UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2021

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _________ to _________

Commission file number 000-55428

STEADFAST APARTMENT REIT, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	36-4769184
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

18100 Von Karman Avenue, Suite 200

Irvine, California 92612

(Address of Principal Executive Offices) (Zip Code)

 (949) 569-9700

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) 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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

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

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

As of October 22, 2021, there were 110,188,892 shares of the Registrant’s common stock issued and outstanding.

1

STEADFAST APARTMENT REIT, INC.

INDEX

	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements	2
Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020	2
Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (unaudited)	3
Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020 (unaudited)	4
Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited)	6
Condensed Notes to Consolidated Financial Statements as of September 30, 2021 (unaudited)	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	58
Item 3. Quantitative and Qualitative Disclosures About Market Risk	86
Item 4. Controls and Procedures	87
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	88
Item 1A. Risk Factors	88
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	98
Item 3. Defaults Upon Senior Securities	99
Item 4. Mine Safety Disclosures	99
Item 5. Other Information	99
Item 6. Exhibits	100
Signatures	101

1

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED BALANCE SHEETS

	September 30, 2021		December 31, 2020
	(Unaudited)
ASSETS
Assets:
Real Estate:
Land	$	338,512,553	$	331,031,517
Building and improvements	2,945,070,487		2,813,476,200
Tenant origination and absorption costs	1,682,900		1,752,793
Total real estate held for investment, cost	3,285,265,940		3,146,260,510
Less accumulated depreciation and amortization	(480,154,543)		(384,494,007)
Total real estate held for investment, net	2,805,111,397		2,761,766,503
Real estate held for development	34,870,861		39,891,218
Real estate held for sale, net	60,367,924		61,975,530
Total real estate, net	2,900,350,182		2,863,633,251
Cash and cash equivalents	122,107,875		258,198,326
Restricted cash	38,360,359		38,998,980
Goodwill	125,220,448		125,220,448
Due from affiliates	266,453		377,218
Rents and other receivables	22,967,608		5,385,108
Other assets	11,996,018		9,925,714
Total assets	$	3,221,268,943	$	3,301,739,045
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities	$	81,920,569	$	80,732,664
Notes Payable, net:
Mortgage notes payable, net	1,369,141,135		1,363,796,018
Credit facilities, net	712,416,114		711,798,953
Notes payable related to real estate held for sale, net	53,684,875		53,650,700
Total notes payable, net	2,135,242,124		2,129,245,671
Distributions payable	4,795,740		8,462,735
Distributions payable to affiliates	265,620		469,236
Due to affiliates	228,202		337,422
Liabilities related to real estate held for sale	1,304,445		865,862
Total liabilities	2,223,756,700		2,220,113,590
Commitments and contingencies (Note 12)
Stockholders’ Equity:
Preferred stock, $0.01 par value per share; 100,000,000 shares authorized, no shares issued and       outstanding	—		—
Common stock, $0.01 par value per share; 999,998,000 shares authorized, 110,188,806 and       110,070,572 shares issued and outstanding at September 30, 2021 and December 31, 2020,        respectively	1,101,887		1,100,706
Convertible stock, $0.01 par value per share; 1,000 shares authorized, zero shares issued       and outstanding as of September 30, 2021 and December 31, 2020, respectively	—		—
Class A Convertible stock, $0.01 par value per share; 1,000 shares authorized, zero shares       issued and outstanding as of September 30, 2021 and December 31, 2020, respectively	—		—
Additional paid-in capital	1,609,821,541		1,603,989,130
Cumulative distributions and net losses	(712,272,617)		(627,787,040)
Total Steadfast Apartment REIT, Inc. (“STAR”) stockholders’ equity	898,650,811		977,302,796
Noncontrolling interest	98,861,432		104,322,659
Total equity	997,512,243		1,081,625,455
Total liabilities and stockholders’ equity	$	3,221,268,943	$	3,301,739,045

See accompanying notes to consolidated financial statements.

2

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues:
Rental income	$	89,905,120	$	82,937,828	$	257,205,237	$	215,817,169
Other income	736,773		732,680		2,219,106		1,862,873
Total revenues	90,641,893		83,670,508		259,424,343		217,680,042
Expenses:
Operating, maintenance and management	23,114,563		21,567,499		65,213,378		53,783,824
Real estate taxes and insurance	12,819,459		12,935,004		41,263,876		35,346,220
Fees to affiliates	4,158		8,449,715		12,708		30,586,344
Depreciation and amortization	34,051,286		47,564,706		101,203,302		129,596,268
Interest expense	20,279,374		20,628,159		60,174,405		54,734,431
General and administrative expenses	14,066,611		11,705,698		37,128,402		19,408,854
Impairment of real estate	—		—		—		5,039,937
Total expenses	104,335,451		122,850,781		304,996,071		328,495,878
Loss before other income (expense)	(13,693,558)		(39,180,273)		(45,571,728)		(110,815,836)
Other income (expense):
Gain on sale of real estate, net	—		1,392,434		—		12,777,033
Interest income	49,382		165,495		252,450		553,011
Insurance proceeds in excess of losses      incurred	375,931		112,342		511,291		236,754
Equity in loss from unconsolidated joint      venture	—		(16,711)		—		(3,020,111)
Fees and other income from affiliates	1,622,096		390,099		4,651,364		390,099
Loss on debt extinguishment	—		(621,451)		—		(621,451)
Total other income	2,047,409		1,422,208		5,415,105		10,315,335
Net loss	(11,646,149)		(37,758,065)		(40,156,623)		(100,500,501)
Loss allocated to noncontrolling interest	(1,003,675)		(844,653)		(2,445,203)		(681,339)
Net loss attributable to common stockholders	$	(10,642,474)	$	(36,913,412)	$	(37,711,420)	$	(99,819,162)
Loss per common share — basic and diluted	$	(0.10)	$	(0.34)	$	(0.34)	$	(1.04)
Weighted average number of common shares     outstanding — basic and diluted	109,901,506		109,663,583		109,898,905		95,714,116

See accompanying notes to consolidated financial statements.

3

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 (Unaudited)

	Common Stock			Convertible Stock			Class A Convertible Stock			Additional Paid-In Capital		Cumulative Distributions & Net Losses		Total STAR Stockholders’ Equity		Noncontrolling Interest		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount		Shares	Amount
BALANCE, July 1, 2021	110,228,140	$	1,102,281	—	$	—	—	$	—	$	1,607,145,466	$	(687,044,939)	$	921,202,808	$	100,805,226	$	1,022,008,034
Issuance of common stock	156,293	1,563		—	—		—	—		2,053,793		—		2,055,356		—		2,055,356
Transfers from redeemable common   stock	—	—		—	—		—	—		171,239		—		171,239		—		171,239
Repurchase of common stock	(195,627)	(1,957)		—	—		—	—		1,957		—		—		—		—
Distributions declared ($0.132 per share   of common stock)	—	—		—	—		—	—		—		(14,585,204)		(14,585,204)		(940,119)		(15,525,323)
Amortization of stock-based   compensation	—	—		—	—		—	—		449,086		—		449,086		—		449,086
Net loss	—	—		—	—		—	—		—		(10,642,474)		(10,642,474)		(1,003,675)		(11,646,149)
BALANCE, September 30, 2021	110,188,806	$	1,101,887	—	$	—	—	$	—	$	1,609,821,541	$	(712,272,617)	$	898,650,811	$	98,861,432	$	997,512,243

	Common Stock			Convertible Stock			Class A Convertible Stock			Additional Paid-In Capital		Cumulative Distributions & Net Losses		Total STAR Stockholders’ Equity		Noncontrolling Interest		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount		Shares	Amount
BALANCE, January 1, 2021	110,070,572	$	1,100,706	—	$	—	—	$	—	$	1,603,989,130	$	(627,787,040)	$	977,302,796	$	104,322,659	$	1,081,625,455
Issuance of common stock	755,506	7,555		—	—		—	—		9,756,893		—		9,764,448		—		9,764,448
Transfers to redeemable common stock	—	—		—	—		—	—		(5,130,324)		—		(5,130,324)		—		(5,130,324)
Repurchase of common stock	(637,272)	(6,374)		—	—		—	—		6,374		—		—		—		—
Distributions declared ($0.425 per share   of common stock)	—	—		—	—		—	—		—		(46,774,157)		(46,774,157)		(3,016,024)		(49,790,181)
Amortization of stock-based   compensation	—	—		—	—		—	—		1,199,468		—		1,199,468		—		1,199,468
Net loss	—	—		—	—		—	—		—		(37,711,420)		(37,711,420)		(2,445,203)		(40,156,623)
BALANCE, September 30, 2021	110,188,806	$	1,101,887	—	$	—	—	$	—	$	1,609,821,541	$	(712,272,617)	$	898,650,811	$	98,861,432	$	997,512,243

See accompanying notes to consolidated financial statements.

4

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 (Unaudited)

	Common Stock			Convertible Stock			Class A Convertible Stock			Additional Paid-In Capital		Cumulative Distributions & Net Losses		Total STAR Stockholders’ Equity		Noncontrolling Interest		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount		Shares	Amount
BALANCE, July 1, 2020	109,437,702	$	1,094,377	—	$	—	1,000	$	10	$	1,596,591,653	$	(526,888,587)	$	1,070,797,453	$	14,450,000	$	1,085,247,453
Issuance of common stock	824,152	8,242		—	—		—	—		9,693,591		—		9,701,833		—		9,701,833
Issuance of OP Units	—	—		—	—		—	—		—		—		—		93,750,000		93,750,000
Repurchase of common stock	(282,483)	(2,825)		—	—		—	—		(3,997,175)		—		(4,000,000)		—		(4,000,000)
Repurchase of Class A convertible stock	—	—		—	—		(1,000)	(10)		(990)		—		(1,000)		—		(1,000)
Distributions declared ($0.226 per share   of common stock)	—	—		—	—		—	—		—		(24,821,896)		(24,821,896)		(668,742)		(25,490,638)
Amortization of stock-based   compensation	—	—		—	—		—	—		97,478		—		97,478		—		97,478
Net loss	—	—		—	—		—	—		—		(36,913,412)		(36,913,412)		(844,653)		(37,758,065)
BALANCE, September 30, 2020	109,979,371	$	1,099,794	—	$	—	—	$	—	$	1,602,384,557	$	(588,623,895)	$	1,014,860,456	$	106,686,605	$	1,121,547,061

	Common Stock			Convertible Stock			Class A Convertible Stock			Additional Paid-In Capital		Cumulative Distributions & Net Losses		Total STAR Stockholders’ Equity		Noncontrolling Interest		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount		Shares	Amount
BALANCE, January 1, 2020	52,607,695	$	526,077	1,000	$	10	—	$	—	$	698,453,981	$	(424,166,210)	$	274,813,858	$	—	$	274,813,858
Issuance of common stock	1,840,307	18,404		—	—		—	—		25,322,884		—		25,341,288		—		25,341,288
Issuance of common stock in connection   with the SIR Merger	43,775,314	437,753		—	—		—	—		692,963,221		—		693,400,974		—		693,400,974
Issuance of common stock in connection   with the STAR III Merger	12,240,739	122,407		—	—		—	—		193,770,898		—		193,893,305		—		193,893,305
Issuance of OP Units	—	—		—	—		—	—		—		—		—		108,200,000		108,200,000
Exchange of convertible common stock   into Class A convertible common stock	—	—		(1,000)	(10)		1,000	10		—		—		—		—		—
Transfers to redeemable common stock	—	—		—	—		—	—		(1,383,318)		—		(1,383,318)		—		(1,383,318)
Repurchase of common stock	(484,684)	(4,847)		—	—		—	—		(6,902,980)		—		(6,907,827)		—		(6,907,827)
Repurchase of Class A convertible stock	—	—		—	—		(1,000)	(10)		(990)		—		(1,000)		—		(1,000)
Distributions declared ($0.674 per share   of common stock)	—	—		—	—		—	—		—		(64,638,523)		(64,638,523)		(832,056)		(65,470,579)
Amortization of stock-based   compensation	—	—		—	—		—	—		160,861		—		160,861		—		160,861
Net loss	—	—		—	—		—	—		—		(99,819,162)		(99,819,162)		(681,339)		(100,500,501)
BALANCE, September 30, 2020	109,979,371	$	1,099,794	—	$	—	—	$	—	$	1,602,384,557	$	(588,623,895)	$	1,014,860,456	$	106,686,605	$	1,121,547,061

See accompanying notes to consolidated financial statements.

5

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2021		2020
Cash Flows from Operating Activities:
Net loss	$	(40,156,623)	$	(100,500,501)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	101,203,302		129,596,268
Fees to affiliates paid in common stock	—		9,484,039
Loss on disposal of buildings and improvements	1,433,135		552,793
Loss on disposal of buildings and improvements from winter storm	12,515,830		—
Amortization of deferred financing costs	1,646,291		1,382,954
Amortization of stock-based compensation	1,199,468		160,861
Amortization of below market leases	(5,014)		(4,265)
Change in fair value of interest rate cap agreements	39,699		56,287
Gain on sale of real estate	—		(12,777,033)
Impairment of real estate	—		5,039,937
Amortization of loan premiums	(1,677,184)		(1,297,874)
Accretion of loan discounts	407,700		338,047
Straight-line of office lease	3,631		—
Interest on finance lease furnishings	258		47
Loss on debt extinguishment	—		621,451
Insurance claim recoveries	(14,347,058)		(777,353)
Equity in loss from unconsolidated joint venture	—		3,020,111
Changes in operating assets and liabilities:
Rents and other receivables	(4,225,816)		(675,979)
Other assets	(2,328,243)		(546,777)
Accounts payable and accrued liabilities	884,910		16,634,701
Due to affiliates	(232,166)		(7,732,288)
Due from affiliates	110,765		(390,099)
Net cash provided by operating activities	56,472,885		42,185,327
Cash Flows from Investing Activities:
Acquisition of real estate investments	(75,966,685)		(69,914,948)
Cash acquired in connection with the Mergers, net of acquisition costs	—		98,283,732
Acquisition of assets from Internalization Transaction	—		(29,486,646)
Acquisition of real estate held for development	—		(14,321,851)
Additions to real estate investments	(43,476,629)		(17,205,299)
Additions to real estate held for development	(25,363,295)		(10,687,626)
Escrow deposits for pending real estate acquisitions	(1,500,000)		(1,000,000)
Purchase of interest rate cap agreements	(59,700)		(67,000)
Net proceeds from sale of real estate investments	—		81,208,213
Net proceeds from sale of unconsolidated joint venture	—		19,022,280

6

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
	Nine Months Ended September 30,
	2021		2020
Proceeds from insurance claims	990,374		1,452,262
Cash contribution to unconsolidated joint venture	—		(274,400)
Cash distribution from unconsolidated joint venture	—		360,700
Net cash (used in) provided by investing activities	(145,375,935)		57,369,417
Cash Flows from Financing Activities:
Proceeds from issuance of mortgage notes payable	11,979,750		2,205,999
Principal payments on mortgage notes payable	(6,360,104)		(35,190,503)
Borrowings from credit facilities	—		198,808,000
Repurchase of Class A convertible stock	—		(1,000)
Payments of commissions on sale of common stock	—		(50,051)
Payment of loan financing deposits	(419,000)		—
Payment of deferred financing costs	—		(6,753,413)
Payment of debt extinguishment costs	—		(324,000)
Distributions to common stockholders	(43,896,344)		(45,742,635)
Repurchase of common stock	(9,130,324)		(6,907,827)
Net cash (used in) provided by financing activities	(47,826,022)		106,044,570
Net (decrease) increase in cash, cash equivalents and restricted cash	(136,729,072)		205,599,314
Cash, cash equivalents and restricted cash, beginning of the period	297,197,306		148,539,671
Cash, cash equivalents and restricted cash, end of the period	$	160,468,234	$	354,138,985
Supplemental Disclosures of Cash Flow Information:
Interest paid, net of amounts capitalized of $844,577 and $576,521 for the   nine months ended September 30, 2021 and 2020, respectively	$	59,979,750	$	51,556,232
Supplemental Disclosures of Noncash Flow Transactions:
Distributions payable to non-affiliated shareholders	$	4,795,740	$	8,182,566
Distributions payable to affiliates	$	265,620	$	454,100
Real estate under development placed in service	$	29,690,942	$	—
Accounts payable related to winter storm	$	2,550,753	$	—
Insurance claims receivable related to winter storm	$	16,440,941	$	—
Class A-2 OP Units issued for real estate	$	—	$	14,450,000
Class B OP Units issued in exchange for net assets acquired in   Internalization Transaction	$	—	$	93,750,000
Goodwill acquired in the Internalization Transaction	$	—	$	125,220,448
Affiliate assets acquired in the Internalization Transaction	$	—	$	1,066,219

7

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)

	Nine Months Ended September 30,
	2021		2020
Affiliate liabilities assumed in the Internalization Transaction	$	—	$	4,701,436
Assumption of mortgage notes payable to acquire real estate	$	—	$	81,315,122
Premiums on assumed mortgage notes payable	$	—	$	945,235
Distributions paid to common stockholders through common stock issuances pursuant   to the distribution reinvestment plan	$	9,764,448	$	15,857,249
Redemptions payable	$	—	$	4,000,000
Accounts payable and accrued liabilities from additions to real estate investments	$	7,625,126	$	111,654
Due to affiliates from additions to real estate investments	$	—	$	25,064
Accounts payable and accrued liabilities from additions to real estate held for   development	$	4,023,120	$	2,993,037
Affiliate accounts payable and accrued liabilities from additions to real estate held for   development	$	173,303	$	56,427
Due to affiliates for commissions on sales of common stock	$	—	$	21,237
Operating and finance lease right-of-use assets, net	$	1,300,961	$	2,332,352
Operating and finance lease liabilities, net	$	1,324,849	$	2,347,600
Fair value of real estate acquired in the SIR merger	$	—	$	1,100,742,973
Fair value of STAR III real estate acquired in the STAR III merger	$	—	$	479,559,505
Fair value of equity issued to SIR shareholders in the SIR merger	$	—	$	693,400,974
Fair value of equity issued to STAR III shareholders in the STAR III merger	$	—	$	193,893,305
Fair value of SIR debt assumed in the SIR merger	$	—	$	506,023,982
Fair value of STAR III debt assumed in the STAR III merger	$	—	$	289,407,045
Fair value of unconsolidated joint venture assumed in the SIR merger	$	—	$	22,128,691
Assets assumed in the SIR merger	$	—	$	3,553,868
Assets assumed in the STAR III merger	$	—	$	2,060,898
Liabilities assumed in the SIR merger	$	—	$	21,782,302
Liabilities assumed in the STAR III merger	$	—	$	7,334,616
Premiums on assumed mortgage notes payable in the SIR and STAR III mergers	$	—	$	14,899,631
Discount on assumed mortgage note payable in the SIR and STAR III mergers	$	—	$	10,489,075

See accompanying notes to consolidated financial statements.

8

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

1.         Organization and Business

Steadfast Apartment REIT, Inc. (the “Company”) was formed on August 22, 2013, as a Maryland corporation that elected to qualify as a real estate investment trust (“REIT”) commencing with the taxable year ended December 31, 2014. On September 3, 2013, the Company was initially capitalized with the sale of 13,500 shares of common stock to Steadfast REIT Investments, LLC, the Company’s former sponsor (“SRI”), at a purchase price of $15.00 per share for an aggregate purchase price of $202,500. SRI is controlled indirectly by Rodney F. Emery, the Company’s Chairman of the board of directors and Chief Executive Officer, through Steadfast REIT Holdings, LLC (“Steadfast Holdings”). Steadfast Apartment Advisor, LLC (the “Former Advisor”), a Delaware limited liability company formed on August 22, 2013 and subsidiary of SRI, invested $1,000 in the Company in exchange for 1,000 shares of non-participating, non-voting convertible stock (the “Convertible Stock”). In connection with the SIR Merger and STAR III Merger (described below), the Former Advisor exchanged the Convertible Stock for new non-participating, non-voting Class A convertible stock (the “Class A Convertible Stock”). In connection with the Internalization Transaction (described below), the Company repurchased the Class A Convertible Stock for $1,000. See Note 8 (Stockholders’ Equity) for further details.

The Company owns and operates a diverse portfolio of multifamily properties located in targeted markets throughout the United States. As of September 30, 2021, the Company owned 70 multifamily properties and three parcels of land held for the development of apartment homes. The Company’s portfolio is comprised of 22,001 apartment homes, including 160 newly constructed apartment homes placed into service at the Garrison Station development project during the nine months ended September 30, 2021. The parcel of land held for the development of the Garrison Station apartments had eight of nine residential buildings placed into service comprising 160 of 176 apartment homes as of September 30, 2021. The Company may acquire additional multifamily properties or pursue multifamily developments in the future. For more information on the Company’s real estate portfolio, see Note 4 (Real Estate).

Public Offering

On December 30, 2013, the Company commenced its initial public offering to offer a maximum of 66,666,667 shares of common stock for sale to the public at an initial price of $15.00 per share (with discounts available for certain categories of purchasers) (the “Primary Offering”). The Company also registered up to 7,017,544 shares of common stock for sale pursuant to the Company’s distribution reinvestment plan (the “DRP,” and together with the Primary Offering, the “Public Offering”) at an initial price of $14.25 per share. The Company terminated its Primary Offering on March 24, 2016, but continued to offer shares of common stock pursuant to the DRP until it was suspended in connection with entering into the Merger Agreement, as defined below. As of the termination of the Primary Offering on March 24, 2016, the Company had sold 48,625,651 shares of common stock in the Public Offering for gross proceeds of $724,849,631, including 1,011,561 shares of common stock issued pursuant to the DRP for gross offering proceeds of $14,414,752. As of September 30, 2021, the Company had issued 112,299,272 shares of common stock for gross offering proceeds of $1,727,794,175, including 8,669,192 shares of common stock issued pursuant to the DRP for gross offering proceeds of $130,065,017. Additionally, on March 6, 2020, the Company issued 56,016,053 shares of common stock in connection with the Mergers described below.

On March 9, 2021, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $15.55 as of December 31, 2020. Additional information on the Company’s estimated value per share can be found in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 12, 2021. In connection with the determination of an estimated value per share, the Company’s board of directors determined a price per share for the DRP of $15.55, effective April 1, 2021. The Company’s board of directors may again, from time to time, in its sole discretion, change the price at which the Company offers shares pursuant to the DRP to reflect changes in the Company’s estimated value per share and other factors that the Company’s board of directors deems relevant. On July 26, 2021, the Company’s board of directors voted to terminate the DRP effective as of the 10th day after notice was provided to stockholders. For more information, see suspension and contingent termination of the DRP and the amended & restated SRP below.

9

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

Merger with Steadfast Income REIT, Inc.

