets

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

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

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

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

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

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

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

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

Revenue Recognition

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

The future minimum rental payments to be received from noncancelable operating leases are approximately $41.4 million and $586,000 for the years ending December 31, 2020 and 2021, and none thereafter.

Revenue is primarily derived from the rental of residential housing units for which the Company receives minimum rents and utility reimbursements pursuant to underlying tenant lease agreements.  The Company also receives other ancillary fees for administration of leases, late payments and amenities, which are charged to residents and recognized monthly as earned. The Company elected the practical expedient to not separate lease and non-lease components and has presented property revenues combined based upon the lease being determined the predominant component. The Company also has revenue sharing arrangements of cable income from contracts with cable providers at the Company's properties. Included in accrued expenses and other liabilities on the consolidated balance sheets at December 31, 2019 and 2018 is a $573,000 and $666,000 contract liability related to deferred revenue from contracts with cable providers. The Company recognizes income from these contracts on a straight line basis over the contract period of 10 years to 12 years. During the years ended December 31, 2019 and 2018, approximately $138,000 and $71,100, respectively of revenue from the contract liability was recognized as income.

Tenant Receivables

The Company makes estimates of the collectability of its tenant receivables related to base rents, including straight-line rentals, expense reimbursements and other revenue or income.  The Company specifically analyzes accounts receivable and historical bad debts, tenant creditworthiness, current economic trends when evaluating the adequacy of the allowance for doubtful accounts.  In addition, with respect to tenants in bankruptcy, the Company makes estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectability of the related receivable.  In some cases, the ultimate resolution of these claims can exceed one year.  At December 31, 2019 and 2018, there were allowances for uncollectible receivables of $44,186 and $13,901, respectively.

Income Taxes

The Company elected to be taxed as a REIT, commencing with its taxable year ended December 31, 2014. To maintain its REIT qualification for U.S. federal income tax purposes, the Company is generally required to distribute at least 90% of its taxable net income (excluding net capital gains) to its stockholders as well as comply with other requirements, including certain asset, income and stock ownership tests. As a REIT, the Company is not subject to federal corporate income tax to the extent that it distributes 100% of its REIT taxable income each year. If the Company fails to qualify as a REIT, and does not qualify for certain statutory relief provisions, it is subject to U.S. federal, state and local income taxes and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year in which it fails its REIT qualification. Accordingly, the Company’s failure to qualify as a REIT could have a material adverse impact on its results of operations and amounts available for distribution to its stockholders.

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

The Company may elect to treat certain of its subsidiaries as taxable REIT subsidiaries (“TRS”). In general a TRS may hold assets and engage in activities that the Company cannot hold or engage in directly and generally may engage in any real estate or non-real estate-related business.  A TRS is subject to U.S. federal, state and local corporate income taxes. While a TRS may generate net income, a TRS can declare dividends to the Company which will be included in the Company’s taxable income and necessitate a distribution to its stockholders. Conversely, if the Company retains earnings at a TRS level, no distribution is required and the Company can increase book equity of the consolidated entity. As of December 31, 2019 and 2018, the Company did not treat any of its subsidiaries as a TRS.

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

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

Earnings Per Share

Basic earnings (loss) per share is calculated on the basis of weighted-average common shares outstanding during the year. Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted-average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted to common stock. None of the 50,000 convertible shares (see Note 11) are included in the diluted earnings per share calculations because the necessary conditions for conversion have not been satisfied as of December 31, 2019 (were such date to represent the end of the contingency period).  For the year ended December 31, 2019 and 2018, common shares potentially issuable to settle distributions payable are excluded from the calculation of diluted earnings per share calculations, as their inclusion would be anti-dilutive.

Adoption of New Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, "Leases" ("ASU

No. 2016-02"), which was amended by ASU No. 2018-09 "Codification Improvements" in July 2018. ASU No. 2016-02, as

amended, is intended to improve financial reporting related to leasing transactions and requires organizations that lease assets

to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. In September 2017, the FASB issued ASU No. 2017-13, "Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic

606), Leases (Topic 840), and Leases (Topic 842)", which provides additional implementation guidance on the previously issued ASU No. 2016-02. The Company adopted these standards as of January 1, 2019, and the adoption did not have a material effect on the Company's consolidated financial statements and disclosures. For operating leases where the Company is the lessor, the underlying leased asset is recognized as real estate on the balance sheet. The Company has chosen to apply the practical expedient (discussed in ASU No. 2018-11, “Leases: Targeted Improvements”) to nonlease component revenue streams and account for them as a combined component with leasing revenue. The Company elected the package of practical expedients permitted within the new standard, which among other things, allows the Company to carry forward the historical lease classification. Also allowable under the new standard (ASU No. 2018-11) is the option, which the Company has elected, to present the operating lease ROU asset and operating lease liabilities as of January 1, 2019 and not restate prior periods. No cumulative impact adjustment was necessary to opening retained earnings as of January 1, 2019. For certain equipment leases, such as copiers, the Company applied a portfolio approach to effectively account for the operating lease ROU assets and liabilities.

In August 2017, FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): targeted Improvements to Accounting for Hedging Activities", which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. The Company adopted the standard on January 1, 2019, and the adoption did not have a significant impact on its consolidated financial statements.

In June 2018, FASB issued ASU 2018-07 “Improvements to Nonemployee Share-Based Payment Accounting” to simplify the accounting for share-based payment transactions for acquiring goods and services from nonemployees by including these payments in the scope of the guidance for share-based payments to employees. The Company adopted the standard on January 1, 2019, and the adoption did not have a significant impact on its consolidated financial statements.

In July 2018, FASB issued ASU 2018-09, "Codification Improvements." This standard does not prescribe any new accounting guidance, but instead makes minor improvements and clarifications of several different FASB Accounting Standards Codification areas based on comments and suggestions made by various stakeholders. The Company adopted the standard on January 1, 2019, and the adoption did not have a significant impact on its consolidated financial statements.

In October 2018, FASB issued ASU No. 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes”. ASU No. 2018-16 permits the use of the Overnight Index Swap (“OIS”) Rate based on the Secured Overnight Financing Rate as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to the interest rates on direct Treasury obligations of the U.S. government, the London Interbank Offered Rate (“LIBOR”) and the OIS Rate based on the Federal Funds Effective Rate. For entities that have not already adopted ASU No. 2017-12, the amendments in ASU No. 2018-16 are required to be adopted concurrently with the amendments in ASU No. 2017-12. . The Company adopted the standard on January 1, 2019, and the adoption did not have a significant impact on its consolidated financial statements.

Accounting Standards Issued But Not Yet Effective

In June 2016, FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses”, which requires measurement and recognition of expected credit losses for financial assets held. ASU No. 2016-13 which will be effective for the Company beginning January 1, 2020. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU No. 2016-13 to have a significant impact on its consolidated financial statements and disclosures due to the fact that the Company did not have instruments subject to this guidance at December 31, 2019.

In January 2017, FASB issued ASU No. 2017-04, "Intangibles- Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment", which alters the current goodwill impairment testing procedures. ASU No. 2017-04 will be effective for the Company beginning January 1, 2020. Early application is permitted. The Company is evaluating this guidance and assessing the impact of this guidance on its consolidated financial statements. Since the Company has no recorded goodwill, there is no expected impact upon adoption.

In August 2018, FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” This update removes, modifies and adds certain disclosure requirements in FASB ASC 820, “Fair Value Measurement” (“ASC 820”). ASU No. 2018-13 will be effective for the Company beginning January 1, 2020 and early adoption is permitted.  The Company is continuing to evaluate this guidance; however, the Company does not expect the adoption of ASU No. 2018-13 to have a significant impact on its consolidated financial statements.

In November 2018, FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842, Leases. ASU 2018-19 is effective on January 1, 2020, with early adoption permitted. The Company is evaluating this guidance; however, it does not expect that adoption of ASU 2018-19 will have a significant impact on its consolidated financial statements. Information regarding the adoption of ASC 842 is described above.

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Document and Entity Information - USD ($)

12 Months Ended

Dec. 31, 2019

Mar. 18, 2020

Jun. 30, 2019

Cover [Abstract]

Entity Registrant Name

Resource Real Estate Opportunity REIT II, Inc.