On August 5, 2019, the Company, Steadfast Income REIT, Inc. (“SIR”), Steadfast Apartment REIT Operating Partnership, L.P., a wholly-owned subsidiary of the Company (the “STAR Operating Partnership”), Steadfast Income REIT Operating Partnership, L.P., the operating partnership of SIR (“SIR OP”), and SI Subsidiary, LLC, a wholly-owned subsidiary of the Company (“SIR Merger Sub”), entered into an Agreement and Plan of Merger (the “SIR Merger Agreement”). Pursuant to the terms and conditions of the SIR Merger Agreement, on March 6, 2020, SIR merged with and into SIR Merger Sub with SIR Merger Sub surviving the merger (the “SIR Merger”). Following the SIR Merger, SIR Merger Sub, as the surviving entity, continued as the Company’s wholly-owned subsidiary. In accordance with the applicable provisions of the Maryland General Corporation Law (“MGCL”), the separate existence of SIR ceased.

At the effective time of the SIR Merger, each issued and outstanding share of SIR common stock (or a fraction thereof), $0.01 par value per share, converted into 0.5934 shares of the Company’s common stock.

Merger with Steadfast Apartment REIT III, Inc.

On August 5, 2019, the Company, Steadfast Apartment REIT III, Inc. (“STAR III”), the STAR Operating Partnership, Steadfast Apartment REIT III Operating Partnership, L.P., the operating partnership of STAR III (the “STAR III OP”), and SIII Subsidiary, LLC, a wholly-owned subsidiary of the Company (“STAR III Merger Sub”), entered into an Agreement and Plan of Merger (the “STAR III Merger Agreement”). Pursuant to the terms and conditions of the STAR III Merger Agreement, on March 6, 2020, STAR III merged with and into STAR III Merger Sub with STAR III Merger Sub surviving the merger (the “STAR III Merger”, and together with the SIR Merger, the “Mergers”). Following the STAR III Merger, STAR III Merger Sub, as the surviving entity, continued as a wholly-owned subsidiary of the Company. In accordance with the applicable provisions of the MGCL, the separate existence of STAR III ceased.

At the effective time of the STAR III Merger, each issued and outstanding share of STAR III common stock (or a fraction thereof), $0.01 par value per share, was converted into 1.430 shares of the Company’s common stock.

Combined Company

Through the Mergers, the Company acquired 36 multifamily properties with 10,166 apartment homes and a 10% interest in one unconsolidated joint venture that owned 20 multifamily properties with a total of 4,584 apartment homes, all of which had a gross real estate value of approximately $1.5 billion. The combined company after the Mergers retained the name “Steadfast Apartment REIT, Inc.” Each merger was intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). For more information on the Mergers, see Note 4 (Real Estate).

Pre-Internalization Operating Partnerships Mergers

On August 28, 2020, pursuant to an Agreement and Plan of Merger (the “SIR OP/STAR OP Merger Agreement”), the STAR Operating Partnership merged with and into the SIR OP (the “SIR OP/STAR OP Merger”). The SIR OP/STAR OP Merger was treated for U.S. federal income tax purposes as a tax-deferred contribution by the Company of all of the assets and liabilities of STAR Operating Partnership to SIR OP under Section 721(a) of the Internal Revenue Code.

Immediately following the consummation of the SIR OP/STAR OP Merger, on August 28, 2020, pursuant to an Agreement and Plan of Merger (the “Operating Partnership Merger Agreement”), STAR III OP merged with and into SIR OP (the “Operating Partnership Merger” and together with the SIR OP/STAR OP Merger, the “Operating Partnership Mergers”). The Operating Partnership Merger was treated as an “asset over partnership merger” governed by Treasury Regulations Section 1.708-1(c)(3)(i), with SIR OP being the “resulting partnership” and STAR III OP terminating.

On August 28, 2020, SIR OP changed its name to “Steadfast Apartment REIT Operating Partnership, L.P.” (the “Operating Partnership”). In addition, on August 28, 2020, prior to completion of the Operating Partnership Mergers, the Company acquired STAR III Merger Sub. On August 28, 2020, SIR Merger Sub, as the initial general partner of the Operating Partnership, transferred all of its general partnership interests to the Company, and the Company was admitted as a substitute general partner of the Operating Partnership.

10

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

On August 28, 2020, the Company, Steadfast Income Advisor, LLC, the initial limited partner of the Operating Partnership (“SIR Advisor”), Steadfast Apartment Advisor III, LLC, a Delaware limited liability company and the special limited partner of the Operating Partnership (“STAR III Advisor”), Wellington VVM LLC, a Delaware limited liability company and limited partner of the Operating Partnership (“Wellington”), and Copans VVM, LLC, a Delaware limited liability company and limited partner of the Operating Partnership (“Copans” and together with “Wellington”, “VV&M”), entered into a Second Amended and Restated Agreement of Limited Partnership of Steadfast Apartment REIT Operating Partnership, L.P. (the “Second A&R Partnership Agreement”) in order to, among other things, reflect the consummation of the Operating Partnership Mergers.

The purpose of the Operating Partnership Mergers described above was to simplify the Company’s corporate structure so that the Company has a single operating partnership that is a direct subsidiary of the Company.

Internalization Transaction

On August 31, 2020, the Operating Partnership and the Company entered into a series of transactions and agreements (such transactions and agreements hereinafter collectively referred to as the “Internalization Transaction”), with SRI, which provided for the internalization of the Company’s external management functions previously provided by the Former Advisor and its affiliates. Prior to the Internalization Closing (as defined herein), which took place contemporaneously with the execution of the Contribution & Purchase Agreement (as defined herein) on August 31, 2020 (the “Internalization Closing”), Steadfast Investment Properties, Inc., a California corporation (“SIP”), Steadfast REIT Services, Inc., a California corporation (“REIT Services”), and their respective affiliates owned and operated all of the assets necessary to operate the Company and its subsidiaries as a self-managed company and employed all the employees necessary to operate as a self-managed company.

Pursuant to a Contribution and Purchase Agreement (the “Contribution & Purchase Agreement”) between the Company, the Operating Partnership and SRI, SRI contributed to the Operating Partnership all of the membership interests in STAR RS Holdings, LLC, a Delaware limited liability company (“SRSH”), and the assets and rights necessary to operate as a self-managed company in all material respects, and the liabilities associated with such assets and rights in exchange for $124,999,000, which was paid as follows: (1) $31,249,000 in cash and (2) 6,155,613.92 Class B OP units of limited partnership interests in the Operating Partnership (the “Class B OP Units”) having the agreed value set forth in the Contribution & Purchase Agreement of $15.23 per Class B OP Unit. In addition, the Company purchased all of the Class A Convertible Stock of the Company held by the Former Advisor for $1,000. As a result of the Internalization Transaction, the Company became self-managed and acquired components of the advisory, investment management and property management operations of the Former Advisor by hiring the Transferring Employees (as defined in the Contribution & Purchase Agreement), who comprise the workforce necessary for the management and day-to-day real estate and accounting operations of the Company and the Operating Partnership.

Concurrently with, and as a condition to the execution and delivery of the Contribution & Purchase Agreement, the Company, through STAR REIT Services, LLC, a Delaware limited liability company and indirect subsidiary of the Company (“SRS”), entered into employment agreements with certain key employees. For more information on the Internalization Transaction, see Note 3 (Internalization Transaction).

On July 16, 2021, the Company received a derivative demand letter addressed to the Board, purportedly sent on behalf of two stockholders, relating to the Internalization Transaction. The letter demanded that the Board appoint a committee to investigate the Internalization Transaction and, among other things, determine whether there exists any basis for the Company to pursue claims relating to that transaction, including for recovery of payments made in the transaction. The Company has formed a Demand Review Committee comprised of two of the Company’s independent directors to investigate the claims made related to the Internalization Transaction.

The Former Advisor

Prior to the Internalization Transaction, the business of the Company was externally managed by the Former Advisor, pursuant to the Amended and Restated Advisory Agreement effective as of March 6, 2020, by and between the Company and the Former Advisor (as may be amended, the “Advisory Agreement”). On August 31, 2020, prior to the Internalization Closing, the Company, the Former Advisor and the Operating Partnership entered into a Joinder Agreement (the “Joinder Agreement”)

11

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

pursuant to which the Operating Partnership became a party to the Advisory Agreement. On August 31, 2020, prior to the Internalization Closing, the Former Advisor and the Company entered into the First Amendment to the Amended and Restated Advisory Agreement in order to remove certain restrictions in the Advisory Agreement related to business combinations and to provide that any amounts accrued to the Former Advisor commencing on September 1, 2020 are paid in cash to the Former Advisor by the Operating Partnership (the “First Amendment”). In connection with the Internalization Transaction, SRS assumed the rights and obligations of the Advisory Agreement from the Former Advisor.

The Operating Partnership

Substantially all of the Company’s business is conducted through the Operating Partnership. The Company is the sole general partner of the Operating Partnership. The Operating Partnership owns, directly or indirectly, all of the properties that the Company has acquired. As of September 30, 2021, the Company owned approximately 94% of the operating partnership units of the Operating Partnership (the “OP Units”). As a result of the Internalization Transaction, SRI owns approximately 5% of the OP Units of the Operating Partnership, including approximately 6,155,613.92 Class B OP Units owned by SRI as of September 30, 2021. The remaining approximate 1% of the OP Units are owned by VV&M, unaffiliated third parties in the form of Class A-2 OP Units (as defined below). The Operating Partnership may conduct certain activities through the Company’s taxable REIT subsidiary, which is an indirect wholly-owned subsidiary of the Operating Partnership. As a condition to the Internalization Closing, on August 31, 2020, the Company, as the general partner and parent of the Operating Partnership, SRI and VV&M entered into a Third Amended and Restated Agreement of Limited Partnership of the Operating Partnership (the “Operating Partnership Agreement”) to restate the Second A&R Partnership Agreement in order to, among other things, remove references to the limited partner interests previously held by SIR Advisor and STAR III Advisor, reflect the consummation of the contribution, and designate Class B OP Units that were issued as consideration pursuant to the Internalization Transaction.

The Operating Partnership Agreement provides that the Operating Partnership is operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code, which classification could result in the Operating Partnership being taxed as a corporation.

Agreement and Plan of Merger

On July 26, 2021, the Company and the Operating Partnership entered into an Agreement and Plan of Merger, (the “IRT Merger Agreement”) with Independence Realty Trust, Inc. (“IRT”), IRT’s operating partnership, Independence Realty Operating Partnership, LP (“IRT OP”), and IRSTAR Sub, LLC, a wholly-owned subsidiary of IRT (“IRT Merger Sub”).

On the terms, and subject to the conditions of, the IRT Merger Agreement, the Company will merge with and into IRT Merger Sub, which is referred to herein as the “Company Merger”, with IRT Merger Sub surviving the Company Merger as a wholly-owned subsidiary of IRT; and immediately thereafter, the Operating Partnership will merge with and into IRT OP (the “Partnership Merger” and together with the Company Merger, the “IRT Mergers”), with IRT OP surviving the Partnership Merger.

In the Company Merger, each outstanding share of the Company’s common stock, par value $0.01 per share, will be converted automatically into the right to receive 0.905 (the “Exchange Ratio”), of a newly issued share of IRT common stock, par value $0.01 per share, (the “IRT Common Stock”), with cash paid in lieu of fractional shares.

In the Partnership Merger, each outstanding unit of limited partnership of the Operating Partnership will be converted into the right to receive the Exchange Ratio of a newly issued common unit of limited partnership of IRT OP, (the “IRT Common Unit”). Under the agreement of limited partnership of IRT OP, IRT common unitholders may generally tender their IRT Common Units, in whole or in part, to IRT OP for redemption for a cash amount based on the then-market price of an equivalent number of shares of IRT Common Stock, and IRT may thereupon elect, at its option, to satisfy the redemption by issuing one share of IRT Common Stock for each IRT Common Unit tendered for redemption.

12

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

Pursuant to the IRT Mergers, the Company’s stockholders will receive, in aggregate, in exchange for their shares of common stock, approximately, 99.7 million shares of IRT Common Stock and limited partners in the Operating Partnership will receive, in aggregate, in exchange for their operating partnership units, approximately 6.4 million IRT OP Common Units.

Consummation of the IRT Mergers is subject to customary closing conditions, including, among others, receipt of IRT stockholder approval and approval of the Company’s stockholders, both of which are scheduled to take place on December 13, 2021, and the closing of the IRT Mergers are expected to occur in the fourth quarter of 2021. For more information on the IRT Mergers, see the Company’s Definitive Proxy Statement filed with the SEC on September 29, 2021.

Suspension and Contingent Termination of the DRP and the Amended and Restated Share Repurchase Plan

In connection with the Company’s entry into the IRT Merger Agreement, on July 26, 2021, the Company announced that the Company’s board of directors, including all of the Company’s independent directors, voted to terminate the DRP and the Amended and Restated Share Repurchase Plan (the “Amended & Restated SRP”), each termination effective as of the effective time of the Company Merger. The Company’s board of directors, including all of the Company’s independent directors, also voted to suspend (1) the DRP, effective as of the 10th day after notice was provided to stockholders and (2) indefinitely suspend the Amended & Restated SRP effective as of the 30th day after notice was provided to stockholders.

As a result of the suspension of the DRP, any distributions paid after the distribution payment date in August 2021 will be paid to the Company’s stockholders in cash. The Company can provide stockholders with assistance on directing cash distribution payments and answering questions. The suspension of the DRP will not affect the payment of distributions to stockholders who previously received their distributions in cash. In addition, as a result of the suspension of the Amended & Restated SRP, the Company will not process or accept any requests for redemption received after July 26, 2021.

Letter Agreement

On July 26, 2021, the Company entered into a letter agreement (the “Letter Agreement”) with Rodney Emery, the Company’s Chief Executive Officer and Chairman of the board of directors, and SRI. Pursuant to the Letter Agreement, SRI agreed to indemnify the Company, STAR OP, their subsidiaries and their successors and assigns (including IRT, IRT OP and IRT Merger Sub and their subsidiaries) (collectively, the “Indemnified Parties”), for 75% of any costs, expenses, judgments, liabilities and payments, including settlement payments and attorneys’ fees, incurred or arising in connection with any direct or derivative claims brought by any stockholder of the Company or its successors and assigns alleging breaches of duties under law or contract, including but not limited to breaches by any current or former directors of the Company, in connection with the Internalization Transaction (the “Internalization Claims”), if and to the extent such costs, expenses, judgments, liabilities and payments, including settlement payments and attorneys’ fees are not paid for by the Company’s insurance provider (subject only to the $1.0 million self-insurance retention amount in the Company’s D&O insurance policies, which retention amount would not be included in the covered costs described above).

SRI’s obligations under the Letter Agreement are capped at the lower of $20.3 million or the value of the Collateral (as defined below) at the time payment is owed under the Letter Agreement and any payments made pursuant to the Letter Agreement must be made solely with the delivery of the Collateral.

As used in the Letter Agreement, “Collateral” means the following, now or later held by or on behalf of SRI: (i) 1,277,778 Class B OP Units, or any interests into which they are exchanged or convert, (ii) distributions (cash or in kind) on any such Class B OP Units (or converted interests), (iii) cash payable or securities issuable, from time to time, upon the redemption, conversion or exchange of any of the foregoing, and (iv) all proceeds of any of the foregoing.

In the event litigation is filed challenging the Company Merger that includes Internalization Claims and claims that are not Internalization Claims, then an allocation of costs, expenses, liabilities and payments, including settlement payments and attorneys’ fees (collectively, “Expenses”), shall be made to reflect Expenses that are reasonably attributable to the Company’s internalization transaction and are covered costs under the Letter Agreement, and any Expenses that are not covered costs under the Letter Agreement.

13

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

The Letter Agreement would terminate in the event the IRT Merger Agreement terminates without the IRT Mergers having been consummated. SRI and Mr. Emery are relieved of their obligations under the Letter Agreement at such time that all of the Collateral, or Collateral valued at $20.3 million, whichever is first, has been applied in satisfaction of the portion of claims for which SRI is responsible, or when all applicable statute of limitations on Internalization Claims have expired and no Internalization Claims remain pending or unsatisfied.

2.         Summary of Significant Accounting Policies

There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2020. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2020, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 12, 2021. 

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, the Operating Partnership and its wholly-owned subsidiaries. The portion of the entity not wholly-owned by the Company is presented as noncontrolling interest. All significant intercompany balances and transactions are eliminated in consolidation. The financial statements of the Company’s subsidiaries are prepared using accounting policies consistent with those of the Company.

The accompanying unaudited consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary for a fair and consistent presentation of the results of such periods. Operating results for the three and nine months ended September 30, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The unaudited consolidated financial statements herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Noncontrolling interests

Noncontrolling interests represent the portion of equity that the Company does not own in an entity that is consolidated. The Company’s noncontrolling interests are comprised of Class A-2 operating partnership units (“Class A-2 OP Units”) and Class B OP Units of the Operating Partnership. The Company accounts for noncontrolling interests in accordance with ASC 810, Consolidation (“ASC 810”). In accordance with ASC 810, the Company reports noncontrolling interests in subsidiaries within equity in the consolidated financial statements, but separate from stockholders’ equity. In accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), noncontrolling interests that are determined to be redeemable are carried at their fair value or redemption value as of the balance sheet date and reported as liabilities or temporary equity depending on their terms. A noncontrolling interest that fails to qualify as permanent equity will be reclassified as a liability or temporary equity. As of September 30, 2021, the Company’s noncontrolling interests qualified as permanent equity. For more information on the Company’s noncontrolling interests, see Note 9 (Noncontrolling Interest).

Use of Estimates

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

14

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

Casualty loss

The Company carries liability insurance to mitigate its exposure to certain losses, including those relating to property damage and business interruption. The Company records the estimated amount of expected insurance proceeds for property damage and other losses incurred as an asset (typically a receivable from the insurer) and income up to the amount of the losses incurred when receipt of insurance proceeds is deemed probable. Any amount of insurance recovery in excess of the amount of the losses incurred is considered a gain contingency and is recorded in other income when the proceeds are received. During the nine months ended September 30, 2021, the Company wrote off $12,515,830 of carrying value of the Company’s fixed assets and recorded $10,800,111 of estimated repair expenses, with a corresponding increase in general and administrative expenses and an increase in the Company’s accounts payable and accrued liabilities, of which $8,249,358 has been paid as of September 30, 2021. The Company also recorded insurance recoveries of $23,315,941 for the estimated insurance claims proceeds in the amount of total losses incurred (as described above) as an increase in rents and other receivables. As of September 30, 2021, $6,875,000 of proceeds were received and $16,440,941 remained in rents and other receivables.

Real Estate Assets

Real Estate Purchase Price Allocation

Upon the acquisition of real estate properties or other entities owning real estate properties, the Company evaluates whether the acquisition is a business combination or an asset acquisition under ASC 805-50, Business Combinations-Related Issues (“ASC 805”). For both business combinations and asset acquisitions the Company allocates the purchase price of real estate properties to acquired tangible assets, consisting of land, buildings and improvements, and acquired intangible assets and liabilities, consisting of the value of above-market and below-market leases and the value of in-place leases. For asset acquisitions, the Company capitalizes transaction costs and allocates the purchase price using a relative fair value method allocating all accumulated costs. For business combinations, the Company expenses transaction costs incurred and allocates the purchase price based on the estimated fair value of each separately identifiable asset and liability. Acquisition fees and costs associated with transactions determined to be asset acquisitions are capitalized in total real estate, net in the accompanying consolidated balance sheets. For the three and nine months ended September 30, 2021 and 2020, all of the Company’s acquisitions of real estate properties, including pursuant to the Mergers, were determined to be asset acquisitions.

The fair values of the tangible assets of an acquired property (which includes land, buildings and improvements) are determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land and buildings and improvements based on management’s determination of the relative fair value of these assets. Management determines the as-if-vacant fair value of a property using methods similar to those used by independent appraisers. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases, including leasing commissions and other related costs. In estimating carrying costs, management includes real estate taxes, insurance, and other operating expenses during the expected lease-up periods based on current market conditions.

The fair values of above-market and below-market in-place leases are recorded based on the present value (using an interest rate which 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) an 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 including any fixed rate bargain renewal periods, with respect to a below-market lease. The above-market and below-market lease values are capitalized as intangible lease assets or liabilities. Above-market lease values are amortized as an adjustment of rental revenue over the remaining terms of the respective leases. Below-market leases are amortized as an adjustment of rental revenue over the remaining terms of the respective leases, including any fixed rate bargain renewal periods. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of above-market and below-market in-place lease values related to that lease would be recorded as an adjustment to rental revenue.

The fair values of in-place leases include an estimate of direct costs associated with obtaining a new resident and opportunity costs associated with lost rentals that are avoided by acquiring an in-place lease. Direct costs associated with

15

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

obtaining a new resident include commissions, resident improvements, and other direct costs and are estimated based on management’s consideration of current market costs to execute a similar lease. The value of opportunity costs is calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. These lease intangibles are amortized to depreciation and amortization expense over the remaining terms of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of in-place lease assets relating to that lease would be expensed.

Impairment of Real Estate Assets

 The Company accounts for its real estate assets in accordance with ASC 360, Property, Plant and Equipment (“ASC 360”). ASC 360 requires the Company to continually monitor events and changes in circumstances that could indicate that the carrying amounts of the Company’s 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 and liabilities may not be recoverable, the Company assesses the recoverability of the assets by estimating whether the Company will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition. Based on this analysis, if the Company does not believe that it will be able to recover the carrying value of the real estate and related intangible assets and liabilities, the Company records an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities. If any assumptions, projections or estimates regarding an asset changes in the future, the Company may have to record an impairment to reduce the net book value of such individual asset. The Company continues to monitor events in connection with the outbreak of the novel Coronavirus (“COVID-19”) and evaluates any potential indicators that could suggest that the carrying value of its real estate investments and related intangible assets and liabilities may not be recoverable. No impairment charge was recorded during the three and nine months ended September 30, 2021. The Company recorded an impairment charge of $5,039,937 related to two of its real estate assets for the nine months ended September 30, 2020.

Real Estate Held for Sale

The Company classifies certain long-lived assets as held for sale once the criteria, as defined by GAAP, have been met and are expected to sell within one year. Long-lived assets to be disposed of are reported at the lower of their carrying amount or fair value minus cost to sell, with any write-down recorded to impairment loss on the consolidated statements of operations. Depreciation and amortization is not recorded for assets classified as held for sale. As of each of September 30, 2021 and December 31, 2020, the Company classified three real estate assets, as presented on its consolidated balance sheets. See Note 4 (Real Estate) for details.

Goodwill

Goodwill represents the excess of consideration paid over the fair value of underlying identifiable net assets of a business acquired. The Company’s goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company takes a qualitative approach to consider whether an impairment of goodwill exists prior to quantitatively determining the fair value of the reporting unit in step one of the impairment test. The Company performed its annual assessment on October 1, 2020. The Company recorded goodwill during the year ended December 31, 2020, in connection with the Internalization Transaction. No impairment charge was recorded during the three and nine months ended September 30, 2021 and 2020. See Note 3 (Internalization Transaction) for details.

Revenue Recognition - Operating Leases

The majority of the Company’s revenue is derived from rental revenue, which is accounted for in accordance with ASC 842, Leases (“ASC 842”). The Company leases apartment homes under operating leases with terms generally of one year or less. Generally, credit investigations are performed for prospective residents and security deposits are obtained. In accordance with ASC 842, the Company recognizes minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectability is probable and records amounts expected to be received in later years as deferred rent receivable. For lease arrangements when it

16

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

is not probable that the Company will collect all or substantially all of the remaining lease payments under the term of the lease, rental revenue is limited to the lesser of the rental revenue that would be recognized on a straight-line basis (as applicable) or the lease payments that have been collected from the lessee. Differences between rental revenue recognized and amounts contractually due under the lease agreements are credited or charged to straight-line rent receivable or straight-line rent liability, as applicable. Tenant reimbursements for common area maintenance and other recoverable expenses, are recognized when the services are provided and the performance obligations are satisfied. Tenant reimbursements for common area maintenance are accounted for as variable lease payments and are recorded as rental income on the Company’s consolidated statement of operations.

Rents and Other Receivables

In accordance with ASC 842, the Company makes a determination of whether the collectability of the lease payments in an operating lease is probable. If the Company determines the lease payments are not probable of collection, the Company would fully reserve for any contractual lease payments, deferred rent receivable, and variable lease payments and would recognize rental income only if cash is received. The Company exercises judgment in establishing these allowances and considers payment history and current credit status of residents in developing these estimates. Due to the short-term nature of the operating leases, the Company does not maintain a deferred rent receivable related to the straight-lining of rents. Any changes to the Company’s collectability assessment are reflected as an adjustment to rental income.

Residents’ Payment Plans Due to COVID-19

In April, 2020, the FASB issued the ASC 842 Q&A to respond to some frequently asked questions about accounting for lease concessions related to the effects of the COVID-19 pandemic. Under ASC 842, modified terms and conditions of a company’s existing lease contracts, such as, changes to lease payments, may affect the economics of the lease for the remainder of the term and are generally accounted for as lease modifications. Some contracts may contain explicit or implicit enforceable rights and obligations that require lease concessions if certain circumstances arise that are beyond the control of the parties to the contract. If a lease contract provides enforceable rights and obligations for concessions in the contract and no changes are made to that contract, the concessions are not considered a lease modification pursuant to ASC 842. This means both the lessor and lessee need not remeasure and reallocate the consideration in the lease contract, reassess the lease term or reassess lease classification and lease liability, provided that the concessions are considered to be a separate contract. If concessions granted by lessors are beyond the enforceable rights and obligations in the contract, entities would generally account for those concessions in accordance with the lease modification guidance in ASC 842 as described above.

The FASB staff has been made aware that, given the unprecedented and global nature of the COVID-19 pandemic, it may be exceedingly challenging for entities to determine whether existing contracts provide enforceable rights and obligations for lease concessions and, if so, whether those concessions are consistent with the terms of the contract or are modifications to a contract.

Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance under ASC 842 to those contracts. Entities may make the elections for any lessor-provided concessions related to the effects of the COVID-19 pandemic (e.g., deferrals of lease payments, reduced future lease payments) as long as the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee. In addition to that, for concessions that provide a deferral of payments with no substantive changes to the consideration in the original contract, the FASB allows entities to account for the concessions as if no changes to the lease contract were made. Under this method, a lessor would increase its lease receivable and continue to recognize income.

During the fiscal quarter ended June 30, 2020, the Company instituted payment plans for its residents that were experiencing hardship due to COVID-19, which the Company refers to as the “COVID-19 Payment Plan.” Pursuant to the COVID-19 Payment Plan, the Company allowed qualifying residents to defer their rent, which is collected by the Company in monthly installment payments over the duration of the current lease or renewal term (which may not exceed 12 months). Additionally, for the months of May and June 2020, the Company began providing certain qualifying residents with a one-time concession to incentivize their performance under the COVID-19 Payment Plan. If the qualifying resident fails to make payments pursuant to the COVID-19 Payment Plan, the concession is immediately terminated, and the qualifying resident is required to immediately

17

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

repay the amount of the concession. The Company did not offer residents any other payment plans during the remaining months in fiscal year 2020 due to the reduced demand of such payment plans.

In January 2021, the Company began offering an extension to the COVID-19 Payment Plan (the “Extension Plan”), that allows eligible residents to defer their rent, which is collected by the Company in monthly installment payments over the lesser of the duration of the current lease term or a maximum of three months (with the exception of certain states that allow a maximum of six months deferral). Under the Extension Plan, no concessions are offered for residents with a payment plan duration of two months or less and residents who opted for the COVID-19 Payment Plan are not eligible to participate in the Extension Plan unless they paid off the amounts due under the COVID-19 Payment Plan.

During the three months ended September 30, 2020, the Company initiated a debt forgiveness program for certain qualifying residents that were experiencing hardship due to COVID-19 and who were in default of their lease payments (the “Debt Forgiveness Program”). Pursuant to the Debt Forgiveness Program, the Company offered qualifying residents an opportunity to terminate their lease without being liable for any unpaid rent and penalties. The Company determined that accounts receivable of $2,610,927 related to the Debt Forgiveness Program are not probable of collection and therefore included these accounts in its reserve.

The Company elected not to evaluate whether the COVID-19 Payment Plans, the Debt Forgiveness Program and the Extension Plan are lease modifications and therefore the Company’s policy is to account for the lease contracts with COVID-19 Payment Plans, Debt Forgiveness Program and the Extension Plan as if no lease modifications occurred. Under this accounting method, a lessor with an operating lease may account for the concession (which in this case only applies to the COVID-19 Payment Plans) by continuing to recognize a lease receivable until the rental payment is received from the lessee at the revised payment date. If it is determined that the lease receivable is not collectable, the Company would treat that lease contract on a cash basis as defined in ASC 842. As of September 30, 2021 and December 31, 2020, the Company reserved $3,863,876 and $2,245,067 of accounts receivables, respectively, which are considered not probable of collection.

The Company is currently working with residents at our communities to obtain rental relief assistance pursuant to the Emergency Rental Assistance Program (“ERA”), administered by the U.S. Department of Treasury. During the nine months ended September 30, 2021, 1,119 residents applied for the ERA, of which 1,057 residents received rental assistance in the aggregate amount of approximately $3,700,000.

Fair Value Measurements

Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other assets and liabilities at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

•Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

•Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

•Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent

18

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and will establish a fair value by assigning weights to the various valuation sources. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. There were no transfers between the levels in the fair value hierarchy during the nine months ended September 30, 2021 and 2020.

The following describes the valuation methodologies used by the Company to measure fair value, including an indication of the level in the fair value hierarchy in which each asset or liability is generally classified.

Interest rate cap agreements - The Company has entered into certain interest rate cap agreements. These derivatives are recorded at fair value. Fair value was based on a model-driven valuation using the associated variable rate curve and an implied market volatility, both of which were observable at commonly quoted intervals for the full term of the interest rate cap agreements. Therefore, the Company’s interest rate cap agreements were classified within Level 2 of the fair value hierarchy and are included in other assets in the accompanying consolidated balance sheets. Changes in the fair value of the interest rate cap agreements are recorded as interest expense in the accompanying consolidated statements of operations.

The following tables reflect the Company’s assets required to be measured at fair value on a recurring basis on the consolidated balance sheets:

	September 30, 2021
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements(1)	$	—	$	27,853	$	—

	December 31, 2020
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements(1)	$	—	$	7,852	$	—

_______________

(1)See Note 14 (Derivative Financial Instruments) for a discussion of the interest rate cap agreements used to manage the exposure to interest rate movement on the Company’s variable rate loans.

Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

Fair Value of Financial Instruments

The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, rents and other receivables, due from affiliates, accounts payable and accrued liabilities, distributions payable, distributions payable to affiliates, due to affiliates and notes payable.

The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities, distributions payable, amounts due from affiliates, amounts due to affiliates and distributions payable to affiliates to approximate the fair value of these financial instruments based on the short duration

19

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

between origination of the instruments and their expected realization. The Company has determined that its notes payable, net are classified as Level 3 within the fair value hierarchy.

The fair value of the notes payable, net is estimated using a discounted cash flow analysis using borrowing rates available to the Company for debt instruments with similar terms and maturities. As of September 30, 2021 and December 31, 2020, the fair value of the notes payable was $2,230,749,187 and $2,246,242,677, respectively, compared to the carrying value of $2,135,242,124 and $2,129,245,671, respectively.

Restricted Cash

Restricted cash represents those cash accounts for which the use of funds is restricted by loan covenants and a cash account established in connection with a letter of credit to fund future workers compensation claims. As of September 30, 2021 and December 31, 2020, the Company had a restricted cash balance of $38,360,359 and $38,998,980, respectively, which represented amounts set aside as impounds for future property tax payments, property insurance payments and tenant improvement payments as required by agreements with the Company’s lenders as well as an amount set aside in connection with a letter of credit.

The following table represents the components of the cash, cash equivalents and restricted cash presented on the accompanying consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020:

	September 30,
	2021		2020
Cash and cash equivalents	$	122,107,875	$	311,515,756
Restricted cash	38,360,359		42,531,779
Other assets related to real estate held for sale	—		91,450
Total cash, cash equivalents and restricted cash	$	160,468,234	$	354,138,985

Distribution Policy

The Company elected to be taxed, and currently qualifies, as a REIT commencing with the taxable year ended December 31, 2014. To maintain its qualification as a REIT, the Company intends to make distributions each taxable year equal to at least 90% of its REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). Distributions declared during the month ended January 31, 2021, were based on daily record dates and calculated at a rate of $0.002466 per share of the Company’s common stock per day during the period from January 1, 2021 through January 31, 2021. On January 12, 2021, the Company’s board of directors determined to reduce the daily distribution amount to $0.001438 per share commencing on February 1, 2021 and ending February 28, 2021, which was extended for the months of March through September 2021. As a result, distributions declared during the period from February 1, 2021 through September 30, 2021, were based on daily record dates and calculated at a rate of $0.001438 per share of the Company’s common stock per day.

Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to qualify as a REIT under the Internal Revenue Code. During the three and nine months ended September 30, 2021, the Company declared distributions totaling $0.132 and $0.425 per share of common stock, respectively. During the three and nine months ended September 30, 2020, the Company declared distributions totaling $0.226 and $0.674 per share of common stock, respectively.

20

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

Lessee Accounting

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires leases with original lease terms of more than 12 months to be recorded on the balance sheet. For leases with terms greater than 12 months, a right-of-use (“ROU”) lease asset and a lease liability are recognized on the balance sheet at commencement date based on the present value of lease payments over the lease term.

Lease renewal or termination options are included in the lease asset and lease liability only if it is reasonably certain that the option to extend or to terminate would be exercised. As the implicit rate in most leases are not readily determinable, the Company’s incremental borrowing rate for each lease at commencement date is used to determine the present value of lease payments. Consideration is given to the Company’s recent debt financing transactions, as well as publicly available data for instruments with similar characteristics, adjusted for the respective lease term, when estimating incremental borrowing rates. Lease expense is recognized over the lease term based on an effective interest method for finance leases and on a straight-line basis for operating leases. On January 1, 2019, the Company adopted ASU 2016-02 and its related amendments (collectively, “ASC 842”) using the modified retrospective method. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carry forward its original assessment of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. The Company also elected the practical expedient that allows lessees the option to account for lease and non-lease components together as a single component for all classes of underlying assets. See Note 15 (Leases).

Equity-Based Compensation

The Company’s stock-based compensation consists of restricted stock issued to key employees and independent directors of the Company. The Company accounts for equity-based compensation awards using the fair value method, which requires an estimate of fair value of the award at the time of grant and recognized on a straight-line basis over the requisite service period of the awards. The compensation expense is adjusted for actual forfeitures upon occurrence. Equity-based compensation is classified within general and administrative expenses in the consolidated statements of operations.

Per Share Data

Basic loss per share attributable to common stockholders for all periods presented are computed by dividing net loss by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted loss per share is computed based on the weighted average number of shares of the Company’s common stock and all potentially dilutive securities, if any. Distributions declared per common share assume each share was issued and outstanding each day during the period. Nonvested shares of the Company’s restricted common stock give rise to potentially dilutive shares of the Company’s common stock but such shares were excluded from the computation of diluted earnings per share because such shares were anti-dilutive during the period.

Segment Disclosure

The Company has determined that it has one reportable segment with activities related to investing in multifamily properties. The Company’s investments in real estate are in different geographic regions, and management evaluates operating performance on an individual asset level. However, as each of the Company’s assets has similar economic characteristics, residents and products and services, its assets have been aggregated into one reportable segment.

Recent Accounting Pronouncements

In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815, (“ASU 2020-01”), which clarifies the interaction between the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The amendments in ASU 2020-01 should be applied

21

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

prospectively. The Company adopted ASU 2020-01 on January 1, 2021. The adoption of this guidance did not have a material impact on its consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provided practical expedients to address existing guidance on contract modifications and hedge accounting due to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates (together “IBORs”) to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). In July 2017, the Financial Conduct Authority announced it intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Company refers to this transition as reference rate reform. The first practical expedient allows companies to elect to not apply certain modification accounting requirements to debt, derivative and lease contracts affected by reference rate reform if certain criteria are met. These criteria include the following: (1) the contract referenced an IBOR rate that is expected to be discontinued; (2) the modified terms directly replace or have the potential to replace the IBOR rate that is expected to be discontinued; and (3) any contemporaneous changes to other terms that change or have the potential to change the amount and timing of contractual cash flows must be related to the replacement of the IBOR rate. If the contract meets all three criteria, there is no requirement for remeasurement of the contract at the modification date or reassessment of the previous accounting determination. The second practical expedient allows companies to change the reference rate and other critical terms related to the reference rate reform in derivative hedge documentation without having to de-designate the hedging relationship. This allows for companies to continue applying hedge accounting to existing cash flow and net investment hedges. ASU 2020-04 was effective upon issuance on a prospective basis beginning January 1, 2020 and may be elected over time as reference rate reform activities occur. Subsequently, in January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope ("ASU 2021-01"). The amendments in ASU 2021-01 clarify that certain optional expedients and exceptions for contract modifications and hedge accounting apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of the discontinuation of the use of LIBOR as a benchmark interest rate due to reference rate reform. ASU 2021-01 is effective immediately for all entities with the option to apply retrospectively as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, and can be applied prospectively to any new contract modifications made on or after January 7, 2021. The ASUs can be adopted no later than December 1, 2022 with early adoption permitted. The relief provided in this guidance is temporary and generally cannot be applied to contract modifications that occur after December 31, 2022 or hedging relationships entered into or evaluated after that date. However, the guidance does allow an entity to continue to apply certain optional expedients related to hedge accounting. The Company identified the instruments influenced by LIBOR to be its variable rate mortgage notes payable and interest rate cap agreements and is currently in the process of liaising with its lenders to assess the nature of potential changes to its variable rate mortgage notes payable and interest rate cap agreements and therefore determining whether it could meet the conditions of the practical expedients provided by the FASB and elect to not apply the modification accounting requirements to its contracts affected by the reference rate reform within the permitted period of December 31, 2022.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 addresses issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. For convertible instruments, ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. ASU 2020-06 also enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings per share guidance. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity and amends the related earnings per share guidance. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The guidance in ASU 2020-06 can be applied through a modified retrospective method of transition or a fully retrospective method of transition. The Company is currently assessing the impact of ASU 2020-06 on its consolidated financial statements and related disclosures from the adoption of ASU 2020-06.

22

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

In October 2020, the FASB issued ASU 2020-10, Codification Improvements (“ASU 2020-10”). ASU 2020-10 contains improvements to GAAP by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is codified in the disclosure section of GAAP. ASU 2020-10 also contains codifications that are varied in nature and may affect the application of the guidance in cases in which the original guidance may have been unclear. ASU 2020-10 is effective for fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company adopted ASU 2020-10 on January 1, 2021. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In November 2020, the SEC issued Release No. 33-10890, Amendments to Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information, to simplify, modernize and enhance certain financial disclosure requirements in Regulation S-K. This amendment became effective on February 10, 2021. Early adoption was permitted. The Company early adopted these modifications in its Annual Report on Form 10-K filed with the SEC on March 12, 2021. The adoption of this guidance did not have a material impact on the consolidated financial statements.

3. Internalization Transaction

On August 31, 2020, the Operating Partnership and the Company completed the Internalization Transaction with SRI, which provided for the internalization of the Company’s external management functions provided by the Former Advisor and its affiliates.

Pursuant to the Contribution & Purchase Agreement between the Company, the Operating Partnership and SRI, SRI contributed to the Operating Partnership all of the membership interests in SRSH, and the assets and rights necessary to operate as a self-managed company in all material respects, and the liabilities associated with such assets and rights in exchange for $124,999,000, which was paid as follows: (1) $31,249,000 in cash consideration and (2) 6,155,613.92 Class B OP Units having the agreed value of $15.23 per Class B OP Unit. The Company also purchased all of the Class A Convertible Stock of the Company held by the Former Advisor for $1,000. As a result of the Internalization Transaction, the Company became self-managed and acquired the advisory, investment management and property management operations of the Former Advisor by hiring the Transferring Employees (as defined in the Contribution & Purchase Agreement), who comprise the workforce necessary for the management and day-to-day real estate and accounting operations of the Company and the Operating Partnership.

Fair Value of Consideration Transferred

The Company accounted for the Internalization Transaction as a business combination under the acquisition method of accounting. Pursuant to the terms of the Internalization Transaction, the following consideration was given in exchange for all of the membership interests in SRSH:

	Amount
Cash consideration (1)	$	31,249,000
Class B OP Units issued	6,155,613.92
Fair value per Class B OP Unit	$	15.23
Fair value of OP Unit Consideration	93,750,000
Promote price (2)	1,000
Accounting value of total consideration	$	125,000,000

_______________

(1)Represents the contractual cash consideration before adjustments to reflect affiliates assets acquired in the Internalization Transaction of $2,717,634 and affiliates liabilities assumed in the Internalization Transaction of $4,701,436.

(2)Represents the repurchase of Class A Convertible Stock by the Company.

23

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

Assets Acquired and Liabilities Assumed

The Internalization Transaction was accounted for as a business combination under the acquisition method of accounting under ASC 805, which requires, among other things, the assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date.

During the year ended December 31, 2020, the Company finalized the purchase price allocation of the fair value of consideration transferred (described above) for the Internalization Transaction. The following table summarizes the finalized purchase price allocation as of the date of the Internalization Transaction:

	Amount
Assets:
Accounts receivable from affiliates	$	3,908,946
Finance lease right-of-use asset	20,925
Other assets	49,919
Property management agreements intangibles(1)	815,000
Operating lease right-of-use asset	1,651,415
Repurchase of Class A Convertible Stock	1,000
Goodwill	125,220,448
Total assets acquired	131,667,653
Liabilities:
Accrued personnel costs	(4,995,313)
Finance lease liability	(20,925)
Operating lease liability	(1,651,415)
Total liabilities assumed	(6,667,653)
Net assets acquired	$	125,000,000

_______________

(1)The intangible assets acquired consist of property management agreements that the Company, acting as advisor and property manager through certain subsidiaries, has with affiliates of SRI (as amended from time to time, the “SRI Property Management Agreements”). The value of the SRI Property Management Agreements was determined based on a discounted cash flow valuation of the projected revenues of the acquired agreements. The SRI Property Management Agreements are subject to an estimated useful life of one year. As of September 30, 2021, the SRI Property Management Agreements were 100% amortized.

Goodwill

In connection with the Internalization Transaction, the Company recorded goodwill of $125.2 million as a result of the consideration exceeding the fair value of the net assets acquired. Goodwill represents the estimated future benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill recorded represents the Company’s acquired workforce and its ability to generate additional opportunities for revenue and raise additional funds.

Pro Forma Financial Information (unaudited)

The following condensed pro forma operating information is presented as if the Internalization Transaction and Mergers occurred in 2019 and had been included in operations as of January 1, 2019. The operations acquired in the Internalization Transaction earned $96.5 million in revenue in 2019, approximately $93.9 million of which was earned from the Company and will be eliminated in the Company’s consolidated financial statements on a post-acquisition basis, and approximately $2.5 million of which was earned pursuant to the SRI Property Management Agreements and will be recurring revenue to the Company resulting in an immaterial impact on the Company’s net loss of approximately $0.4 million.

24

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

The pro forma operating information excludes certain nonrecurring adjustments, such as acquisition fees and expenses incurred, to reflect the pro forma impact the acquisition would have on earnings on a continuous basis:

	Year Ended December 31,
	2020		2019
Revenue	$	303,851,813	$	323,258,776
Net income (loss)(1)(2)	$	(109,151,163)	$	29,545,827
Net income (loss) attributable to noncontrolling interests	$	(5,759,798)	$	1,585,124
Net income (loss) attributable to common stockholders(3)	$	(103,391,365)	$	27,960,703
Net income (loss) attributable to common stockholders per share - basic and diluted	$	(1.04)	$	0.26

_______________

(1)The incremental cost of hiring the existing workforce responsible for the Company’s real estate management and operations of $17,906,923 and $17,742,481, was included in pro forma expenses in arriving at the pro forma net income (loss) for the years ended December 31, 2020 and 2019, respectively. The pro forma impact of the Internalization Transaction on the Company’s historical results of operations based on the historical net income of SRI and its affiliates was $19,083,158 for the year ended December 31, 2019.

(2)Contemporaneously with the Internalization Closing, the Company hired 634 employees, previously employed by SRI and its affiliates, to operate all of the assets necessary to operate the business of the Company.

(3)Amount is net of net income (loss) attributable to noncontrolling interests and distributions to preferred shareholders.

25

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

4.          Real Estate

Current Period Acquisitions

During the nine months ended September 30, 2021, the Company acquired one multifamily real estate property, which was determined to be an asset acquisition. The following is a summary of the real estate property acquired during the nine months ended September 30, 2021:

				Purchase Price Allocation
Property Name	Location	Purchase Date	Homes	Land		Buildings and Improvements		Tenant Origination and Absorption Costs		Total Purchase Price
Ballpark Apartments at   Town Madison	Huntsville, AL	6/29/2021	274	$	3,773,236	$	72,579,544	$	1,113,905	$	77,466,685

As of September 30, 2021, the Company owned 70 multifamily properties and three parcels of land held for the development of apartment homes. The Company’s portfolio is comprised of 22,001 apartment homes, including 160 newly constructed apartment homes placed into service at the Garrison Station development project as of September 30, 2021.

The total acquisition price of the Company’s multifamily real estate portfolio was $3,236,068,388, excluding land held for the development of apartment homes of $34,870,861. As of September 30, 2021 and December 31, 2020, the Company’s portfolio was approximately 96.5% and 95.4% occupied and the average monthly rent was $1,237 and $1,173, respectively.