Entity Central Index Key

0001559484

Current Fiscal Year End Date

--12-31

Entity Well-known Seasoned Issuer

No

Entity Voluntary Filers

No

Entity Current Reporting Status

Yes

Entity Interactive Data Current

Yes

Entity Filer Category

Non-accelerated Filer

Document Type

10-K

Document Period End Date

Dec. 31, 2019

Document Fiscal Year Focus

2018

Document Fiscal Period Focus

FY

Amendment Flag

false

Entity Emerging Growth Company

true

Entity Small Business

true

Entity Ex Transition Period

true

Title of 12(g) Security

Common Stock, par value $0.01 per share

Entity Shell Company

false

Document Annual Report

true

Document Transition Report

false

Entity File Number

000-55430

Entity Tax Identification Number

80-0854717

Entity Incorporation, State or Country Code

MD

Entity Address, Address Line One

1845 Walnut Street

Entity Address, Address Line Two

18th Floor

Entity Address, City or Town

Philadelphia

Entity Address, State or Province

PA

Entity Address, Postal Zip Code

19103

City Area Code

215

Local Phone Number

231-7050

Entity Common Stock, Shares Outstanding

60,339,875

Entity Public Float

$ 0

Documents Incorporated by Reference

Registrant incorporates by reference portions of the Resource Real Estate Opportunity REIT II, Inc. Definitive Proxy Statement for the 2020 Annual Meeting of Stockholders (Items 10, 11, 12, 13, and 14 of Part III).

XML

Consolidated Statement of Changes in Stockholders' Equity - USD ($) $ in Thousands	Total	Convertible Stock	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit
Balance, beginning of period at Dec. 31, 2017	$ 330,660	$ 1	$ 606	$ 534,683	$ (444)	$ (204,186)
Balance, beginning of period (in shares) at Dec. 31, 2017		50,000	60,782,000
Common stock issued through distribution reinvestment plan	20,693		$ 24	20,669
Common stock issued through distribution reinvestment plan (in shares)			2,397,000
Distributions declared	(36,634)					(36,634)
Common stock redemptions	(15,877)		$ (18)	(15,859)
Common stock redemptions (in shares)			(1,800,000)
Designated derivatives, fair value adjustment	65				65
Net loss	(35,441)					(35,441)
Balance, end of period at Dec. 31, 2018	$ 263,466	$ 1	$ 612	539,493	(379)	(276,261)
Balance, end of period (in shares) at Dec. 31, 2018	61,378,367	50,000	61,379,000
Common stock issued through distribution reinvestment plan	$ 14,724		$ 18	14,706
Common stock issued through distribution reinvestment plan (in shares)			1,754,000
Distributions declared	(24,358)					(24,358)
Common stock redemptions	(25,765)		$ (30)	(25,735)
Common stock redemptions (in shares)			(3,038,000)
Designated derivatives, fair value adjustment	190				190
Net loss	(11,944)					(11,944)
Balance, end of period at Dec. 31, 2019	$ 216,313	$ 1	$ 600	$ 528,464	$ (189)	$ (312,563)
Balance, end of period (in shares) at Dec. 31, 2019	60,094,623	50,000	60,095,000

XML

Supplemental Cash Flow Information

12 Months Ended

Dec. 31, 2019

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION

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

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

XML

Identified Intangible Assets, Net

12 Months Ended

Dec. 31, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Identified Intangible Assets, Net

NOTE 7 - IDENTIFIED INTANGIBLE ASSETS, NET

Identified intangible assets, net, consist of in-place rental leases.  The gross value of acquired in-place leases totaled $17.3 million and $18.5 millionas of December 31, 2019 and 2018, respectively, which were reported net of accumulated amortization of$17.3 million and $18.5 million, respectively.  For the years ended December 31, 2019 and 2018, amortization expense was $0and $813,000, respectively. Intangible assets were fully amortized as of December 31, 2018.

XML

Equity

12 Months Ended

Dec. 31, 2019

Equity [Abstract]

Equity

NOTE 11 – EQUITY

Preferred Stock

The Company’s charter authorizes the Company to issue 10,000,000 shares of its $0.01 par value preferred stock. As of both December 31, 2019 and 2018, no shares of preferred stock were issued or outstanding.