As of September 30, 2021 and December 31, 2020, investments in real estate and accumulated depreciation and amortization related to the Company’s consolidated real estate properties was as follows:

	September 30, 2021
	Assets
	Land		Building and Improvements(1)		Tenant Origination and Absorption Costs		Total Real Estate Held for Investment		Real Estate Under Development		Real Estate Held for Sale
Investments in real estate	$	338,512,553	$	2,945,070,487	$	1,682,900	$	3,285,265,940	$	34,870,861	$	75,895,741
Less: Accumulated depreciation and amortization	—		(479,484,461)		(670,082)		(480,154,543)		—		(15,527,817)
Net investments in real estate and related lease intangibles	$	338,512,553	$	2,465,586,026	$	1,012,818	$	2,805,111,397	$	34,870,861	$	60,367,924

	December 31, 2020
	Assets
	Land		Building and Improvements(1)		Tenant Origination and Absorption Costs		Total Real Estate Held for Investment		Real Estate Under Development		Real Estate Held for Sale
Investments in real estate	$	331,031,517	$	2,813,476,200	$	1,752,793	$	3,146,260,510	$	39,891,218	$	75,226,200
Less: Accumulated depreciation and amortization	—		(384,163,168)		(330,839)		(384,494,007)		—		(13,250,670)
Net investments in real estate and related lease intangibles	$	331,031,517	$	2,429,313,032	$	1,421,954	$	2,761,766,503	$	39,891,218	$	61,975,530

During the nine months ended September 30, 2021 and 2020, the Company wrote off $12,515,830 and $0, respectively, of fixed assets related to the damage caused to the Company’s multifamily properties impacted by the winter storm that took place in February 2021.

26

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

Total depreciation and amortization expenses were $34,051,286 and $101,203,302 for the three and nine months ended September 30, 2021, respectively, and $47,564,706 and $129,596,268 for the three and nine months ended September 30, 2020, respectively.

Depreciation of the Company’s buildings and improvements was $33,320,641 and $99,073,405 for the three and nine months ended September 30, 2021, and $33,055,972 and $89,122,949 for the three and nine months ended September 30, 2020, respectively. Depreciation of the Company’s acquired furniture and fixtures in the Internalization Transaction was $16,057 and $44,243 for the three and nine months ended September 30, 2021, respectively, and $2,490 for each of the three and nine months ended September 30, 2020, respectively.

Amortization of the Company’s intangible assets was $714,588 and $2,085,654 for the three and nine months ended September 30, 2021, respectively, and $14,506,244 and $40,470,829 for the three and nine months ended September 30, 2020, respectively.

Amortization of the Company’s tenant origination and absorption costs was $572,331 and $1,523,041 for the three and nine months ended September 30, 2021, respectively, and $14,431,485 and $40,392,592 for the three and nine months ended September 30, 2020, respectively. Tenant origination and absorption costs had a weighted-average amortization period as of the date of acquisition of less than one year.

Amortization of the Company’s operating ROU assets was $3,367 and $10,101 for the three and nine months ended September 30, 2021, respectively, and $3,367 and $6,845 for the three and nine months ended September 30, 2020, respectively. This represents the amortization of initial indirect costs included in the measurement of the operating ROU assets.

Amortization of the Company’s SRI Property Management Agreements was $138,890 and $552,512 for the three and nine months ended September 30, 2021, respectively, and $71,392 for each of the three and nine months ended September 30, 2020.

Amortization of the Company’s other intangible assets, which consist of below-market leases, was $1,671 and $5,014 for the three and nine months ended September 30, 2021, respectively, and $1,671 and $4,265 for the three and nine months ended September 30, 2020, respectively, and is included as an increase to rental income in the accompanying consolidated condensed statements of operations. Other intangible assets had a weighted-average amortization period as of the date of acquisition of ten years.

Operating Leases

As of September 30, 2021, the Company’s real estate portfolio comprised 22,001 residential apartment homes and was 97.7% leased by a diverse group of residents. For the three and nine months ended September 30, 2021 and 2020, the Company’s real estate portfolio earned in excess of 99% and less than 1% of its rental income from residential tenants and commercial tenants, respectively. The residential tenant lease terms typically consist of lease durations equal to 12 months or less. The commercial tenant leases consist of remaining lease durations varying from 0.25 years to nine years.

Some residential leases contain provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to residents. Generally, upon the execution of a lease, the Company requires security deposits from residents in the form of a cash deposit. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in accounts payables and accrued liabilities in the accompanying consolidated balance sheets and totaled $9,207,498 and $8,545,977 as of September 30, 2021 and December 31, 2020, respectively.

27

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

The future minimum rental receipts from the Company’s properties under non-cancelable operating leases attributable to commercial tenants as of September 30, 2021, and thereafter is as follows:

October 1 to December 31, 2021	$	74,821
2022	274,149
2023	280,777
2024	288,703
2025	296,860
Thereafter	1,059,469
	$	2,274,779

As of September 30, 2021 and December 31, 2020, no tenant represented over 10% of the Company’s annualized base rent and there were no significant industry concentrations with respect to its commercial leases.

Real Estate Under Development

During the three and nine months ended September 30, 2021, the Company owned the following parcels of land held for the development of apartment homes:

Development Name	Location	Purchase Date	Land Held for Development		Construction in Progress		Total Carrying Value
Garrison Station (1)	Murfreesboro, TN	5/30/2019	$	246,527	$	2,037,090	$	2,283,617
Arista at Broomfield	Broomfield, CO	3/13/2020	7,283,803		16,134,724		23,418,527
Flatirons	Broomfield, CO	6/19/2020	8,574,704		594,013		9,168,717
			$	16,105,034	$	18,765,827	$	34,870,861

_______________

(1)The Company is developing Garrison Station, which consists of nine residential buildings comprised of 176 apartment homes. During the nine months ended September 30, 2021, eight buildings comprised of 160 apartment homes were placed in service totaling $29,690,942, and are included in total real estate held for investment, net in the accompanying consolidated balance sheets.

Real Estate Held for Sale

Heritage Place Apartments

On April 27, 2015, the Company acquired Heritage Place Apartments, a multifamily property located in Franklin, Tennessee, containing 105 apartment homes. As of September 30, 2021, Heritage Place Apartments met all the criteria to be classified as held for sale. The real estate, other assets, mortgage notes and other liabilities related to Heritage Place Apartments are disclosed separately for the periods presented in the accompanying consolidated balance sheets.

Carrington Park

On August 19, 2015, the Company acquired Carrington Park, a multifamily property located in Kansas City, Missouri, containing 298 apartment homes. As of September 30, 2021, Carrington Park met all the criteria to be classified as held for sale. The real estate, other assets, mortgage notes and other liabilities related to Carrington Park are disclosed separately for the periods presented in the accompanying consolidated balance sheets.

Clarion Park Apartments

On March 6, 2020, the Company acquired Clarion Park Apartments, a multifamily property located in Olathe, Kansas, containing 220 apartment homes. As of September 30, 2021, Clarion Park Apartments met all the criteria to be classified as

28

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

held for sale. The real estate, other assets, mortgage notes and other liabilities related to Clarion Park Apartments are disclosed separately for the periods presented in the accompanying consolidated balance sheets.

The results of operations from Heritage Place Apartments, Carrington Park and Clarion Park Apartments for the three and nine months ended September 30, 2021, which are summarized in the following table, were included in continuing operations on the Company’s consolidated statements of operations.

	For the Three Months Ended		For the Nine Months Ended
	September 30, 2021		September 30, 2021
Revenues	$	2,075,942	$	6,090,669
Expenses	1,905,518		5,800,728
Net income	$	170,424	$	289,941

Completion of SIR and STAR III Mergers

On March 6, 2020, pursuant to the terms and conditions of the SIR Merger Agreement and STAR III Merger Agreement (together the “Merger Agreements”), SIR Merger Sub and STAR III Merger Sub, the surviving entities, continued as wholly-owned subsidiaries of the Company. In accordance with the applicable provisions of the MGCL, the separate existence of SIR and STAR III ceased. The combined company retained the name “Steadfast Apartment REIT, Inc.” At the effective time of the Mergers, each issued and outstanding share of SIR, and STAR III’s common stock (or a fraction thereof), each $0.01 par value per share, was converted into 0.5934 and 1.430 shares of the Company’s common stock, respectively.

The following table summarizes the purchase price of SIR and STAR III as of the date of the Mergers:

	SIR		STAR III
Class A common stock issued and outstanding	—		3,458,807
Class R common stock issued and outstanding	—		475,207
Class T common stock issued and outstanding	—		4,625,943
Common stock issued and outstanding	73,770,330		—
Total common stock issued and outstanding	73,770,330		8,559,957
Exchange ratio	0.5934		1.430
STAR common stock issued as consideration(1)	43,775,314		12,240,739
STAR’s estimated value per share at the time of Mergers	$	15.84	$	15.84
Value of STAR’s common stock issued as consideration	$	693,400,974	$	193,893,305

____________________

(1) Represents the number of shares of common stock of SIR and STAR III converted into shares of the Company’s common stock upon consummation of the Mergers.

29

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

The following table presents the purchase price allocation of SIR’s and STAR III’s identifiable assets and liabilities assumed as of the date of the Mergers:

	SIR		STAR III
Assets:
Land	$	114,377,468	$	58,056,275
Buildings and improvements	959,337,747		411,461,858
Acquired intangibles	27,027,759		10,041,373
Other assets	122,688,608		21,438,855
Investment in unconsolidated joint venture	22,128,691		—
Total assets:	$	1,245,560,273	$	500,998,361
Liabilities:
Mortgage notes payable, net	$	(506,023,981)	$	(289,407,045)
Other liabilities	(46,135,318)		(17,698,011)
Total liabilities:	$	(552,159,299)	$	(307,105,056)
Fair value of net assets acquired	$	693,400,974	$	193,893,305

Capitalized Acquisition Costs Related to the Mergers

The SIR Merger and STAR III Merger were each accounted for as an asset acquisition. In accordance with the asset acquisition method of accounting, costs incurred to acquire the asset were capitalized as part of the acquisition price. Upon the execution of the Merger Agreements on August 5, 2019, the SIR Merger and STAR III Merger were considered probable of occurring, at which point the Company began to capitalize the merger related acquisition costs to building and improvements in the accompanying consolidated balance sheets. Prior to such date, the merger related acquisition costs were expensed to general and administrative expenses in the accompanying consolidated statements of operations.

5. Investment in Unconsolidated Joint Venture

On March 6, 2020, upon consummation of the SIR Merger, the Company acquired a 10% interest in BREIT Steadfast MF JV LP (the “Joint Venture”). On July 16, 2020 (the “JV Disposition Date”), the Company sold its joint venture interest for $19,278,280 to an affiliate of the general partner of the Joint Venture. The Company did not exercise significant influence, nor did it control the Joint Venture and had accounted for its former investment in the Joint Venture under the equity method of accounting. Income, losses, contributions and distributions were generally allocated based on the members’ respective equity interests.

The Company recognized an other-than-temporary impairment (“OTTI”) on its investment in the Joint Venture of $2,442,411 during the three months ended June 30, 2020. The OTTI was a result of the Company receiving an indication of value in connection with negotiating a sale of the Company’s joint venture interest at a disposition price that was less than the carrying value of the Joint Venture. The OTTI was included in equity in loss from unconsolidated joint venture on the Company’s consolidated statements of operations. In determining the fair value of the Joint Venture, the Company considered Level 3 inputs.

As of the JV Disposition Date, the book value of the Company’s investment in the Joint Venture was $18,955,478, which included an accounting outside basis difference of $8,067,010, net and capitalized transaction costs of $594,993, net. The accounting outside basis difference represented the difference between the purchase price the Company paid for its investment in the Joint Venture in connection with the SIR Merger and the book value of the Company’s equity in the Joint Venture as of the JV Disposition Date. The capitalized transaction costs relate to acquiring the interest in the Joint Venture through the consummation of the SIR Merger.

30

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

During the three and nine months ended September 30, 2020, $58,144 and $490,586, respectively, of amortization of the basis difference was included in equity in loss from unconsolidated joint venture on the accompanying consolidated statements of operations. The Company recorded the gain on sale of the investment in unconsolidated joint venture of $66,802 in equity in loss from unconsolidated joint venture on the accompanying consolidated statements of operations. The Company received distributions of $0 during each of the three and nine months ended September 30, 2021 and $0 and $360,700 during the three and nine months ended September 30, 2020, related to its investment in the Joint Venture, respectively.

Unaudited financial information for the Joint Venture for the periods from March 6, 2020 through the JV Disposition Date, is summarized below:

	For the Period from July 1, 2020 through July 16, 2020		For the Period from March 6, 2020 through July 16, 2020
Revenues	$	2,779,246	$	23,313,921
Expenses	(3,079,277)		(25,078,993)
Other income	46,341		225,914
Net loss	$	(253,690)	$	(1,539,158)
Company’s proportional net loss	$	(25,369)	$	(153,916)
Amortization of outside basis	(58,144)		(490,586)
Impairment of unconsolidated joint venture	—		(2,442,411)
Gain on sale of unconsolidated joint venture	66,802		66,802
Equity in loss from unconsolidated joint venture	$	(16,711)	$	(3,020,111)

6.          Other Assets

As of September 30, 2021 and December 31, 2020, other assets consisted of:

	September 30, 2021		December 31, 2020
Prepaid expenses	$	9,548,056	$	6,446,847
SRI Property Management Agreements, net	—		543,332
Interest rate cap agreements (Note 14)	27,853		7,852
Other deposits	907,017		649,470
Corporate computers, net	172,957		132,708
Lease right-of-use assets, net (Note 15)(1)	1,340,135		2,145,505
Other assets	$	11,996,018	$	9,925,714

_________________

(1) As of September 30, 2021, lease ROU assets, net included finance lease ROU asset, net of $7,665 and operating ROU assets, net of $1,332,470. As of December 31, 2020, lease ROU assets, net included finance lease ROU asset, net of $16,845 and operating ROU assets, net of $2,128,660.

Amortization of the Company’s SRI Property Management Agreements was $138,890 and $552,512 for the three and nine months ended September 30, 2021, respectively, and $71,392 for each of the three and nine months ended September 30, 2020.

Amortization of the Company’s initial indirect costs included in the measurement of the operating ROU assets for the three and nine months ended September 30, 2021, was $3,367 and $10,101, respectively. Amortization of the Company’s initial

31

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

indirect costs included in the measurement of the operating ROU assets for the three and nine months ended September 30, 2020, was $3,367 and $6,845, respectively. See Note 15 (Leases) for details.

7.          Debt

Mortgage Notes Payable

The following is a summary of mortgage notes payable, net, secured by individual properties as of September 30, 2021 and December 31, 2020.

	September 30, 2021
			Interest Rate Range		Weighted Average Interest Rate
Type	Number of Instruments	Maturity Date Range	Minimum	Maximum		Principal Outstanding
Variable rate(1)	4	10/16/2022 - 1/1/2027	1-Mo LIBOR + 1.88%	1-Mo LIBOR + 2.31%	2.20%	$	124,175,912
Fixed rate	42	10/1/2022 - 10/1/2056	3.19%	4.66%	3.85%	1,268,773,626
Mortgage notes payable, gross	46				3.70%	1,392,949,538
Premiums and discounts, net(2)						2,540,250
Deferred financing costs, net(3)						(5,747,561)
Mortgage notes payable, net						$	1,389,742,227

	December 31, 2020
			Interest Rate Range		Weighted Average Interest Rate
Type	Number of Instruments	Maturity Date Range	Minimum	Maximum		Principal Outstanding
Variable rate(1)	4	10/16/2022 - 1/1/2027	1-Mo LIBOR + 1.88%	1-Mo LIBOR +2.31%	2.27%	$	113,452,357
Fixed rate	42	10/1/2022 - 10/1/2056	3.19%	4.66%	3.85%	1,273,877,535
Mortgage notes payable, gross	46				3.72%	1,387,329,892
Premiums and discount, net(2)						3,809,734
Deferred financing costs, net(3)						(6,756,841)
Mortgage notes payable, net						$	1,384,382,785

________________

(1)    See Note 14 (Derivative Financial Instruments) for a discussion of the interest rate cap agreements used to manage the exposure to interest rate movement on the Company’s variable rate loans.

(2) The following table summarizes debt premiums and discounts as of September 30, 2021 and December 31, 2020, including the unamortized portion included in the principal balance as well as amounts amortized included in interest expense in the accompanying consolidated statements of operations:

32

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

Net Debt Premium (Discount) before Amortization as of September 30, 2021		Amortization of Debt (Premium) Discount During the Nine Months Ended September 30, 2021		Unamortized Net Debt Premium (Discount) as of September 30, 2021
$	15,375,305	$	(3,513,759)	$	11,861,546
(10,179,526)		858,230		(9,321,296)
$	5,195,779	$	(2,655,529)	$	2,540,250

Net Debt Premium (Discount) before Amortization as of December 31, 2020		Amortization of Debt (Premium) Discount During the Year Ended December 31, 2020		Unamortized Net Debt Premium (Discount) as of December 31, 2020
$	15,375,305	$	(1,836,575)	$	13,538,730
(10,179,526)		450,530		(9,728,996)
$	5,195,779	$	(1,386,045)	$	3,809,734

(3)    Accumulated amortization related to deferred financing costs as of September 30, 2021 and December 31, 2020 was $4,504,463 and $3,495,183, respectively.

Construction loan

On October 16, 2019, the Company entered into an agreement with PNC Bank, National Association (“PNC Bank”) for a construction loan related to the Garrison Station development project in an aggregate principal amount not to exceed $19,800,000 for a 36 month initial term and two 12 month mini-perm extensions. The rate of interest on the construction loan is daily LIBOR plus 2.00%, which then reduces to daily LIBOR plus 1.80% upon achieving completion as defined in the construction loan agreement and at a debt service coverage ratio (“DSCR”) of 1.15x. The loan includes a 0.4% fee at closing, a 0.1% fee upon exercising the mini-perm and a 0.1% fee upon extending the mini-perm, each payable to PNC Bank. There is an exit fee of 0.1% which will be waived if permanent financing is secured through PNC Bank or one of its affiliates. As of September 30, 2021 and December 31, 2020, the principal outstanding balance on the construction loan was $18,244,300 and $6,264,549, respectively, and was included within mortgage notes payable, net on the accompanying consolidated balance sheets.

Credit Facilities

Master Credit Facility

On July 31, 2018, 16 indirect wholly-owned subsidiaries of the Company entered into a Master Credit Facility Agreement (“MCFA”) with Newmark Group, Inc., formerly Berkeley Point Capital, LLC (“Facility Lender”), for an aggregate principal amount of $551,669,000. On February 11, 2020, in connection with the financing of Patina Flats at the Foundry, the Company and the Facility Lender amended the MCFA to substitute Patina Flats at the Foundry and Fielders Creek, the then-unencumbered multifamily property owned by the Company, as substitute collateral for the three multifamily properties disposed of and released from the MCFA. The Company also increased its outstanding borrowings pursuant to the MCFA by $40,468,000, a portion of which was attributable to the acquisition of Patina Flats at the Foundry. The MCFA provides for four tranches: (1) a fixed rate loan in the aggregate principal amount of $331,001,400 that accrues interest at 4.43% per annum; (2) a fixed rate loan in the aggregate principal amount of $137,917,250 that accrues interest at 4.57% per annum; (3) a variable rate loan in the aggregate principal amount of $82,750,350 that accrues interest at the one-month LIBOR plus 1.70% per annum; and (4) a fixed rate loan in the aggregate principal amount of $40,468,000 that accrues interest at 3.34% per annum. The first three tranches have a maturity date of August 1, 2028, and the fourth tranche has a maturity date of March 1, 2030, unless in each case the maturity date is accelerated in accordance with the terms of the loan documents. Interest only payments are payable monthly through August 1, 2025 and April 1, 2027 on the first three tranches and fourth tranche, respectively, with interest and principal payments due monthly thereafter.

33

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

PNC Master Credit Facility

On June 17, 2020, the Company, through seven indirect wholly-owned subsidiaries (each, a “Borrower” and collectively, the “Borrowers”), entered into a Master Credit Facility Agreement (the “PNC MCFA”), a fixed rate Multifamily Note and a variable rate Multifamily Note (collectively, the “Notes”) and the other loan documents for the benefit of PNC Bank. The PNC MCFA provides for two tranches: (1) a fixed rate loan in the aggregate principal amount of $79,170,000 that accrues interest at 2.82% per annum; and (2) a variable rate loan in the aggregate principal amount of $79,170,000 that accrues interest at the one-month LIBOR plus 2.135% per annum. If LIBOR is no longer posted through electronic transmission, is no longer available or, in PNC Bank’s determination, is no longer widely accepted or has been replaced as the index for similar financial instruments, PNC Bank will choose a new index taking into account general comparability to LIBOR and other factors, including any adjustment factor to preserve the relative economic positions of the Borrowers and PNC Bank with respect to any advances made pursuant to the PNC MCFA. The Company paid $633,360 in the aggregate in loan origination fees to PNC Bank in connection with the financings, and paid the Former Advisor a loan coordination fee of $791,700.

Revolving Credit Loan Facility

On June 26, 2020, the Company entered into a revolving credit loan facility (the “Revolver”) with PNC Bank in an amount not to exceed $65,000,000. The Revolver provides for advances (each, a “Revolver Loan”) solely for the purpose of financing costs in connection with acquisitions and development of real estate projects and for general corporate purposes (subject to certain debt service and loan to value requirements). The Revolver has a maturity date of June 26, 2023, subject to extension. Advances made under the Revolver are secured by the Landings of Brentwood property, as evidenced by the Loan Agreement, the Credit Facility Notes (the “Notes”), the Deed of Trust and a Guaranty from the Company (the “Guaranty,” together with the Loan Agreement and the Notes, the “Loan Documents”).

The Company has the option to select the interest rate in respect of the outstanding unpaid principal amount of each Revolver Loan from the following options: (1) a fluctuating rate per annum equal to the sum of the daily LIBOR rate plus the daily LIBOR rate spread or (2) a fluctuating rate per annum equal to the base rate plus the alternate rate spread. No amounts were outstanding on the Revolver at September 30, 2021 and December 31, 2020.

As of September 30, 2021 and December 31, 2020, the advances obtained and certain financing costs incurred under the MCFA, PNC MCFA and the Revolver, which are included in credit facilities, net, in the accompanying consolidated balance sheets, are summarized in the following table.

	Amount of Advance as of
	September 30, 2021		December 31, 2020
Principal balance on MCFA, gross	$	592,137,000	$	592,137,000
Principal balance on PNC MCFA, gross	158,340,000		158,340,000
Deferred financing costs, net on MCFA(1)	(3,083,410)		(3,436,850)
Deferred financing costs, net on PNC MCFA(2)	(1,553,045)		(1,689,935)
Deferred financing costs, net on Revolver(3)	(340,648)		(487,329)
Credit facilities, net	$	745,499,897	$	744,862,886

_______________

(1)    Accumulated amortization related to deferred financing costs in respect of the MCFA as of September 30, 2021 and December 31, 2020, was $1,651,705 and $1,298,265, respectively.

(2)    Accumulated amortization related to deferred financing costs in respect of the PNC MCFA as of September 30, 2021 and December 31, 2020, was $236,174 and $99,283, respectively.

(3)    Accumulated amortization related to deferred financing costs in respect of the Revolver as of September 30, 2021 and December 31, 2020, was $248,230 and $101,549, respectively.

34

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

Assumed Debt as a Result of the Completion of Mergers

On March 6, 2020, upon consummation of the Mergers, the Company assumed all of SIR’s and STAR III’s obligations under the outstanding mortgage loans secured by 29 properties. The Company recognized the fair value of the assumed notes payable in the Mergers of $795,431,027, which consists of the assumed principal balance of $791,020,471 and a net premium of $4,410,556.