Convertible Stock

As of December 31, 2019, the Company had 50,000 shares of $0.01 par value convertible stock outstanding, which are owned by the Advisor. The convertible stock will convert into shares of the Company’s common stock upon the occurrence of (a) the Company having paid distributions to common stockholders that in the aggregate equal 100% of the price at which the Company originally sold the shares plus an amount sufficient to produce a 7% cumulative, non-compounded annual return on the shares at that price; or (b) if the Company lists its common stock on a national securities exchange and, on or after the 31st trading day following the listing, the Company’s value based on the average trading price of its common stock since the listing, plus prior distributions, combine to meet the same 7% return threshold.

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

(A) the lesser of

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

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

(2) the sum of the aggregate issue price of those outstanding shares plus a 7% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, divided by

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

As of December 31, 2019, no Triggering Events had occurred or were probable to occur.

Common Stock

As of December 31, 2019, the Company had an aggregate of 60,094,623 shares of $0.01 par value common stock outstanding, including the Advisor's additional purchase of 117,778 shares of common stock for $1.1 million, as follows (dollars in thousands):

	Shares			Gross Proceeds
Shares issued through initial public offering		55,791,297		$	556,197
Shares issued through stock distributions		246,365			—
Shares issued through distribution reinvestment plan		9,826,431			85,348
Advisor's initial investment, net of 5,000 share conversion		15,000			150
Total		65,879,093		$	641,695
Shares redeemed and retired		(5,784,470	)
Total shares outstanding		60,094,623

Redemptions

During the year ended December 31, 2019, the Company redeemed shares of common stock as follows (in thousands, except per share data):

Period	Total Number of Shares Redeemed (1)		Average Price Paid per Share		Cumulative Number of Shares Purchased as Part of a Publicly Announced Plan or Program (2)		Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
January 2019		—	$	—		—	(2)
February 2019		—	$	—		—	(2)
March 2019	664		$	8.97	664		(2)
April 2019		—	$	—		—	(2)
May 2019		—	$	—		—	(2)
June 2019		1,671	$	8.34		2,335	(2)
July 2019		—	$	—		—	(2)
August 2019		—	$	—		—	(2)
September 2019	467		$	8.36		2,802	(2)
October 2019		—	$	—		—	(2)
November 2019		—	$	—		—	(2)
December 2019		236	$	8.33		3,038	(2)

(1) All purchases of equity securities by the Company in the year ended December 31, 2019 were made pursuant to the Company's share redemption program.

(2) The Company currently limits the dollar value and number of shares that may be repurchased under the program, as discussed below.

The Company will not redeem in excess of 5% of the weighted-average number of shares outstanding during the 12 month period immediately prior to the effective date of redemption.  Generally, the cash available for redemption will be limited to proceeds from the distribution reinvestment plan plus, if the Company had positive operating cash flow from the previous fiscal year, 1% of all operating cash flow from the previous fiscal year.  These limitations apply to all redemptions, including redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility.

During the year ended December 31, 2019, not all redemption requests were honored. As a result of the 5% limit of shares that may be repurchased under the program, during the year ended December 31, 2019, 48.1% of redemption requests were honored. As a result, the Company had $27.3 million of outstanding and unfilled redemption requests, representing 3,276,329 shares.

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

On February 14, 2020, the Company’s board of directors suspended the share redemption program, with exceptions for redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility. The suspension took effect on March 20, 2020. While the share redemption program is partially suspended, pending and new redemption requests for redemptions submitted other than in connection with a stockholder’s death or qualifying disability will not be honored or retained, but will be cancelled with the ability to resubmit when, if ever, the share redemption program is fully resumed.