The following is a summary of the terms of the assumed loans on the date of the Mergers:

			Interest Rate Range
Type	Number of Instruments	Maturity Date Range	Minimum	Maximum	Principal Outstanding At Merger Date
Variable rate	2	1/1/2027 - 9/1/2027	1-Mo LIBOR + 2.195%	1-Mo LIBOR + 2.31%	$	64,070,000
Fixed rate	27	10/1/2022 - 10/1/2056	3.19%	4.66%	726,950,471
Assumed Principal Mortgage Notes Payable	29				$	791,020,471

Maturity and Interest

The following is a summary of the Company’s aggregate maturities as of September 30, 2021:

					Maturities During the Years Ending December 31,
Contractual Obligations	Total		Remainder of 2021		2022		2023		2024		2025		Thereafter
Principal payments on outstanding debt (1)	$	2,143,426,538	$	2,317,869	$	53,106,875	$	60,666,525	$	58,184,121	$	197,560,660	$	1,771,590,488

________________

(1)    Scheduled principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude deferred financing costs, net and debt premiums (discounts), net associated with the notes payable.

The Company’s notes payable contain customary financial and non-financial debt covenants. At September 30, 2021, the Company was in compliance with all debt covenants.

For the three and nine months ended September 30, 2021, the Company incurred interest expense of $20,279,374 and $60,174,405, respectively. Interest expense for the three and nine months ended September 30, 2021, includes amortization of deferred financing costs totaling $548,726 and $1,646,291, net unrealized loss from the change in fair value of interest rate cap agreements of $40,902 and $39,699, amortization of net loan premiums and discounts of $(428,434) and $(1,269,484), capitalized interest of $284,511 and $844,577, credit facility commitment fees of $32,861 and $98,852, and imputed interest on the finance lease portion of the sublease of $65 and $258, respectively. The capitalized interest is included in real estate held for development in the accompanying consolidated balance sheets.

For the three and nine months ended September 30, 2020, the Company incurred interest expense of $20,628,159 and $54,734,431, respectively. Interest expense for the three and nine months ended September 30, 2020, includes amortization of deferred financing costs of $573,078 and $1,382,954, net unrealized loss from the change in fair value of interest rate cap agreements of $29,093 and $56,287, amortization of net loan premiums and discounts of $(431,387) and $(959,827) and costs associated with the refinance of debt of $0 and $42,881, net of capitalized interest of $313,902 and $576,521, and imputed interest on the finance lease portion of the sublease of $47 and $47, respectively. The capitalized interest is included in real estate held for development in the accompanying consolidated balance sheets.

35

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

Interest expense of $6,584,586 and $6,806,695 was payable as of September 30, 2021 and December 31, 2020, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

8.         Stockholders’ Equity

 General

Pursuant to the Company’s Articles of Amendment and Restatement (as supplemented, the “Charter”), the total number of shares of capital stock authorized for issuance is 1,100,000,000 shares, consisting of 999,998,000 shares of common stock with a par value of $0.01 per share, 1,000 shares of Class A non-participating, non-voting convertible stock with a par value of $0.01 per share, 1,000 shares of non-participating, non-voting convertible stock with a par value of $0.01 per share and 100,000,000 shares of preferred stock with a par value of $0.01 per share.

Common Stock

The shares of the Company’s common stock entitle the holders to one vote per share on all matters upon which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the MGCL and to all rights of a stockholder pursuant to the MGCL. The common stock has no preferences or preemptive, conversion or exchange rights.

On September 3, 2013, the Company issued 13,500 shares of common stock to SRI, the Company’s former sponsor, for $202,500. From inception through March 24, 2016, the date of the termination of the Primary Offering, the Company had issued 48,625,651 shares of common stock in its Public Offering for offering proceeds of $640,012,497, including 1,011,561 shares of common stock issued pursuant to the DRP for total proceeds of $14,414,752, net of offering costs of $84,837,134. The offering costs primarily consisted of selling commissions and dealer manager fees paid in the Primary Offering. Following the termination of the Public Offering, the Company continued to offer shares pursuant to the DRP until the DRP was suspended in connection with the entry into the IRT Merger Agreement.

As of September 30, 2021, the Company had issued 112,299,272 shares of common stock for offering proceeds of $1,642,957,041, including 8,669,192 shares of common stock issued pursuant to the DRP, for total DRP proceeds of $130,065,017, net of offering costs of $84,837,134 and 56,016,053 shares of common stock issued in connection with the Mergers, described below. The offering costs primarily consisted of selling commissions and dealer manager fees paid in the Primary Offering. On March 6, 2020, the Company issued 43,775,314 shares of its common stock to SIR’s stockholders and 12,240,739 shares of its common stock to STAR III’s stockholders in connection with the Mergers.

As further discussed in Note 11 (Incentive Award Plan and Independent Director Compensation), the shares of restricted common stock granted to the Company’s independent directors prior to the Internalization Transaction vest and become non-forfeitable in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant. On September 15, 2020, the Company’s board of directors approved an amendment to the independent directors’ compensation plan, pursuant to which, each of the Company’s current independent directors is entitled to receive an annual retainer of $75,000 in cash and $75,000 in shares of restricted common stock upon election or re-election to the Company’s board of directors. The shares of restricted common stock granted pursuant to the Company’s independent directors’ compensation plan generally vest in two equal annual installments beginning on the first anniversary of the date of grant and ending on the second anniversary of the date of grant; provided, however, that the restricted stock will become fully vested on the earlier to occur of: (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company.

36

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

The issuance and vesting activity for the nine months ended September 30, 2021 and year ended December 31, 2020, for the restricted stock issued to the Company’s independent directors were as follows:

	Nine Months Ended September 30, 2021	Year Ended December 31, 2020
Nonvested shares at the beginning of the period	33,369	7,497
Granted shares	24,116	31,288
Vested shares	(2,916)	(5,416)
Nonvested shares at the end of the period	54,569	33,369

Additionally, the weighted average fair value of restricted common stock issued to the Company’s independent directors for the nine months ended September 30, 2021 and year ended December 31, 2020 was as follows:

Grant Year	Weighted Average Fair Value
2020	$	15.36
2021	15.55

Included in general and administrative expenses is $85,579 and $211,915 for the three and nine months ended September 30, 2021, respectively, and $18,309 and $81,692 for the three and nine months ended September 30, 2020, respectively, for compensation expense related to the issuance of restricted common stock. As of September 30, 2021, the compensation expense related to the issuance of the restricted common stock not yet recognized was $629,250. The weighted average remaining term of the restricted common stock was approximately one year as of September 30, 2021. As of September 30, 2021, no shares of restricted common stock issued to the independent directors have been forfeited.

Issuance of Restricted Stock Awards to Key Employees

2020 Restricted Stock Awards

In connection with the Internalization Transaction, on September 1, 2020, certain key employees of the Company were issued restricted stock grants under the terms of the Company’s Amended and Restated 2013 Incentive Plan (the “Incentive Award Plan”), which grants had been approved by the board of directors and the special committee formed for the purpose of reviewing, considering, investigating, evaluating, proposing and negotiating the Mergers (the “Special Committee”). The grants to the key employees of the Company were made pursuant to a restricted stock grant agreement. The grants vest 50% on the second anniversary of the grant date and 50% on the third anniversary of the grant date (collectively, the “2020 Restricted Stock Awards”).

The 2020 Restricted Stock Award provides that vesting is subject to the key employee’s continued employment with the Company through each applicable vesting date, except in the event of death or disability, in which case, any unvested portion of the awards will become fully vested. In addition, the Restricted Stock Award provides the key employee with rights as a stockholder in respect of the awards’ vested and unvested shares, including the right to vote and the right to dividends.

In the event of a termination of a key employee’s employment by the Company without cause or by the key employee for good reason within 12 months following a change in control, any unvested portion of the 2020 Restricted Stock Award will become fully vested at the time of such termination, provided that if the 2020 Restricted Stock Award is unvested at the time of a change in control of the Company and is not assumed or substituted for equivalent awards as part of the change in control transaction, the 2020 Restricted Stock Awards will become fully vested at the time of the change in control transaction. The fair value of grants issued was approximately $2,850,000.

2021 Restricted Stock Awards

Pursuant to employment agreements with key employees, on March 15, 2021, the Company granted key employees an award of time-based restricted stock (the “Time-Based 2021 Award”) with a total grant date fair value of $1,512,000 subject to

37

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

the terms of the Incentive Award Plan. The Time-Based 2021 Awards vest ratably over three years following the grant date, subject to the key employee’s continuous employment through the applicable vesting dates, with certain exceptions.

Total compensation expense related to the 2020 Restricted Stock Awards and the Time-Based 2021 Award for the three and nine months ended September 30, 2021 and 2020 was $363,507, $987,553, $79,169 and $79,169, respectively, and was included in general and administrative costs on the accompanying consolidated statements of operations. As of September 30, 2021, the compensation expense related to the issuance of the restricted common stock to the key employees not yet recognized was $3,057,771. The weighted average remaining term of the restricted common stock issued to the Company’s key employees was approximately 1.4 years as of September 30, 2021. As of September 30, 2021, no shares of restricted common stock issued to the Company’s key employees have been forfeited.

Investment Management Fee and Loan Coordination Fee Paid to Former Advisor in Shares

Following the completion of the Mergers on March 6, 2020 and until the Internalization Closing, and pursuant to the Advisory Agreement, the Company paid the Former Advisor a monthly investment management fee, payable 50% in cash and 50% in shares of the Company’s common stock at the estimated value per share at the time of issuance. The shares of common stock fully vested and became non-forfeitable upon payment of the monthly investment management fee. The fair value of the vested common stock at the date of issuance, using the then-most recent publicly disclosed estimated value per share, was recorded in stockholders’ equity in the accompanying consolidated balance sheets. No investment management fees were incurred in shares for the three and nine months ended September 30, 2021. Investment management fees of $2,863,215 and $8,367,340 were incurred in shares for the three and nine months ended September 30, 2020, respectively.

Following the closing of the Mergers on March 6, 2020 and until the closing of the Internalization Transaction, pursuant to the Advisory Agreement, the Company paid the Former Advisor a loan coordination fee in shares of the Company’s common stock at the estimated value per share at the time of issuance. The loan coordination fee was payable in shares equal to 0.5% of the amount of debt financed or refinanced (in each case, other than at the time of the acquisition of a property) or the Company’s proportionate share of the amount refinanced in the case of investments made through a joint venture. No loan coordination fees were incurred in shares for the three and nine months ended September 30, 2021. Loan coordination fees incurred in shares and included in fees to affiliates in the accompanying consolidated statements of operations were $0 and $1,116,700 for the three and nine months ended September 30, 2020, respectively.

Convertible Stock and Class A Convertible Stock

Prior to the completion of the Mergers on March 6, 2020, the Company’s then-outstanding Convertible Stock would have been converted into shares of the Company’s common stock if and when: (A) the Company had made total distributions on the then-outstanding shares of the Company’s common stock equal to the original issue price of those shares plus an aggregate 6.0% cumulative, non-compounded, annual return on the original issue price of those shares, (B) the Company listed its common stock for trading on a national securities exchange, or (C) the Advisory Agreement was terminated or not renewed (other than for “cause” as defined in the Advisory Agreement). In general, each share of Convertible Stock would convert into a number of shares of common stock equal to 1/1000 of the quotient of (A) 15% of the excess of (1) the Company’s “enterprise value” plus the aggregate value of distributions paid to date on the then outstanding shares of the Company’s common stock over (2) the aggregate purchase price paid by stockholders for those outstanding shares of common stock plus an aggregated 6.0% cumulative, non-compounded, annual return on the original issue price of those outstanding shares, divided by (B) the Company’s enterprise value divided by the number of outstanding shares of common stock on an as-converted basis, in each case calculated as of the date of the conversion. In the event of a termination or non-renewal of the Advisory Agreement for cause, all of the shares of the Convertible Stock would have been repurchased by the Company for $1.00.

In connection with the Mergers, the Company and the Former Advisor exchanged the then-outstanding Convertible Stock for new Class A Convertible Stock. The Class A Convertible Stock would have been converted into shares of the Company’s common stock if (1) the Company had made total distributions of money or other property to its stockholders or by SIR and STAR III to their respective holders of common shares (with respect to SIR and STAR III, including in each case distributions paid to SIR and STAR III stockholders prior to the closing of the Mergers), which the Company refers to collectively as the “Class A Distributions,” equal to the sum of the original issue price of the Company’s shares of common stock, shares of common stock of SIR and shares of common stock of STAR III (the “Common Equity”), plus an aggregate 6.0% cumulative,

38

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

non-compounded, annual return on the original issue price of those shares, (2) the Company listed its common stock for trading on a national securities exchange or entered into a merger whereby holders of the Company’s common stock receive listed securities of another issuer or (3) the Company’s Advisory Agreement was terminated or not renewed (other than for “cause” as defined in the Advisory Agreement), each of the above is referred to as a “Triggering Event.” Upon any of these Triggering Events, each share of Class A Convertible Stock would have been converted into a number of shares of the Company’s common stock equal to 1/1000 of the quotient of (A) 15% of the amount, if any, by which (i) the “Class A Enterprise Value” plus the aggregate value of the Distributions paid to date on the Common Equity exceeded (ii) the aggregate purchase price paid by stockholders for the Common Equity plus an aggregated 6.0% cumulative, non-compounded, annual return on the original issue price of the Common Equity as of the date of the Triggering Event, divided by (B) the Class A Enterprise Value divided by the number of the Company’s outstanding common shares on an as-converted basis as of the date of Triggering Event.

As discussed in Note 1 (Organization and Business), in connection with the Internalization Transaction, the Company repurchased all of the Class A Convertible Stock from the Former Advisor for $1,000.

Preferred Stock

The Charter provides the Company’s board of directors with the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such shares of preferred stock, the board of directors shall have the power from time to time to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares of preferred stock. The Company’s board of directors is authorized to amend the Charter without the approval of the stockholders to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue. As of September 30, 2021 and December 31, 2020, no shares of the Company’s preferred stock were issued and outstanding.

Distribution Reinvestment Plan

The Company’s board of directors has approved the DRP through which common stockholders may elect to reinvest an amount equal to the distributions declared on their shares of common stock in additional shares of the Company’s common stock in lieu of receiving cash distributions. The purchase price per share under the DRP initially was $14.25. On March 9, 2021 and April 17, 2020, the Company’s board of directors approved a price per share for the DRP of $15.55 and $15.23, effective April 1, 2021 and May 1, 2020, respectively, in connection with the determination of an estimated value per share of the Company’s common stock.

No sales commissions or dealer manager fees are payable on shares sold through the DRP. The Company’s board of directors may amend, suspend or terminate the DRP at its discretion at any time upon ten days notice to the Company’s stockholders. Following any termination of the DRP, all subsequent distributions to stockholders will be made in cash.

Suspension and Contingent Termination of the DRP

In connection with the approval of the IRT Mergers, on July 26, 2021, the Company announced that the Company’s board of directors, including all of the Company’s independent directors, voted to terminate the DRP as of the effective time of the Company Merger. The Company’s board of directors, including all of the Company’s independent directors, also voted to suspend the DRP, effective as of the 10th day after notice was provided to stockholders.

As a result of the suspension of the DRP, any distributions paid after the distribution payment date in August 2021 were paid to the Company’s stockholders in cash. The Company can provide stockholders with assistance on directing cash distribution payments and answering questions. The suspension of the DRP did not affect the payment of distributions to stockholders who previously received their distributions in cash.

Share Repurchase Plan and Redeemable Common Stock

The Company’s share repurchase plan may provide an opportunity for stockholders to have their shares of common stock repurchased by the Company, subject to certain restrictions and limitations. No shares can be repurchased under the Company’s share repurchase plan until after the first anniversary of the date of purchase of such shares; provided, however, that this holding period shall not apply to repurchases requested within two years after the death or disability of a stockholder.

39

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

In connection with the announcement of the then-proposed Mergers, on August 5, 2019, the Company’s board of directors approved the Amended & Restated SRP, which became effective September 5, 2019, and applied with repurchases made on the repurchase dates subsequent to the effective date of the Amended & Restated SRP. Under the Amended & Restated SRP, the Company only repurchased shares of common stock in connection with the death or qualifying disability (as defined in the Amended & Restated SRP) of a stockholder. Repurchases pursuant to the Amended & Restated SRP were limited to $2,000,000 per quarter.

On March 3, 2020, in connection with the closing of the Mergers, the Company’s board of directors amended the Amended & Restated SRP to: (1) allow all stockholders to request repurchases (as opposed to death and disability only), (2) limit the amount of shares repurchased pursuant to the Amended & Restated SRP each quarter to $4,000,000 and (3) set the repurchase price in all instances (including death and disability) to an amount equal to 93% of the most recent publicly disclosed estimated value per share. The $4,000,000 quarterly limit was first in effect on the repurchase date at April 30, 2020, with respect to repurchases for the three months ended March 31, 2020, but was limited to death and disability only. The Amended & Restated SRP was open to all repurchase requests beginning April 1, 2020.

On January 12, 2021, the board of directors further amended the Amended & Restated SRP. The amendment (1) limited repurchase requests to death and qualifying disability only and (2) set a $3,000,000 per calendar quarter limit on the amount of repurchases by the Company. The amendment took effect 30 days from January 14, 2021, and was in effect on April 30, 2021, the Repurchase Date (as defined below), with respect to repurchases for the fiscal quarter ending March 31, 2021. Share repurchase requests that did not meet the requirements for death and disability were cancelled (including any requests received during the first fiscal quarter of 2021). Prior to the suspension of the SRP discussed below, the share repurchase price was $14.46 per share, which represented 93% of the most recently published estimated value per share of $15.55.

In connection with the approval of the IRT Mergers, on July 26, 2021, the Company announced that the Company’s board of directors, including all of the Company’s independent directors, voted to terminate the Amended & Restated SRP as of the effective time of the Company Merger. The Company’s board of directors, including all of the Company’s independent directors, also voted to indefinitely suspend the Amended & Restated SRP effective as of the 30th day after notice was provided to stockholders. In addition, as a result of the suspension of the Amended & Restated SRP, the Company will not process or accept any requests for redemption received after July 26, 2021.

Prior to the March 3, 2020 amendments (described above), the share repurchase price was further reduced based on how long the stockholder had held the shares as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of the Share Repurchase Price(2)
2 years	95.0% of the Share Repurchase Price(2)
3 years	97.5% of the Share Repurchase Price(2)
4 years	100% of the Share Repurchase Price(2)
In the event of a stockholder’s death or disability(3)	Average Issue Price for Shares(4)

________________

(1)     As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock. Repurchase price includes the full amount paid for each share, including all sales commissions and dealer manager fees.

(2) The “Share Repurchase Price” equaled 93% of the most recently publicly disclosed estimated value per share determined by the Company’s board of directors.

(3)    The required one-year holding period did not apply to repurchases requested within two years after the death or disability of a stockholder.

40

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

(4)    The purchase price per share for shares repurchased upon the death or disability of a stockholder was equal to the average issue price per share for all of the stockholder’s shares.

The purchase price per share for shares repurchased pursuant to the Amended & Restated SRP was further reduced by the aggregate amount of net proceeds per share, if any, distributed to the Company’s stockholders prior to the Repurchase Date (defined below) as a result of the sale of one or more of the Company’s assets that constituted a return of capital as a result of such sales.

Repurchases of shares of the Company’s common stock were made quarterly upon written request to the Company at least 15 days prior to the end of the applicable quarter. Repurchase requests were honored approximately 30 days following the end of the applicable quarter (“Repurchase Date”). Stockholders could withdraw their repurchase request at any time up to three business days prior to the Repurchase Date.

The Company was not obligated to repurchase shares of its common stock under the Amended & Restated SRP. In no event did repurchases under the Amended & Restated SRP exceed 5% of the weighted average number of shares of common stock outstanding during the prior calendar year or the $3,000,000 limit for any quarter put in place by the Company’s board of directors. There was no fee in connection with a repurchase of shares of the Company’s common stock pursuant to the Amended & Restated SRP. As of September 30, 2021 and December 31, 2020, the Company had recorded $0 and $4,000,000, respectively, which represented 0 and 282,477 (pursuant to the Amended & Restated SRP) shares of common stock, respectively, in accounts payable and accrued liabilities on the accompanying consolidated balance sheets related to these unfulfilled repurchase requests.

During the three and nine months ended September 30, 2021, the Company repurchased a total of 195,627 and 637,272 shares with a total repurchase value of $2,828,761 and $9,130,324, and received requests for repurchases of 0 and 345,303 shares with a total repurchase value of $0 and $4,993,073, respectively.

During the three and nine months ended September 30, 2020, the Company repurchased a total of 282,483 and 484,684 shares with a total repurchase value of $4,000,000 and $6,907,827, and received requests for the repurchase of 1,568,908 and 4,382,676 shares with a total repurchase value of $22,215,732 and $62,058,686, respectively.

The Company could not guarantee that the funds set aside for the Amended & Restated SRP would be sufficient to accommodate all repurchase requests made in any quarter. In the event that the Company did not have sufficient funds available to repurchase all of the shares of the Company’s common stock for which repurchase requests had been submitted for death and disability, repurchase requests were paid on a pro rata basis up to the $3,000,000 quarterly cap.

Distributions

The Company’s long-term goal is to pay distributions solely from cash flow from operations. However, because the Company may receive income from interest or rents at various times during the Company’s fiscal year and because the Company may need cash flow from operations during a particular period to fund capital expenditures and other expenses, the Company expects that at times during the Company’s operational stage, the Company will declare distributions in anticipation of cash flow that the Company expects to receive during a later period, and the Company expects to pay these distributions in advance of its actual receipt of these funds. The Company’s board of directors has the authority under its organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or advances. The Company has not established a limit on the amount of proceeds it may use to fund distributions from sources other than cash flow from operations. If the Company pays distributions from sources other than cash flow from operations, the Company will have fewer funds available and stockholders’ overall return on their investment in the Company may be reduced.

To maintain the Company’s qualification as a REIT, the Company must make aggregate annual distributions to its stockholders of at least 90% of its REIT taxable income (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If the Company meets the REIT qualification requirements, the Company generally will not be subject to federal income tax on the income that the Company distributes to its stockholders each year.

41

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

Distributions Declared and Paid

The Company’s board of directors approved a cash distribution that accrued at a rate of $0.002466 per day for each share of the Company’s common stock during the month ended January 31, 2021, which, if paid over a 365-day period is equivalent to $0.90 per share. On January 12, 2021, the Company’s board of directors approved a cash distribution that accrues at a rate of $0.001438 per day for each share of the Company’s common stock for the period commencing on February 1, 2021 and ending on February 28, 2021, which was extended for the months of March through September, 2021, and which, if paid over a 365-day period is equivalent to $0.525 per share. The distributions declared accrue daily to stockholders of record as of the close of business on each day and are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month. There is no guarantee that the Company will continue to pay distributions at this rate or at all.

The following tables reflect distributions declared and paid to common stockholders and Class A-2 and Class B OP Unit holders (collectively, the “Noncontrolling Interest OP Unit Holders”) for the three and nine months ended September 30, 2021 and 2020:

	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
	Common Stockholders		Noncontrolling Interest OP Unit Holders		Total		Common Stockholders		Noncontrolling Interest OP Unit Holders		Total
DRP distributions declared (in shares)	67,112		—		67,112		515,952		—		515,952
DRP distributions declared (value)	$	1,043,598	$	—	$	1,043,598	$	7,942,867	$	—	$	7,942,867
Cash distributions declared	13,541,606		940,119		14,481,725		38,831,290		3,016,024		41,847,314
Total distributions declared	$	14,585,204	$	940,119	$	15,525,323	$	46,774,157	$	3,016,024	$	49,790,181
DRP distributions paid (in shares)	132,177		—		132,177		634,155		—		634,155
DRP distributions paid (value)	$	2,055,356	$	—	$	2,055,356	$	9,764,448	$	—	$	9,764,448
Cash distributions paid	12,531,553		940,119		13,471,672		40,379,699		3,516,645		43,896,344
Total distributions paid	$	14,586,909	$	940,119	$	15,527,028	$	50,144,147	$	3,516,645	$	53,660,792

	Three Months Ended September 30, 2020						Nine Months Ended September 30, 2020
	Common Stockholders		Noncontrolling Interest OP Unit Holders		Total		Common Stockholders		Noncontrolling Interest OP Unit Holders		Total
DRP distributions declared (in shares)	352,345		—		352,345		1,028,773		—		1,028,773
DRP distributions declared (value)	$	5,366,210	$	—	$	5,366,210	$	15,865,995	$	—	$	15,865,995
Cash distributions declared	19,455,686		668,742		20,124,428		48,772,528		832,056		49,604,584
Total distributions declared	$	24,821,896	$	668,742	$	25,490,638	$	64,638,523	$	832,056	$	65,470,579
DRP distributions paid (in shares)	352,832		—		352,832		1,023,791		—		1,023,791
DRP distributions paid (value)	$	5,373,636	$	—	$	5,373,636	$	15,857,249	$	—	$	15,857,249
Cash distributions paid	19,567,958		144,650		19,712,608		45,434,671		307,964		45,742,635
Total distributions paid	$	24,941,594	$	144,650	$	25,086,244	$	61,291,920	$	307,964	$	61,599,884

As of September 30, 2021 and December 31, 2020, $5,061,360 and $8,931,971 of distributions declared were payable, which included $0 and $1,821,581, or 0 shares and 119,605 shares of common stock, attributable to the DRP, respectively.

42

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

As reflected in the table above, for the three and nine months ended September 30, 2021 and 2020, the Company paid total distributions of $15,527,028 and $53,660,792, respectively, and $25,086,244 and $61,599,884, respectively.

9.         Noncontrolling Interest

Noncontrolling interests represent operating partnership interests in the Operating Partnership of which the Company is the general partner.

Class A-2 Operating Partnership Units

Class A-2 OP Units were issued as part of the consideration to purchase VV&M Apartments. STAR III OP, the Company’s then-indirect subsidiary, agreed to acquire the 310 unit multifamily property located in Dallas, Texas known as VV&M Apartments for an aggregate purchase price of $59,250,000, pursuant to the terms of a Contribution Agreement, dated as of March 20, 2020 (the “Contribution Agreement”), by and among STAR III OP, as Purchaser, and VV&M. On April 21, 2020 (the “VV&M Closing Date”), VV&M contributed the VV&M Apartments to STAR III OP, and STAR III OP issued 948,785 Class A-2 OP Units at an estimated value per unit of $15.23, the fair value determined at the date of transaction, or $14,450,000 in the aggregate, to VV&M, all in accordance with the Contribution Agreement.

On the VV&M Closing Date, STAR III OP and VV&M entered into the Second A&R Partnership Agreement. The Second A&R Partnership Agreement allows for VV&M to request STAR III OP to: (1) repurchase the outstanding Class A-2 OP Units after five years from the VV&M Closing Date (the “Put”), or (2) convert the Class A-2 OP Units into shares of common stock of the Company. STAR III OP has the right to repurchase the Class A-2 OP Units after five years from the VV&M Closing Date and can exercise its option to settle the Put in shares of common stock of the Company. The Class A-2 OP Units receive distributions at the same rate paid to holders of the Company’s common stock and are allocated a share of the income or loss on a pro rata basis of the then-three operating partnerships combined. The Company has evaluated the terms of the Second A&R Partnership Agreement and in accordance with ASC 480, determined that the Class A-2 OP Units are properly recognized as permanent equity on the consolidated balance sheets.

On August 28, 2020, STAR III OP merged with and into the Operating Partnership, and VV&M owns the Class A-2 operating partnership units in the Operating Partnership pursuant to the Operating Partnership Agreement on substantially the same terms described above.

Class B Operating Partnership Units

Class B OP Units were issued as consideration in the Internalization Transaction as discussed in Note 1 (Organization and Business). The Class B OP Units were valued at $15.23 per unit at the time of the transaction. On August 31, 2020, the date of the Internalization Closing, the Company, VV&M, STAR OP and SRI entered into the Operating Partnership Agreement. The Operating Partnership Agreement includes a provision that allows for SRI to request the repurchase of all outstanding Class B OP Units, one year from the date of the Internalization Closing; however, under the terms of the Contribution & Purchase Agreement, SRI is precluded from redeeming or transferring the Class B OP Units for two years from the date of the Internalization Closing. The Operating Partnership Agreement also includes a provision for the Company to settle the repurchase request in shares of the Company’s common stock rather than in cash, in its sole discretion as the general partner of the Operating Partnership. The Class B OP Units receive distributions at the same rate paid to holders of the Company’s common stock and are allocated a share of the Operating Partnership and its subsidiaries’ net income or losses on a pro rata basis. The Company has evaluated the terms of the Operating Partnership Agreement and in accordance with ASC 480, determined that the Class B OP Units are properly recognized as permanent equity on the consolidated balance sheets.

43

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

As of September 30, 2021, noncontrolling interests were approximately 6.06% of total shares and 6.05% of weighted average shares outstanding (both measures assuming Class A-2 OP Units and Class B OP Units were converted to common stock). The changes in the carrying amount of noncontrolling interests consisted of the following for the three and nine months ended September 30, 2021 and 2020:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Beginning balance Class A-2 OP Units	$	12,749,653	$	14,450,000	$	13,219,354	$	—
Issuance of Class A-2 OP Units	—		—		—		14,450,000
Loss allocated to Class A-2 OP Units	(134,005)		(700,327)		(326,469)		(537,013)
Distributions to Class A-2 OP Units	(125,552)		(214,642)		(402,787)		(377,956)
Beginning balance Class B OP Units	88,055,573		93,750,000		91,103,305		93,750,000
Loss allocated to Class B OP Units	(869,670)		(144,326)		(2,118,734)		(144,326)
Distributions to Class B OP Units	(814,567)		(454,100)		(2,613,237)		(454,100)
Noncontrolling interests ending balance	$	98,861,432	$	106,686,605	$	98,861,432	$	106,686,605

10.          Related Party Arrangements

Prior to the Internalization Closing on August 31, 2020, the Former Advisor was the Company’s advisor and, as such, supervised and managed the Company’s day-to-day operations and selected the Company’s real property investments and real estate-related assets, subject to oversight by the Company’s board of directors. The Former Advisor also provided marketing, sales and client services on the Company’s behalf. The Former Advisor is owned by SRI, the Company’s former sponsor. Mr. Emery, the Company’s Chairman of the board of directors and Chief Executive Officer, owns a 48.6% interest in Steadfast Holdings, the largest owner of SRI. Ms. del Rio, the Company’s former Secretary and an affiliated director, owns a 6.3% interest in Steadfast Holdings. From 2014 to 2020, Ms. Neyland, the Company’s President, Chief Financial Officer and Treasurer, earned an annual 5% profits interest from Steadfast Holdings. Ms. Neyland’s profits interest was terminated in November 2020.

During the eight months ended August 31, 2020, all of our other officers and directors, other than our independent directors, were officers of our Former Advisor and officers, limited partners and/or members of our former sponsor and other affiliates of our Former Advisor.

Prior to the Internalization Closing, the Company and the Operating Partnership operated pursuant to the Advisory Agreement with the Former Advisor. Pursuant to the Advisory Agreement, the Company was obligated to pay the Former Advisor specified fees upon the provision of certain services, the investment of funds in real estate and real estate-related investments and the management of the Company’s investments and for other services (including, but not limited to, the disposition of investments). Subject to the limitations described below, the Company was also obligated to reimburse the Former Advisor and its affiliates for organization and offering costs incurred by the Former Advisor and its affiliates on behalf of the Company, as well as acquisition and origination expenses and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company.

44

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

Summarized below are the related party transactions incurred by the Company for the three and nine months ended September 30, 2021 and 2020, respectively, and any related amounts payable and (receivable) as of September 30, 2021 and December 31, 2020:

	Incurred (Received) For the				Incurred (Received) For the				Payable (Receivable) as of
	Three Months Ended Sep 30,				Nine Months Ended Sep 30,
	2021		2020		2021		2020		Sep 30, 2021		Dec 31, 2020
Consolidated Statements of Operations:
Expensed
Investment management fees (1)	$	—	$	5,648,468	$	—	$	19,537,998	$	—	$	—
Due diligence costs (2)	300		10,270		37,466		11,381		300		102,301
Loan coordination fees (1)	—		—		—		1,605,652		—		—
Disposition fees (3)	—		256,000		—		594,750		—		—
Disposition transaction costs (3)	—		—		—		5,144		—		—
Property management:
Fees (1)	4,158		1,618,611		12,708		5,484,468		1,269		5,585
Reimbursement of onsite personnel (4)	—		4,926,692		—		17,402,120		—		—
Reimbursement of other (1)	—		1,182,636		—		3,958,226		—		—
Reimbursement of property operations (4)	—		42,026		9,168		230,225		—		—
Reimbursement of property G&A (2)	—		30,480		—		114,696		—		—
Other operating expenses (2)	358,643		1,134,085		1,221,329		2,798,549		22,148		158,723
Reimbursement of personnel benefits and other   costs (5)	41,390		470,925		153,752		470,925		28,006		20,457
Insurance proceeds (6)	—		—		—		(150,000)		—		—
Property insurance (6)	—		9,214		—		2,449,166		—		—
Earned
Rental revenue (7)	—		(12,133)		—		(53,162)		—		—
Transition services agreement income (6)	(7,884)		(62,000)		(22,415)		(62,000)		(10,309)		(103,552)
SRI Property management agreement income (6)	(366,966)		(71,446)		(929,725)		(71,446)		(120,408)		(77,760)
Other reimbursement income under the SRI   property management agreements (6)	(134,247)		(38,487)		(345,779)		(38,487)		—		(21,980)
Reimbursement of onsite personnel income   under the SRI property management    agreements (6)	(1,065,967)		(218,166)		(3,241,507)		(218,166)		(116,338)		(173,927)
SRI construction management fee income (6)	(47,032)		—		(111,937)		—		(16,222)		—
Consolidated Balance Sheets:
Net assets acquired in internalization transaction (8)	—		123,236,646		—		123,236,646		—		—
Sublease security deposit (9)	—		85,000		—		85,000		(85,000)		(85,000)
Deferred financing costs (10)	—		—		—		49,050		—		—
Capitalized to Real Estate
Capitalized development services fee (11)	173,303		151,071		173,303		453,213		173,303		50,357
Capitalized investment management fees (11)	—		78,053		—		257,721		—		—
Capitalized development costs (11)	900		—		2,500		3,030		—		—
Acquisition expenses (12)	—		36,470		—		426,389		—		—
Acquisition fees (12)	—		—		—		17,717,639		—		—
Loan coordination fees (12)	—		—		—		8,812,071		—		—
Construction management:
Fees (13)	—		153,826		—		536,098		—		—
Reimbursement of labor costs (13)	—		70,238		—		236,477		—		—

45

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

	Incurred (Received) For the				Incurred (Received) For the				Payable (Receivable) as of
	Three Months Ended Sep 30,				Nine Months Ended Sep 30,
	2021		2020		2021		2020		Sep 30, 2021		Dec 31, 2020
Additional paid-in capital
Distributions to Class B OP Unit holders(14)	$	814,567	$	454,378	$	2,613,238	$	454,378	$	265,620	$	469,236
Issuance of Class B OP Units (15)	—		93,750,000		—		93,750,000		—		—
Redemption of convertible stock (15)	—		1,000		—		1,000		—		—
	$	(228,835)	$	232,943,857	$	(427,899)	$	300,088,751	$	142,369	$	344,440

__________________

1)Included in fees to affiliates in the accompanying consolidated statements of operations. Property management fees of $4,158 relate to compliance fees incurred under a compliance agreement with the Former Property Manager, as defined below, to follow certain tax compliance procedures with respect to the leasing of apartment homes to qualified residents.

2)Included in general and administrative expenses in the accompanying consolidated statements of operations. Due diligence costs of $300 represent acquisition expenses related to the Company’s real estate projects that did not come to fruition and which were incurred by an affiliate of SIP on behalf of the Company. Other operating expenses of $358,643 relate to sublease rental expenses of $280,186 and $78,457 of expenses related to information systems costs incurred by SIP on behalf of the Company.

3)Included in gain on sale of real estate, net in the accompanying consolidated statements of operations.

4)Included in operating, maintenance and management in the accompanying consolidated statements of operations.

5)Represents reimbursements of miscellaneous employee related costs to SIP for the period when benefits were administered by SIP. The employer benefit cost portion is included in general and administrative expenses in the accompanying consolidated statements of operations.

6)Included in other income in the accompanying consolidated statements of operations.

7)Included in rental income in the accompanying consolidated statements of operations.

8)In connection with the Internalization Transaction, the Company became self-managed and acquired the advisory,

asset management and property management business of the Former Advisor resulting in the recognition of net assets

assumed in the Internalization Transaction of $123,236,646, which consists of goodwill of $125,220,448, other assets

of $2,717,634 and accounts payable and accrued liabilities of $4,701,436, all of which are included in the

accompanying consolidated balance sheets.

9)Included in other assets in the accompanying consolidated balance sheets.

10)Included in notes payable, net in the accompanying consolidated balance sheets.

11)Included in real estate held for development in the accompanying consolidated balance sheets.

12)Included in total real estate, net in the accompanying consolidated balance sheets.

13)Included in building and improvements in the accompanying consolidated balance sheets.

14)Included in cumulative distributions and net losses in the accompanying consolidated balance sheets.

15)In connection with the Internalization Transaction, in exchange for acquiring the advisory, asset management and property management business of the Former Advisor and its affiliates, the Company paid its former sponsor, total consideration of $124,999,000 which consists of $31,249,000 in cash consideration and 6,155,613.92 of Class B OP Units valued at $15.23 per unit or $93,750,000. The Class B OP Units are included within noncontrolling interests in the accompanying consolidated balance sheets. In addition, the Company purchased all of the Class A convertible shares of the Company held by the Former Advisor for $1,000.

46

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

Investment Management Fee

Prior to the completion of the Mergers on March 6, 2020, the Company paid the Former Advisor a monthly investment management fee equal to one-twelfth of 1.0% of (1) the cost of real properties and real estate-related assets acquired directly by the Company or (2) the Company’s allocable cost of each investment in real property or real estate related asset acquired through a joint venture. The investment management fee is calculated including the amount actually paid or budgeted to fund acquisition fees, acquisition expenses, cost of development, construction or improvement and any debt attributable to such investments, or the Company’s proportionate share thereof in the case of investments made through joint ventures. Following the completion of the Mergers and until the Internalization Closing, the Company paid the Former Advisor a monthly investment management fee, which was calculated on the same basis as described above, and payable 50% in cash and 50% in shares of the Company’s common stock. Investment management fees paid in shares, included in fees to affiliates in the accompanying consolidated statements of operations were $0 for each of the three and nine months ended September 30, 2021, and $4,328,191 and $8,367,340 for the three and nine months ended September 30, 2020, respectively.

Following the Internalization Closing, investment management fees paid by the Company are intercompany transactions and are eliminated in consolidation.

Acquisition Fees and Expenses

Prior to the completion of the Mergers, the Company paid the Former Advisor an acquisition fee equal to 1.0% of the cost of investment, which includes the amount actually paid or budgeted to fund the acquisition, origination, development, construction or improvement (i.e. value-enhancement) of any real property or real estate-related asset acquired. In addition to acquisition fees, the Company reimbursed the Former Advisor for amounts directly incurred by the Former Advisor and amounts the Former Advisor paid to third parties in connection with the selection, evaluation, acquisition and development of a property or acquisition of real estate-related assets, whether or not the Company ultimately acquired the property or the real estate-related assets. Following the completion of the Mergers and until the Internalization Closing, the Company paid the Former Advisor an acquisition fee of 0.5%, which was calculated on the same basis as above. In connection with the Mergers, the Company paid the Former Advisor an acquisition fee of $16,281,487, which was capitalized to the acquired real estate and investment in unconsolidated joint venture in the accompanying consolidated balance sheets.

The Charter limits the Company’s ability to pay acquisition fees if the total of all acquisition fees and expenses relating to the purchase would exceed 4.5% of the contract purchase price. Under the Charter, a majority of the Company’s board of directors, including a majority of the independent directors, is required to approve any acquisition fees (or portion thereof) that would cause the total of all acquisition fees and expenses relating to an acquisition to exceed 4.5% of the contract purchase price.

Following the Internalization Closing, acquisition fees and expenses paid by the Company are intercompany transactions and are eliminated in consolidation.

Loan Coordination Fee

Prior to the completion of the Mergers, the Company paid the Former Advisor or its affiliate a loan coordination fee equal to 1.0% of the initial amount of new debt financed or outstanding debt assumed in connection with the acquisition, development, construction, improvement or origination of a property or a real estate-related asset. In addition, in connection with any debt financing or refinancing (in each case, other than identified at the time of the acquisition of a property or a real estate-related asset), the Company paid the Former Advisor or its affiliate a loan coordination fee equal to 0.75% of the amount of debt financed or refinanced. In some instances, the Company and the Former Advisor agreed to a loan coordination fee of $100,000 per loan refinanced.

Following the completion of the Mergers and until the Internalization Closing, the Company paid the Former Advisor or one of its affiliates, in cash, the loan coordination fee equal to 0.5% of (1) the initial amount of new debt financed or outstanding debt assumed in connection with the acquisition, development, construction, improvement or origination of any type of real estate asset or real estate-related asset acquired directly or (2) the Company’s allocable portion of the purchase price and therefore the related debt in connection with the acquisition or origination of any type of real estate asset or real estate-related asset acquired through a joint venture. In connection with the Mergers, the Company paid the Former Advisor a loan

47

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

coordination fee of $7,910,205, which was capitalized to the acquired real estate and investment in unconsolidated joint venture in the accompanying consolidated balance sheets.

As compensation for services rendered in connection with any financing or the refinancing of any debt (in each case, other than at the time of the acquisition of a property), the Company also paid the Former Advisor or one of its affiliates, in the form of shares equal to such amount, a loan coordination fee equal to 0.5% of the amount refinanced or the Company’s proportionate share of the amount refinanced in the case of investments made through a joint venture. No loan coordination fee was paid in shares to the Company’s Former Advisor during the three and nine months ended September 30, 2021. Loan coordination fees of $0 and $1,116,700 were paid in shares to the Company’s Former Advisor for each of the three and nine months ended September 30, 2020, respectively.

Following the Internalization Closing, loan coordination fees paid by the Company are intercompany transactions and are eliminated in consolidation.

Property Management Fees and Expenses

Prior to the Internalization Closing, the Company was party to property management agreements (each, as amended from time to time, a “Property Management Agreement”) with Steadfast Management Company, Inc., an affiliate of SRI (the “Former Property Manager”), in connection with the management of each of the Company’s properties. Pursuant to each Property Management Agreement, the Company paid the Former Property Manager a monthly management fee equal to a range from 2.5% to 3.5% of each property’s gross revenues (as defined in the respective Property Management Agreements) for each month, as determined by the Former Advisor and approved by a majority of the Company’s board of directors, including a majority of the independent directors. Each Property Management Agreement had an initial one-year term and continued thereafter on a month-to-month basis unless either party gave 60 days’ prior notice of its desire to terminate the Property Management Agreement, provided that the Company could terminate the Property Management Agreement at any time upon a determination of gross negligence, willful misconduct or bad acts of the Former Property Manager or its employees or upon an uncured breach of the Property Management Agreement upon 30 days’ prior written notice to the Former Property Manager.

In addition to the property management fee, the Property Management Agreements also specified certain other reimbursements payable to the Former Property Manager for benefit administration, information technology infrastructure, licenses, support and training services and capital expenditures supervision. The Company also reimbursed the Former Property Manager for the salaries and related benefits of on-site property management employees.

In connection with the Internalization Transaction, the Company terminated its existing property-level property management agreements with the Former Property Manager. Following the Internalization Closing, property management fees paid by the Company are intercompany transactions and are eliminated in consolidation.

Construction Management Fees and Expenses 

Prior to the Internalization Closing, the Company was party to construction management agreements (each, a “Construction Management Agreement”) with Pacific Coast Land & Construction, Inc., an affiliate of SRI (the “Former Construction Manager”), in connection with capital improvements and renovation or value-enhancement projects for certain properties the Company acquired. The construction management fee payable with respect to each property under the Construction Management Agreements ranged from 6.0% to 12.0% of the costs of the improvements for which the Construction Manager had planning and oversight authority. Generally, each Construction Management Agreement could have been terminated by either party with 30 days’ prior written notice to the other party. Construction management fees were capitalized to the respective real estate properties in the period in which they were incurred as such costs relate to capital improvements and renovations for apartment homes taken out of service while they undergo the planned renovation.

The Company also reimbursed the Former Construction Manager for the salaries and related benefits of certain of its employees for time spent working on capital improvements and renovations.

In connection with the Internalization Transaction, the Company terminated its existing Construction Management Agreements with the Former Construction Manager.

48

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

Development Services

The Company is a party to a development services agreement (the “Development Services Agreement”) with Steadfast Multifamily Development, Inc., an affiliate of SRI (the “Developer”), in connection with certain development projects, pursuant to which the Developer receives a development fee and reimbursement for certain expenses for overseeing the development project. The Company entered into a Development Services Agreement with the Developer in connection with the Garrison Station, the Arista at Broomfield and the Flatirons development projects that provide for a development fee equal to 4% of the hard and soft costs of the development project (as defined in the applicable Development Services Agreement) as specified in the Development Services Agreement. 75% of the development fee is paid in 14 monthly installments and the remaining 25% is paid upon delivery of a certificate of occupancy by the Developer to the Company.

On August 12, 2021, the Company and the Developer entered into an amendment to the Development Services Agreement in connection with certain development projects which (1) added an incentive fee of 1% (not to exceed $350,000) of the hard and soft costs, less the cost of the land, related acquisition costs and city permits and fees to the development services fee at Garrison Station and (2) clarified final development fees at the Arista at Broomfield and Flatirons development projects are based on final actual costs.