Distributions

For the year ended December 31, 2019, the Company paid aggregate distributions of $27.2 million including $12.5 million of distributions paid in cash and $14.7 million of distributions reinvested in shares of common stock through the Company's distribution reinvestment plan, as follows (in thousands):

Authorization Date	Per Common Share		Record Dates	Distribution Date	Distributions reinvested in shares of Common Stock		Net Cash Distributions		Total Aggregate Distributions
December 14, 2018	$	0.00164384	December 29, 2018 through January 30, 2019	January 31, 2019	$	1,717	$	1,412	$	3,129
December 14, 2018		0.00164384	January 31, 2019 through February 27, 2019	February 28, 2019		1,553		1,281		2,834
December 14, 2018		0.00164384	February 28, 2019 through March 28, 2019	March 29, 2019		1,594		1,342		2,936
March 20, 2019		0.00109589	March 29, 2019 through April 29, 2019	April 30, 2019		1,164		985		2,149
March 20, 2019		0.00109589	April 30, 2019 through May 30, 2019	May 31, 2019		1,131		956		2,087
March 20, 2019		0.00109589	May 31, 2019 through June 27, 2019	June 28, 2019		1,012		858		1,870
June 11, 2019		0.00109589	June 28, 2019 through July 30, 2019	July 31, 2019		1,174		996		2,170
June 11, 2019		0.00109589	July 31 2019 through August 29, 2019	August 30, 2019		1,068		909		1,977
June 11, 2019		0.00109589	August 30, 2019 through September 27, 2019	September 30, 2019		1,026		881		1,907
September 10, 2019		0.00109589	September 28, 2019 through October 30, 2019	October 31, 2019		1,159		1,008		2,167
September 10, 2019		0.00109589	October 31, 2019 through November 26, 2019	November 27, 2019		944		834		1,778
September 10, 2019		0.00109589	November 27, 2019 through December 30, 2019	December 31, 2019		1,182		1,057		2,239
					$	14,724	$	12,519	$	27,243

On December 11, 2019, the Company's Board of Directors approved distributions in an amount of $0.001095890 per share of common stock for stockholders of record each day in the period from December 31, 2019 through and including March 30, 2020, payable on January 31, 2020, February 28, 2020 and March 31, 2020.

The following is a reconciliation of total aggregate distributions paid to total distributions declared for the year ended December 31, 2019 (in thousands):

Total aggregate distributions paid	$	27,243
Less: distribution payable at December 31, 2018		(8,878	)
Add: distribution payable at December 31, 2019		5,993
Total distributions declared	$	24,358

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

XML

Related Party Transactions - Fees Earned/Expenses Incurred and Amounts Payable to Related Parties (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Related Party Transaction [Line Items]
Due from related parties	$ 297	$ 57
Due to related parties	432	584
RAI | Self-Insurance Funds Held
Related Party Transaction [Line Items]
Due from related parties	33	57
RAI | Operating Expense Reimbursements
Related Party Transaction [Line Items]
Due from related parties	264
RAI | Internal Audit Fees
Related Party Transaction [Line Items]
Due to related parties		25
Advisor | Operating Expense Reimbursements
Related Party Transaction [Line Items]
Due to related parties	6	133
Fees earned / expenses incurred	3,462	3,708
Advisor | Asset Management Fees
Related Party Transaction [Line Items]
Fees earned / expenses incurred	9,374	9,840
Advisor | Debt Financing Fees
Related Party Transaction [Line Items]
Fees earned / expenses incurred	39	78
Manager | Operating Expense Reimbursements
Related Party Transaction [Line Items]
Due to related parties	96	97
Fees earned / expenses incurred	70	201
Manager | Property Management Fees
Related Party Transaction [Line Items]
Due to related parties	328	329
Fees earned / expenses incurred	3,834	3,888
Manager | Construction Management Fees
Related Party Transaction [Line Items]
Fees earned / expenses incurred	255	859
Manager | Construction Payroll Reimbursements
Related Party Transaction [Line Items]
Fees earned / expenses incurred	63	$ 121
Property | Meridian
Related Party Transaction [Line Items]
Due to related parties	$ 2

XML

Equity - Distributions (Details) - USD ($) $ / shares in Units, $ in Thousands		12 Months Ended
	Dec. 11, 2019	Dec. 31, 2019	Dec. 31, 2018
Class of Stock [Line Items]
Distributions reinvested in shares of Common Stock		$ 14,724	$ 20,693
Net Cash Distributions		12,519
Total Aggregate Distributions		27,243
Dividends declared, daily accrual amount (in dollars per share)	$ 0.001095890
Less: distribution payable at December 31, 2018		(8,878)
Distribution payable		5,993	8,878
Total distributions declared		24,358	$ 36,634
December 29, 2018 through January 30, 2019
Class of Stock [Line Items]
Distributions reinvested in shares of Common Stock		1,717
Net Cash Distributions		1,412
Total Aggregate Distributions		$ 3,129
Per Common Share per day (in dollars per share)		$ 0.00164384
Distribution Date		Jan. 31, 2019
January 31, 2019 through February 27, 2019
Class of Stock [Line Items]
Distributions reinvested in shares of Common Stock		$ 1,553
Net Cash Distributions		1,281
Total Aggregate Distributions		$ 2,834
Per Common Share per day (in dollars per share)		$ 0.00164384
Distribution Date		Feb. 28, 2019
February 28, 2019 through March 28, 2019
Class of Stock [Line Items]
Distributions reinvested in shares of Common Stock		$ 1,594
Net Cash Distributions		1,342
Total Aggregate Distributions		$ 2,936
Per Common Share per day (in dollars per share)		$ 0.00164384
Distribution Date		Mar. 29, 2019
March 29, 2019 through April 29, 2019
Class of Stock [Line Items]
Distributions reinvested in shares of Common Stock		$ 1,164
Net Cash Distributions		985
Total Aggregate Distributions		$ 2,149
Per Common Share per day (in dollars per share)		$ 0.00109589
Distribution Date		Apr. 30, 2019
April 30, 2019 through May 30, 2019
Class of Stock [Line Items]
Distributions reinvested in shares of Common Stock		$ 1,131
Net Cash Distributions		956
Total Aggregate Distributions		$ 2,087
Per Common Share per day (in dollars per share)		$ 0.00109589
Distribution Date		May 31, 2019
May 31, 2019 through June 27, 2019
Class of Stock [Line Items]
Distributions reinvested in shares of Common Stock		$ 1,012
Net Cash Distributions		858
Total Aggregate Distributions		$ 1,870
Per Common Share per day (in dollars per share)		$ 0.00109589
Distribution Date		Jun. 28, 2019
June 28, 2019 through July 30, 2019
Class of Stock [Line Items]
Distributions reinvested in shares of Common Stock		$ 1,174
Net Cash Distributions		996
Total Aggregate Distributions		$ 2,170
Per Common Share per day (in dollars per share)		$ 0.00109589
Distribution Date		Jul. 31, 2019
July 31, 2019 through August 29, 2019
Class of Stock [Line Items]
Distributions reinvested in shares of Common Stock		$ 1,068
Net Cash Distributions		909
Total Aggregate Distributions		$ 1,977
Per Common Share per day (in dollars per share)		$ 0.00109589
Distribution Date		Aug. 30, 2019
August 30, 2019 through September 27, 2019
Class of Stock [Line Items]
Distributions reinvested in shares of Common Stock		$ 1,026
Net Cash Distributions		881
Total Aggregate Distributions		$ 1,907
Per Common Share per day (in dollars per share)		$ 0.00109589
Distribution Date		Sep. 30, 2019
September 28, 2019 through October 30, 2019
Class of Stock [Line Items]
Distributions reinvested in shares of Common Stock		$ 1,159
Net Cash Distributions		1,008
Total Aggregate Distributions		$ 2,167
Per Common Share per day (in dollars per share)		$ 0.00109589
Distribution Date		Oct. 31, 2019
October 31, 2019 through November 26, 2019
Class of Stock [Line Items]
Distributions reinvested in shares of Common Stock		$ 944
Net Cash Distributions		834
Total Aggregate Distributions		$ 1,778
Per Common Share per day (in dollars per share)		$ 0.00109589
Distribution Date		Nov. 27, 2019
November 27, 2019 through December 30, 2019
Class of Stock [Line Items]
Distributions reinvested in shares of Common Stock		$ 1,182
Net Cash Distributions		1,057
Total Aggregate Distributions		$ 2,239
Per Common Share per day (in dollars per share)		$ 0.00109589
Distribution Date		Dec. 31, 2019