Property Insurance

Prior to the Internalization Closing, the Company deposited amounts with an affiliate of SRI, the Company’s former sponsor, to fund a prepaid insurance deductible account to cover the cost of required insurance deductibles across all properties of the Company and other affiliated entities of the Company’s former sponsor. Upon filing a major claim, proceeds from the insurance deductible account could be used by the Company or another affiliate of SRI. In addition, the Company deposited amounts with an affiliate of the Company’s former sponsor to cover the cost of property and property related insurance across certain properties of the Company. As a result of the Internalization Transaction, the Company is no longer party to the insurance deductible arrangement with any affiliates of the Former Sponsor.

Other Operating Expense Reimbursement

In addition to the various fees paid to the Former Advisor, the Company was obligated to pay directly or reimburse all expenses incurred by the Former Advisor in providing services to the Company, including the Company’s allocable share of the Former Advisor’s overhead, such as rent, employee costs, utilities and information technology costs. The Company was not to reimburse the Former Advisor for employee costs in connection with services for which the Former Advisor or its affiliates received acquisition fees or disposition fees or for the salaries the Former Advisor paid to the Company’s executive officers.

The Charter limits the Company’s total operating expenses during any four fiscal quarters to the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income for the same period (the “2%/25% Limitation”). The Company was to reimburse the Former Advisor, at the end of each fiscal quarter, for operating expenses incurred by the Former Advisor; provided, however, that the Company did not reimburse the Former Advisor at the end of any fiscal quarter for operating expenses that exceed the 2%/25% Limitation unless the independent directors determined that such excess expenses were justified based on unusual and non-recurring factors. The Former Advisor was obligated to reimburse the Company for the amount by which the Company’s operating expenses for the preceding four fiscal quarters then ended exceeded the 2%/25% Limitation, unless approved by the independent directors. For purposes of determining the 2%/25% Limitation amount, “average invested assets” means the average monthly book value of the Company’s assets invested directly or indirectly in equity interests and loans secured by real estate during the 12-month period before deducting depreciation, bad debts reserves or other non-cash reserves. “Total operating expenses” means all expenses paid or incurred by the Company that are in any way related to the Company’s operation, including the Company’s allocable share of the Former Advisor’s overhead, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, listing and registration of shares of the Company’s common stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of the Company’s assets; (f) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that the Company does not close) and investment management fees; (g) real estate commissions on the resale of

49

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

investments; and (h) other expenses connected with the acquisition, disposition, management and ownership of investments (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property).

As of September 30, 2021, the Company’s total operating expenses, as defined above, did not exceed the 2%/25% Limitation.

Disposition Fee

Prior to the completion of the Mergers, if the Former Advisor or its affiliates provided a substantial amount of services in connection with the sale of a property or real estate-related asset as determined by a majority of the Company’s independent directors, the Company paid the Former Advisor or its affiliates a fee equivalent to one-half of the brokerage commissions paid, but in no event to exceed 1.0% of the sales price of each property or real estate-related asset sold. Following the completion of the Mergers and until the Internalization Closing, the disposition fee payable to the Former Advisor was one-half of the brokerage commissions paid, but in no event to exceed 0.5% of the sales price of each property or real estate-related asset sold.

To the extent the disposition fee was paid upon the sale of any assets other than real property, it was included as an operating expense for purposes of the 2%/25% Limitation.

Following the Internalization Closing, disposition fees paid by the Company are intercompany transactions and are eliminated in consolidation.

Class A Convertible Stock

In connection with the Mergers, the Company and the Former Advisor exchanged the then outstanding Convertible Stock for the new Class A Convertible Stock. The Class A Convertible Stock would convert into shares of the Company’s common stock if (1) the Company had made total Class A Distributions equal to the original issue price of the Common Equity, plus an aggregate 6.0% cumulative, non-compounded, annual return on the original issue price of those shares, (2) the Company listed its common stock for trading on a national securities exchange or entered into a merger whereby holders of the Company’s common stock received listed securities of another issuer or (3) the Company’s Advisory Agreement was terminated or not renewed (other than for “cause” as defined in the Advisory Agreement). Upon any of these Triggering Events, each share of Class A Convertible Stock would have been converted into a number of shares of the Company’s common stock equal to 1/1000 of the quotient of (A) 15% of the amount, if any, by which (i) the Class A Enterprise Value plus the aggregate value of the Class A Distributions paid to date on the Common Equity exceeds (ii) the aggregate purchase price paid by stockholders for the Common Equity plus an aggregated 6.0% cumulative, non-compounded, annual return on the original issue price of the Common Equity as of the date of the Triggering Event, divided by (B) the Class A Enterprise Value divided by the number of the Company’s outstanding common shares on an as-converted basis as of the date of Triggering Event. In connection with the Internalization Transaction, the Company repurchased the Class A Convertible Stock for $1,000. See Note 8 (Stockholders’ Equity) for details.

Ancillary Internalization Transaction Agreements

Transition Services Agreement

As a condition to Internalization Closing, on August 31, 2020, the Company and SIP entered into a Transition Services Agreement (the “Transition Services Agreement”), pursuant to which, commencing on August 31, 2020 until March 31, 2021, which was subsequently extended through December 16, 2021, unless earlier terminated pursuant to the Transition Services Agreement, SIP will continue to provide certain operational and administrative support at cost plus 15% to the Company, which may include support relating to, without limitation, shared legal, and tax support as set forth in the Transition Services Agreement. Similarly, the Company agreed to provide certain services to SIP and its affiliates at cost plus 15%, which may include acquisition, disposition and financing support, legal support, shared information technology and human resources.

SRI Property Management Agreements

In connection with the Internalization Transaction, the Company terminated its existing property-level property management agreements with the Former Property Manager. On August 31, 2020, SRS, entered into the SRI Property Management Agreements with an affiliate of SRI to provide property management services in connection with certain properties owned by

50

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

SIP or its affiliates (each a “Property Owner” and collectively, the “Property Owners”). Pursuant to each SRI Property Management Agreement, SRS received a monthly management fee equal to 2.0% of each property’s gross collections for such month (“Gross Collections”). On April 23, 2021, SRS entered into amendments to the SRI Property Management Agreements with affiliates of SRI to (1) provide that SRS is responsible for providing accounting services for the properties owned by the Property Owners and (2) increase the property management fee from 2.0% to 3.0% of Gross Collections. Each SRI Property Management Agreement has an initial one-year term and will continue thereafter on a month-to-month basis unless the Property Owner terminates the SRI Property Management Agreement with 60 days’ prior written notice or upon the determination of gross negligence, willful misconduct or bad acts of SRS or its employees with 30 days’ prior written notice to SRS. After the first one-year term, either party may terminate the SRI Property Management Agreement in the event of a material breach that remains uncured for a period of 30 days after written notification of such breach. As of September 30, 2021 and December 31, 2020, the Company recognized the SRI Property Management Agreements asset, net of $0 and $543,332 within other assets on the accompanying consolidate balance sheets. The SRI Property Management Agreement asset was fully amortized as of September 30, 2021.

In addition to the property management fee earned by SRS, the SRI Property Management Agreements also specify certain other reimbursements payable to SRS for benefit administration, information technology infrastructure, licenses, support and training services. SRS is also reimbursed for the salaries and related benefits of on-site property management employees at certain properties owned by SIP or its affiliates.

On October 1, 2021, Steadfast Companies, on behalf of each Property Owner, provided written notice to terminate the SRI Property Management Agreements no later than December 30, 2021.

SRI Construction Management Agreements

On September 1, 2020, SRS, entered into the SRI construction management agreements with an affiliate of SRI (the “SRI Construction Management Agreements”) to provide construction management services in connection with certain properties owned by SIP or its affiliates. Pursuant to each SRI Construction Management Agreement, SRS will receive a construction management fee equal to 7.5% of the total project costs. In addition, SRS will be reimbursed for all agreed upon costs associated with staffing. Each SRI Construction Management Agreement may be terminated by either party with the delivery of a 30-day written notice to the other party.

Registration Rights Agreement

As a condition to the Internalization Closing, on August 31, 2020, the Company, the Operating Partnership and SRI entered into a registration rights agreement (the “Registration Rights Agreement”). Upon the terms and conditions in the Operating Partnership Agreement, the Class B OP Units are redeemable for shares of the Company’s common stock. Pursuant to the Contribution & Purchase Agreement, SRI (or any successor holder) may not transfer the Class B OP Units until August 31, 2022 (the “Lock-Up Expiration”). Beginning on the fifth anniversary of the Internalization Closing, SRI (or any successor holder) may request the Company to register for resale under the Securities Act of 1933, as amended, shares of the Company’s common stock issued or issuable to such holder. The Company agreed to use commercially reasonable efforts to file a registration statement on Form S-3 within 30 days of such request and within 60 days of such request in the case of a registration statement on Form S-11 or such other appropriate form. The Company has agreed to cause such registration statement to become effective as soon as reasonably practicable thereafter. The Registration Rights Agreement also grants SRI (or any successor holder) certain “piggyback” registration rights after the Lock-Up Expiration.

Non-Competition Agreement

As a condition to the Internalization Closing, on August 31, 2020, the Company entered into a Non-Competition Agreement (the “Non-Competition Agreement”) with Rodney F. Emery, the largest indirect owner of SRI and the Company’s Chairman of the board of directors and Chief Executive Officer, providing that from the date of the Internalization Closing until the date that is 30 months from August 31, 2020 (the “Restricted Period”), in general, Mr. Emery shall not, directly or indirectly, (i) solicit certain employees or service providers of the Company, subject to certain exceptions, or (ii) solicit certain customers, vendors, suppliers, agents, partners or other similar parties with the purpose of causing such parties or their affiliates to cease doing business with the Company or otherwise interfere with the Company’s business relationships with third parties.

51

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

During the Restricted Period, Mr. Emery, subject to limited exceptions provided in the Non-Competition Agreement, in general (i) shall not, and shall cause his respective affiliates not to, engage in the business of managing, operating, directing and supervising the operations and administration of multifamily assets of the class and type owned by the Company as of August 31, 2020 (the “Assets”) (such business activities described in this subsection (i) being the “Restricted Business”), (ii) shall, consistent with past practice, present each opportunity and investment fully and accurately to the Company’s board of directors prior to his or his affiliates acquisition of any Assets and only make such investment on behalf of himself or his affiliates if the Company’s board of directors declines the opportunity; and (iii) shall not engage with or otherwise acquire an interest in, directly or indirectly, any business or enterprise that primarily engage in the Restricted Business in an area within a two-mile radius of each Asset owned or managed by the Company as of the Internalization Closing.

Further, each of SRS, the Company and the Operating Partnership agreed that, in general, during the Restricted Period, each will not solicit any employee of SRI or its affiliates or attempt to assist any such employee to enter into any other consulting or business relationship with SRS, the Company and the Operating Partnership, subject to certain limitations.

Sub-Lease

In connection with the Internalization Transaction, SRS, an indirect subsidiary of the Company, entered into a sub-lease agreement (the “Sub-Lease”) with the Former Property Manager on September 1, 2020, for its headquarters in Irvine, California. The Sub-Lease also includes certain furniture and fixtures, that will become the property of SRS at the end of the lease term. As of September 30, 2021, the Sub-Lease has a remaining lease term of eight months with no option to renew. The monthly sub-lease expense is recognized on a straight line basis over the remaining term of the the Sub-Lease. As of September 30, 2021 and December 31, 2020, as it pertains to the Sub-Lease of the office space, the Company recorded an operating lease ROU asset, net of $637,194 and $1,339,591 and an operating lease liability, net of $648,057 and $1,346,835, respectively. As of September 30, 2021 and December 31, 2020, as it pertains to the Sub-Lease of the furniture and fixtures, the Company recognized a finance lease ROU asset, net of $7,665 and $16,845 and a finance lease liability, net of $8,098 and $17,020, respectively. For the three and nine months ended September 30, 2021, the Sub-Lease expense related to the office space was $241,549 and $724,647, respectively, and for the furniture and fixtures $3,125 and $9,438, respectively. For the three and nine months ended September 30, 2020, the Sub-Lease expense related to the office space and the furniture and fixtures was $80,517 and $47, respectively. See Note 15 (Leases) for further details about the Company’s leases.

Certain Conflict Resolution Procedures

Every transaction that the Company enters into with its affiliates is subject to an inherent conflict of interest. The board of directors may encounter conflicts of interest in enforcing the Company’s rights against any affiliate in the event of a default by or disagreement with an affiliate or in invoking powers, rights or options pursuant to any agreement between the Company and the Company’s affiliates. As a general rule, any related party transaction must be approved by a majority of the directors (including a majority of independent directors) not otherwise interested in the transaction. In determining whether to approve or authorize a particular related party transaction, these persons will consider whether the transaction between the Company and the related party is fair and reasonable to the Company and has terms and conditions no less favorable to the Company than those available from unaffiliated third parties.

11.          Incentive Award Plan and Independent Director Compensation

The Company’s Incentive Award Plan provides for the grant of equity awards to its employees, directors and consultants and those of the Company’s affiliates. The Incentive Award Plan authorizes the grant of non-qualified and incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, dividend equivalents and other stock-based awards or cash-based awards.

Under the independent directors’ compensation plan and subject to such plan’s conditions and restrictions, each of the Company’s independent directors received 3,333 shares of restricted common stock once the Company raised $2,000,000 in gross offering proceeds in the Public Offering. Each subsequent independent director that joins the Company’s board of directors receives 3,333 shares of restricted common stock upon election to the Company’s board of directors. In addition, on

52

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

the date following an independent director’s re-election to the Company’s board of directors, he or she receives 1,666 shares of restricted common stock.

On March 6, 2020, the Company granted 3,333 shares of restricted common stock pursuant to the independent directors’ compensation plan to each of its two newly elected independent directors. One-fourth of the shares of restricted common stock generally vest and become non-forfeitable upon issuance and the remaining portion will vest in 3 equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted stock will become fully vested and become non-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability or (2) a change in control of the Company. These restricted stock awards entitle the holders to participate in distributions even if the shares are not fully vested.

On September 15, 2020, the Company’s board of directors approved an amendment to the independent directors’ compensation plan, which is described in more detail below. On December 3, 2020, the Company granted 4,924 shares of restricted common stock to each of its five independent directors pursuant to the Incentive Award Plan at a fair value of $15.23 per share in connection with their re-election to the board of directors at the Company’s annual meeting of stockholders. These shares generally vest in 2 equal annual installments beginning on the first anniversary of the date of grant and ending on the second anniversary of the date of grant; provided, however, that the restricted stock will become fully vested on the earlier to occur of: (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company.

The Company recorded a stock-based compensation expense of $85,579 and $211,915 for the three and nine months ended September 30, 2021, respectively, and $18,309 and $81,692 for the three and nine months ended September 30, 2020, respectively, related to the independent directors’ restricted common stock.

In addition to the stock awards, prior to September 15, 2020, the Company paid each of its independent directors an annual retainer of $55,000, prorated for any partial term (the audit committee chairperson received an additional $10,000 annual retainer, prorated for any partial term). The independent directors were also paid for attending meetings as follows: (i) $2,500 for each board meeting attended in person, (ii) $1,500 for each committee meeting attended in person in such director’s capacity as a committee member, (iii) $1,000 for each board meeting attended via teleconference (not to exceed $4,000 for any one set of meetings attended on any given day). In connection with meetings of the special committee, the independent directors received $1,000 for each teleconference meeting and $1,500 for each in-person meeting. All directors also receive reimbursement of reasonable out of pocket expenses incurred in connection with attendance at meetings of the board of directors.

Beginning September 15, 2020, the effective date of the amendment to the independent directors’ compensation plan, the Company pays each of its independent directors an annual retainer of $75,000 in cash and $75,000 in shares of restricted common stock, prorated for any partial term (the audit committee chairperson receives an additional $15,000 annual retainer, the compensation committee chairperson receives an additional $10,000 annual retainer, the investment committee chairperson receives an additional $10,000 annual retainer, the nominating and corporate governance committee chairperson receives an additional $10,000 annual retainer, and the lead independent director receives an additional $25,000 annual retainer, prorated for any partial term). The independent directors are also paid $2,000 for each in-person or telephonic board or committee meeting attended (not to exceed $4,000 for any one set of meetings attended on any given day). Further, directors may elect to receive any cash fees in fully-vested shares of common stock of the Company.

On July 16, 2021, the Company received a derivative demand letter addressed to the Company’s board of directors, purportedly sent on behalf of two stockholders, relating to the Internalization Transaction. The letter demanded that the Company’s board of directors appoint a committee to investigate the Internalization Transaction and, among other things, determine whether there exists any basis for the Company to pursue claims relating to that transaction, including for recovery of payments made in the transaction. In September 2021, the Company established the Demand Review Committee, comprised of two independent directors, to pursue the purported claims mentioned above. The Company agreed to pay each member of the Demand Review Committee a one-time retainer in the amount of $50,000, which is included in general and administrative expenses in the accompanying consolidated statements of operations.

Director compensation is an operating expense of the Company that, prior to the Internalization Closing, was subject to the operating expense reimbursement obligation of the Former Advisor discussed in Note 10 (Related Party Arrangements). The

53

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

Company recorded an operating expense of $321,250 and $807,750 for the three and nine months ended September 30, 2021, respectively, and $228,750 and $765,750 for the three and nine months ended September 30, 2020, respectively, related to the independent directors’ annual cash retainer, attending board and committee meetings and a one-time retainer for the two independent directors serving on the Demand Review Committee, which is included in general and administrative expenses in the accompanying consolidated statements of operations. Upon signing the merger agreements, merger related acquisition expenses including $0 for each of the three and nine months ended September 30, 2021, and $0 and $3,000 for the three and nine months ended September 30, 2020, respectively, related to attending committee meetings, met the definition of capitalized expenses and were therefore capitalized in the accompanying consolidated balance sheets. As of September 30, 2021 and December 31, 2020, $321,250 and $209,250, respectively, related to the independent directors’ annual retainer paid in cash and board and committee meetings attendance is included in accounts payable and accrued liabilities in the consolidated balance sheets.

12.          Commitments and Contingencies

Economic Dependency 

Prior to the Internalization Closing, the Company was dependent on the Former Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase and disposition of real estate and real estate-related investments; management of the daily operations of the Company’s real estate and real estate-related investment portfolio; and other general and administrative responsibilities. As a result of the Internalization Transaction, the Company became self-managed and acquired components of the advisory, asset management and property management operations of the Former Advisor by hiring the Transferring Employees (as defined in the Contribution & Purchase Agreement), who comprise the workforce necessary for the management and day-to-day real estate and accounting operations of the Company and the Operating Partnership. The Company’s own employees now provide the services that the Former Advisor provided, as described above.

As of September 30, 2021, the Company is developing a multifamily property known as Garrison Station consisting of nine residential buildings with 176 apartment homes with remaining commitments to fund of approximately $1,800,000 (inclusive of applicable construction loan obligations) and an estimated completion date in the fourth quarter of 2021. As of September 30, 2021, 160 of the 176 apartment homes were placed in service.

Concentration of Credit Risk

The geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the Atlanta, Georgia and Dallas/Fort Worth, Texas apartment markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition from other apartment communities, decrease in demand for apartments or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its residents and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.

Legal Matters

From time to time, the Company is subject, or party, to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is reasonably possible to have a material adverse effect on the Company’s results of operations or financial condition nor is the Company aware of any such legal proceedings contemplated by government agencies.

54

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

13.          Earnings Per Share

The following table presents a reconciliation of net loss attributable to common stockholders and shares used in calculating basic and diluted loss per share, or EPS, for the three and nine months ended September 30, 2021 and 2020:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net loss attributable to common stockholders	$	(10,642,474)	$	(36,913,412)	$	(37,711,420)	$	(99,819,162)
Less:
Distributions related to unvested restricted     stockholders(1)	(43,359)		(16,066)		(124,447)		(20,840)
Numerator for loss per common share — basic	$	(10,685,833)	$	(36,929,478)	$	(37,835,867)	$	(99,840,002)
Weighted average common shares outstanding —     basic and diluted(2)	109,901,506		109,663,583		109,898,905		95,714,116
Loss per common share — basic and diluted	$	(0.10)	$	(0.34)	$	(0.34)	$	(1.04)

_____________________

(1)    Unvested restricted stockholders that have a right to participate in dividends declared on common stock are accounted for as participating securities and reflected in the calculation of basic and diluted EPS under the two-class method.

(2)    The Company excluded all unvested restricted common shares outstanding issued to the Company’s independent directors and certain key employees, the Class A-2 OP Units and the Class B OP Units from the calculation of diluted loss per common share as the effect would have been antidilutive.

14.          Derivative Financial Instruments

The Company uses interest rate derivatives with the objective of managing exposure to interest rate movements thereby minimizing the effect of interest rate changes and the effect they could have on future cash flows. Interest rate cap agreements are used to accomplish this objective. The following table provides the terms of the Company’s interest rate derivative instruments that were in effect at September 30, 2021 and December 31, 2020:

September 30, 2021
Type	Maturity Date Range	Based on	Number of Instruments	Notional Amount		Variable Rate	Weighted Average Rate Cap	Fair Value
Interest Rate Cap	9/1/2022 - 8/1/2024	One-Month LIBOR	5	$	269,300,350	0.08%	4.07%	$	27,853

December 31, 2020
Type	Maturity Date Range	Based on	Number of Instruments	Notional Amount		Variable Rate	Weighted Average Rate Cap	Fair Value
Interest Rate Cap	1/1/2021 - 7/1/2023	One-Month LIBOR	9	$	407,935,350	0.14%	3.41%	$	7,852

The interest rate cap agreements are not designated as effective cash flow hedges. Accordingly, the Company records any changes in the fair value of the interest rate cap agreements as interest expense. The change in the fair value of the interest rate cap agreements for the three and nine months ended September 30, 2021, resulted in an unrealized loss of $40,902 and $39,699, respectively, and for the three and nine months ended September 30, 2020, resulted in an unrealized loss of $29,093 and $56,287, respectively, which is included in interest expense in the accompanying consolidated statements of operations. During the three and nine months ended September 30, 2021 and 2020, the Company acquired interest rate cap agreements of $47,500 and $59,700 and $20,000 and $67,000, respectively, and did not receive settlement proceeds. The Company also acquired interest rate cap agreements of $6,110 during the nine months ended September 30, 2020, in connection with the Mergers. The

fair value of the interest rate cap agreements of $27,853 and $7,852 as of September 30, 2021 and December 31, 2020, respectively, is included in other assets on the accompanying consolidated balance sheets.

15.          Leases

Lessee

The Company leases office space, a parking garage, furniture, fixtures and office equipment. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately from each other. A limited number of leases include options to renew or options to extend the lease term. The exercise of lease renewal options is at the Company’s sole discretion. The depreciable life of lease ROU assets are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The components of lease costs were as follows:

		Three Months Ended September 30,
Lease Cost	Classification	2021		2020
Operating Lease cost(1)	Operating, maintenance and management	$	10,233	$	11,340
Operating Lease cost(1)	General and administrative	241,549		80,516
Finance lease cost
Amortization of leased assets	Depreciation and amortization	3,060		1,020
Accretion of lease liabilities	Interest expense	65		47
Total lease cost		$	254,907	$	92,923
		Nine Months Ended September 30,
Lease Cost	Classification	2021		2020
Operating Lease cost(1)	Operating, maintenance and management	$	26,746	$	27,867
Operating Lease cost(1)	General and administrative	724,647		80,516
Finance lease cost
Amortization of leased assets	Depreciation and amortization	9,180		1,020
Accretion of lease liabilities	Interest expense	258		47
Total lease cost		$	760,831	$	109,450

_____________________

(1)    Includes short-term leases and variable lease costs, which are immaterial.

Other information related to leases was as follows:

Lease Term and Discount Rate	September 30, 2021		December 31, 2020
Weighted average remaining lease term (in years)
Operating leases	3.6		3.4
Finance leases	0.7		1.4
Weighted average discount rate
Operating Leases	3.4	%	3.2	%
Finance Leases	2.9	%	2.9	%

55

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

	Nine Months Ended September 30,
Supplemental Disclosure of Cash Flows Information	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows related to operating leases	$	862,107	$	213,698
Operating cash outflows related to finance leases	$	9,180	$	1,020
Financing cash outflows related to finance leases	$	—	$	—

Operating Leases

The following table sets forth as of September 30, 2021, the undiscounted cash flows of the Company’s scheduled lease obligations for future minimum payments for the three months ending December 31, 2021 and for each of the next four years ending December 31, and thereafter, as well as the reconciliation of those cash flows to operating lease liabilities on the Company’s accompanying consolidated balance sheets:

Year	Amount
Remainder of 2021	$	297,071
2022	611,239
2023	188,990
2024	122,026
2025	94,506
Thereafter	266,910
Total undiscounted operating lease payments	$	1,580,742
Less: interest	(263,991)
Present value of operating lease liabilities	$	1,316,751

Finance Leases

The following table sets forth as of September 30, 2021, the undiscounted cash flows of the Company’s scheduled obligations for future minimum payments for the three months ending December 31, 2021 and for each of the next four years ending December 31 and thereafter, as well as a reconciliation of those cash flows to finance lease liabilities:

Year	Amount
Remainder of 2021	$	3,060
2022	5,100
2023	—
2024	—
2025	—
Thereafter	—
Total undiscounted finance lease payments	$	8,160
Less: interest	(62)
Present value of finance lease liabilities	$	8,098

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(unaudited)

16.          Subsequent Events

Distributions Paid

On October 1, 2021, the Company paid distributions of $5,061,360, which related to distributions declared for each day in the period from September 1, 2021 through September 30, 2021. All such distributions were paid in cash.

Distributions Declared

On October 26, 2021, the Company’s board of directors approved and authorized a daily distribution to stockholders of record as of the close of business on each day of the period commencing on November 1, 2021 and ending on November 30, 2021. The distributions will be equal to $0.001438 per share of the Company’s common stock per day. The distributions for each record date in November 2021 will be paid in December 2021. The distributions will be payable to stockholders from legally available funds therefor.

Complaints filed in Central District of California and Southern District of New York

On October 18, 2021, and October 21, 2021, the Company and each member of the board of directors was named as a defendant in two separate complaints filed in the United States District Court Central District of California Southern Division and in the United States District Court Southern District of New York (the “Complaints”), respectively. Each Complaint, filed on behalf of someone claiming to be a stockholder of the Company, accuses the defendants of certain violations of Section 14(a) of the Securities Exchange Act of 1934 in connection with the proxy statement mailed to the Company’s stockholders soliciting proxies for the IRT Merger. The Company disagrees with the allegations and intends to vigorously defend itself and its directors.

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PART I — FINANCIAL INFORMATION (continued)

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

The following discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements of Steadfast Apartment REIT, Inc. and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Steadfast Apartment REIT, Inc., a Maryland corporation.

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q (this “Quarterly Report”) that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. One factor that could have a material adverse effect on our operations and future prospects is the adverse effect of COVID-19 and its variants on the financial condition, results of operations, cash flows and performance of us and our tenants, the real estate market and the global economy and financial markets. The extent to which COVID-19 impacts us and our residents will depend on future developments, including the outbreak of new strains of the virus and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, you should interpret many of the risks identified in this report, as well as the risks set forth below, as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic. Additional factors that could have a material adverse effect on our operations and future prospects include, but are not limited to:

•the fact that we have had a net loss for each quarterly and annual period since inception; 

•changes in economic conditions generally and the real estate and debt markets specifically; 

•our ability to secure resident leases for our multifamily properties at favorable rental rates; 

•risks inherent in the real estate business, including resident defaults, potential liability relating to environmental matters and the lack of liquidity of real estate investments; 

•our pending merger with IRT;

•our ability to retain our key employees;

•our ability to generate sufficient cash flows to pay distributions to our stockholders;

•legislative or regulatory changes (including changes to the laws governing the taxation of real estate investment trusts, or REITs); 

•the impact of severe weather events;

•the availability of capital; 

•changes in interest rates; and

•changes to generally accepted accounting principles, or GAAP.

Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements included in this Quarterly Report. All forward-looking statements are made as of the date of this Quarterly Report and the risk that actual results will differ materially from the expectations expressed in this Quarterly Report will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this Quarterly Report,

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PART I — FINANCIAL INFORMATION (continued)

whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this Quarterly Report, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Quarterly Report will be achieved.

All forward looking statements included herein should be read in connection with the risks identified in the “Risk Factors” section of this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission, or the SEC, on March 12, 2021.

Overview

We were formed on August 22, 2013, as a Maryland corporation that elected to be taxed as, and qualifies as, a REIT. As of September 30, 2021, we owned and managed a diverse portfolio of 70 multifamily properties comprised of 22,001 apartment homes and three parcels of land held for the development of apartment homes. We may acquire additional multifamily properties or pursue multifamily development projects in the future.

Agreement and Plan of Merger

On July 26, 2021, we and Steadfast Apartment REIT Operating Partnership, L.P., our subsidiary operating partnership, or the Operating Partnership, entered into an Agreement and Plan of Merger, or the IRT Merger Agreement, with Independence Realty Trust, Inc., or IRT, IRT’s operating partnership, Independence Realty Operating Partnership, LP, or IRT OP, and IRSTAR Sub, LLC, a wholly-owned subsidiary of IRT, or IRT Merger Sub.

On the terms, and subject to the conditions of, the IRT Merger Agreement, we will merge with and into IRT Merger Sub, which is referred to herein as the “Company Merger”, with IRT Merger Sub surviving the Company Merger as a wholly-owned subsidiary of IRT; and immediately thereafter, the Operating Partnership will merge with and into IRT OP, or the Partnership Merger, and, together with the Company Merger, the “IRT Mergers”, with IRT OP surviving the Partnership Merger.

In the Company Merger, each outstanding share of our common stock, par value $0.01 per share, will be converted automatically into the right to receive 0.905, or the Exchange Ratio, of a newly issued share of IRT common stock, par value $0.01 per share, or the IRT common stock, with cash paid in lieu of fractional shares.

In the Partnership Merger, each outstanding unit of limited partnership of the Operating Partnership will be converted into the right to receive the Exchange Ratio of a newly issued common unit of limited partnership of IRT OP, or the IRT common units. Under the agreement of limited partnership of IRT OP, IRT common unitholders may generally tender their IRT common units, in whole or in part, to IRT OP for redemption for a cash amount based on the then-market price of an equivalent number of shares of IRT common stock, and IRT may thereupon elect, at its option, to satisfy the redemption by issuing one share of IRT common stock for each IRT common unit tendered for redemption.

Pursuant to the IRT Mergers, our stockholders will receive, in aggregate, in exchange for their shares of common stock, approximately, 99.7 million shares of IRT common stock and limited partners in our Operating Partnership will receive, in aggregate, in exchange for their operating partnership units, approximately 6.4 million IRT OP common units.

Consummation of the IRT Mergers is subject to customary closing conditions, including, among others, receipt of IRT stockholder approval and approval of our stockholders, and is expected to occur in the fourth quarter of 2021. For more information on the Mergers, see our Definitive Proxy Statement filed with the SEC on September 29, 2021.

In connection with the approval of the IRT Mergers, on July 26, 2021, we announced that our board of directors, including all of our independent directors, voted to terminate our distribution reinvestment plan and the share repurchase plan, each termination effective as of the effective time of the Company Merger. Our board of directors, including all of our independent directors, also voted to suspend (1) the distribution reinvestment plan, effective as of the 10th day after notice is provided to stockholders and (2) indefinitely suspend the share repurchase plan, effective as of 30th day after notice is provided to stockholders.

As a result of the suspension of the distribution reinvestment plan, any distributions paid after the distribution payment date in August 2021, will be paid to our stockholders in cash. We can provide stockholders with assistance on directing cash distribution payments and answering questions. The suspension of the distribution reinvestment plan will not affect the payment of distributions to stockholders who previously received their distributions in cash. In addition, as a result of the suspension of the share repurchase plan, we will not process or accept any requests for redemption received after July 26, 2021.

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PART I — FINANCIAL INFORMATION (continued)

COVID-19 Impact

We are carefully monitoring the ongoing COVID-19 pandemic and its impact on our business. During the quarter ended June 30, 2020, we instituted payment plans for our residents that were experiencing hardship due to COVID-19, which we refer to as the “COVID-19 Payment Plan.” Pursuant to the COVID-19 Payment Plan, we allowed qualifying residents to defer their rent, which is collected by us in monthly installment payments over the duration of the current lease or renewal term (which may not exceed 12 months). Additionally, for the months of May and June 2020, we provided certain qualifying residents with a one-time concession to incentivize their performance under the payment plan. If the qualifying resident failed to make payments pursuant to the COVID-19 Payment Plan, the concession was immediately terminated, and the qualifying resident was required to immediately repay the amount of the concession. Due to reduced demand, we did not offer residents any other payment plans during the remaining months of 2020. In the aggregate, approximately $2,053,821 in rent was subject to the COVID-19 Payment Plan, with $9,945 still due as of September 30, 2021.

In January 2021, we began offering an extension to the COVID-19 Payment Plan, or the Extension Plan, that allows eligible residents to defer their rent, which is collected by us in monthly installment payments over the lesser of the duration of the current lease term or a maximum of three months (with the exception of certain states that allow a maximum of six months deferral). Under the Extension Plan, no concessions are offered for residents with a payment plan duration of two months or less and residents who opted for the COVID-19 Payment Plan are not eligible to participate in the Extension Plan unless they paid off the amounts due under the COVID-19 Payment Plan. As of October 13, 2021, the number of qualifying residents who opted for the Extension Plan were 55 and approximately $37,000 in rent was subject to the Extension Plan.

During the quarter ended September 30, 2020, we initiated a debt forgiveness program for certain of our residents that were experiencing hardship due to COVID-19 and who were in default on their lease payments, which we refer to as the “Debt Forgiveness Program.” Pursuant to the Debt Forgiveness Program, we offered qualifying residents an opportunity to terminate the lease without being liable for any unpaid rent and penalties. We determined that accounts receivable of $2,610,927 related to the Debt Forgiveness Program are not probable of collection and therefore included these accounts in our reserve. In the aggregate, $298,576 of rent was written off as of September 30, 2021. As of September 30, 2021, approximately 55 of 455 residents that qualified for the Debt Forgiveness Program, vacated their apartment homes, terminating their lease resulting in the forgiveness and write-off of their debt. We may in the future continue to offer various types of payment plans or rent relief depending on the ongoing impact of the COVID-19 pandemic.

During the nine months ended September 30, 2021, we collected an average of 96% in rent due pursuant to our leases. We collected 94% in rent due pursuant to our leases through October 25, 2021. We have reserved approximately $3,863,876 of accounts receivable which we consider not probable for collection. Although the COVID-19 pandemic has not materially impacted our rent collections, the future impact of COVID-19 is still unknown. We are currently working with residents at our communities to obtain rental relief assistance pursuant to the Emergency Rental Assistance Program (“ERA”) adopted by the U.S. Department of Treasury. During the nine months ended September 30, 2021, 1,119 residents applied for the ERA, of which 1,057 residents received rental assistance in the aggregate amount of approximately $3,700,000.

Winter Storm

In February 2021, certain regions of the United States experienced winter storms and extreme cold temperatures, including in the states where we own and operate multifamily properties. The storms and the extreme cold temperatures resulted in power outages and freezing water pipes which negatively impacted some of our properties. Our properties are fully insured, and we expect the costs to be fully recoverable by insurance proceeds, less the plan’s deductible. During the nine months ended September 30, 2021, we wrote off $12,515,830 of carrying value of our fixed assets and recorded $10,800,111 of estimated repair expenses, with a corresponding increase in general and administrative expenses and an increase in our accounts payable and accrued liabilities, of which $8,249,358 has been paid as of September 30, 2021. We also recorded insurance recoveries of $23,315,941 for the estimated insurance claims proceeds in the amount of total losses incurred (as described above) as an increase in rents and other receivables. As of September 30, 2021, $6,875,000 of proceeds were received and $16,440,941 remained in rents and other receivables. As a result, while our net loss for the nine months ended September 30, 2021, was not impacted, we experienced a decrease in the carrying value of our real estate held for investment, net and increases to rents and other receivables and accounts payable and accrued liabilities in the consolidated balance sheets for nine months ended September 30, 2021.

Public Offering

On December 30, 2013, we commenced our initial public offering of up to 66,666,667 shares of common stock at an initial price of $15.00 per share and up to 7,017,544 shares of common stock pursuant to our distribution reinvestment plan at an initial price of $14.25 per share. On March 24, 2016, we terminated our initial public offering. As of March 24, 2016, we had

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PART I — FINANCIAL INFORMATION (continued)

sold 48,625,651 shares of common stock for gross offering proceeds of $724,849,631, including 1,011,561 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $14,414,752. Following the termination of our initial public offering, we continued to offer shares of our common stock pursuant to our distribution reinvestment plan until it was suspended in connection with entering into the IRT Merger Agreement. As of September 30, 2021, we had sold 112,299,272 shares of common stock for gross offering proceeds of $1,727,794,175, including 8,669,192 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $130,065,017 and 56,016,053 shares of common stock issued in connection with the Mergers (as defined below).

On March 9, 2021, our board of directors determined an estimated value per share of our common stock of $15.55 as of December 31, 2020. In connection with the determination of an estimated value per share, our board of directors determined a purchase price per share for the distribution reinvestment plan of $15.55, effective April 1, 2021. In the future, our board of directors may, in its sole discretion and from time to time, change the price at which we offer shares pursuant to our distribution reinvestment plan to reflect changes in our estimated value per share and other factors that our board of directors deems relevant.

Merger with Steadfast Income REIT, Inc.

On August 5, 2019, we, Steadfast Income REIT, Inc., or SIR, our Operating Partnership, Steadfast Income REIT Operating Partnership, L.P., the operating partnership of SIR, or the SIR OP, and SI Subsidiary, LLC, or SIR Merger Sub, entered into an Agreement and Plan of Merger, or the SIR Merger Agreement. Pursuant to the terms and conditions of the SIR Merger Agreement, on March 6, 2020, SIR merged with and into SIR Merger Sub with SIR Merger Sub surviving the merger, or the SIR Merger. Following the SIR Merger, SIR Merger Sub, as the surviving entity, continued as our wholly-owned subsidiary. In accordance with the applicable provisions of the Maryland General Corporation Law, or MGCL, the separate existence of SIR ceased.

At the effective time of the SIR Merger, each issued and outstanding share of SIR common stock (or a fraction thereof), $0.01 par value per share, converted into 0.5934 shares of our common stock.

Merger with Steadfast Apartment REIT III, Inc.

On August 5, 2019, we, Steadfast Apartment REIT III, Inc., or STAR III, our Operating Partnership, Steadfast Apartment REIT III Operating Partnership, L.P., the operating partnership of STAR III, or the STAR III OP, and SIII Subsidiary, LLC, or STAR III Merger Sub, entered into an Agreement and Plan of Merger, or the STAR III Merger Agreement. Pursuant to the terms and conditions of the STAR III Merger Agreement, on March 6, 2020, STAR III merged with and into STAR III Merger Sub with STAR III Merger Sub surviving the merger, or the STAR III Merger, and together with the SIR Merger, the “Mergers.” Following the STAR III Merger, STAR III Merger Sub, as the surviving entity, continued as our wholly-owned subsidiary. In accordance with the applicable provisions of the MGCL, the separate existence of STAR III ceased.

At the effective time of the STAR III Merger, each issued and outstanding share of STAR III common stock (or a fraction thereof), $0.01 par value per share, was converted into 1.430 shares of our common stock.

Combined Company

Through the Mergers, we acquired 36 multifamily properties with 10,166 apartment homes and a 10% interest in one unconsolidated joint venture that owned 20 multifamily properties with a total of 4,584 apartment homes, all of which had a gross real estate value of approximately $1.5 billion. The combined company after the Mergers retained the name “Steadfast Apartment REIT, Inc.” Each merger qualified as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code.

Pre-Internalization Operating Partnerships Merger

On August 28, 2020, pursuant to an Agreement and Plan of Merger, our Operating Partnership merged with and into the SIR OP, or the SIR OP/STAR OP Merger. The SIR OP/STAR OP Merger was treated for U.S. federal income tax purposes as a tax-deferred contribution by us of all of the assets and liabilities of STAR Operating Partnership to SIR OP under Section 721(a) of the Internal Revenue Code.

Immediately following the consummation of the SIR OP/STAR OP Merger, on August 28, 2020, pursuant to an Agreement and Plan of Merger, STAR III OP merged with and into SIR OP, or the Operating Partnership Merger, and together with the SIR OP/STAR OP Merger, the Operating Partnership Mergers, with SIR OP being the “resulting partnership” and STAR III OP terminating.

On August 28, 2020, SIR OP changed its name to “Steadfast Apartment REIT Operating Partnership, L.P.”, which is referred to herein as the “Operating Partnership.” In addition, on August 28, 2020, prior to completion of the Operating

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Partnership Mergers, we acquired STAR III Merger Sub. On August 28, 2020, SIR Merger Sub, as the initial general partner of the Operating Partnership, transferred all of its general partnership interests to us, and we were admitted as a substitute general partner of the Operating Partnership.

On August 28, 2020, we, Steadfast Income Advisor, LLC, the initial limited partner of the Operating Partnership, or SIR Advisor, Steadfast Apartment Advisor III, LLC, a Delaware limited liability company and the special limited partner of the Operating Partnership, or STAR III Advisor, Wellington VVM LLC, a Delaware limited liability company and limited partner of the Operating Partnership, or Wellington, and Copans VVM, LLC, a Delaware limited liability company and limited partner of the Operating Partnership, or Copans, and together with Wellington, “VV&M”, entered into a Second Amended and Restated Agreement of Limited Partnership, or the Second A&R Partnership Agreement, in order to, among other things, reflect the consummation of the Operating Partnership Mergers.

The purpose of the pre-internalization Operating Partnership Mergers was to simplify our corporate structure so that we had a single operating partnership as our direct subsidiary.

Internalization Transaction

On August 31, 2020, we and the Operating Partnership entered into a series of transactions and agreements (such transactions and agreements hereinafter collectively referred to as the “Internalization Transaction”), with Steadfast REIT Investments, LLC, our former sponsor, or SRI, which resulted in the internalization of our external management functions provided by Steadfast Apartment Advisor, LLC, our former external advisor, which we refer to as our “Former Advisor,” and its affiliates. Prior to the Internalization Closing, which took place contemporaneously with the execution of the Contribution & Purchase Agreement (as defined below) on August 31, 2020, or the Internalization Closing, Steadfast Investment Properties, Inc., a California corporation, or SIP, Steadfast REIT Services, Inc., a California corporation, or Steadfast REIT Services, and their respective affiliates owned and operated all of the assets necessary to operate as a self-managed company, and employed all the employees necessary to operate as a self-managed company.

Pursuant to a Contribution and Purchase Agreement, between us, the Operating Partnership and SRI, SRI contributed to the Operating Partnership all of the membership interests in STAR RS Holdings, LLC, a Delaware limited liability company, or SRSH, and the assets and rights necessary to operate as a self-managed company in all material respects, and the liabilities associated with such assets and rights, or the Contribution, in exchange for $124,999,000, which was paid as follows: (1) $31,249,000 in cash, or the Cash Consideration, and (2) 6,155,613.92 Class B units of limited partnership interests in the Operating Partnership, or the Class B OP Units, having the agreed value set forth in the Contribution and Purchase Agreement, or the OP Unit Consideration. In addition, we purchased all of our Class A Convertible Stock held by the Former Advisor for $1,000. As a result of the Internalization Transaction, we became self-managed and acquired components of the advisory, asset management and property management operations of the Former Advisor and its affiliates by hiring the employees, who comprise the workforce necessary for the management and day-to-day real estate and accounting operations for us and the Operating Partnership. Additional information on the Internalization Transaction can be found on our Current Report in Form 8-K filed with the SEC on September 3, 2020. See also Note 3 (Internalization Transaction) to our consolidated financial statements in this Quarterly Report.

On July 16, 2021, we received a derivative demand letter addressed to our board of directors, purportedly sent on behalf of two stockholders, relating to the Internalization Transaction. The letter demanded that our board of directors appoint a committee to investigate the Internalization Transaction and, among other things, determine whether there exists any basis for us to pursue claims relating to that transaction, including for recovery of payments made in the transaction. In September 2021, we established a Demand Review Committee, composed of two independent directors, to pursue the purported claims related to the Internalization Transaction.

The Former Advisor

Prior to the Internalization Transaction, our day-to-day operations were externally managed by the Former Advisor, pursuant to the Amended and Restated Advisory Agreement effective as of March 6, 2020, by and between us and the Former Advisor, as amended, the Advisory Agreement. On August 31, 2020, prior to the Internalization Closing, we, the Former Advisor and the Operating Partnership entered into a Joinder Agreement pursuant to which the Operating Partnership became a party to the Advisory Agreement. On August 31, 2020, prior to the Internalization Closing, we and the Former Advisor entered into the First Amendment to Amended and Restated Advisory Agreement in order to remove certain restrictions in the Advisory Agreement related to business combinations and to provide that any amounts accrued to the Former Advisor commencing on September 1, 2020 were paid in cash to the Former Advisor by the Operating Partnership. In connection with the Internalization Transaction, STAR REIT Services, LLC, our subsidiary, or SRS, assumed the rights and obligations of the Advisory Agreement from the Former Advisor.

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PART I — FINANCIAL INFORMATION (continued)

The Operating Partnership

Substantially all of our business is conducted through the Operating Partnership. We are the sole general partner of the Operating Partnership. As a condition to the Internalization Closing, on August 31, 2020, we, as the general partner and parent of the Operating Partnership, SRI and VV&M entered into the Operating Partnership Agreement (as defined above), to restate the Second A&R Partnership Agreement in order to, among other things, remove references to the limited partner interests previously held by SIR Advisor and STAR III Advisor, reflect the consummation of the Contribution, and designate Class B OP Units that were issued as the OP Unit Consideration.

The Operating Partnership Agreement provides that the Operating Partnership will be operated in a manner that will enable us to (1) satisfy the requirements for being classified as a REIT for federal income tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code, which classification could result in the Operating Partnership being taxed as a corporation, rather than as a disregarded entity.

We elected to be taxed as a REIT under the Internal Revenue Code commencing with our taxable year ended December 31, 2014. As a REIT, we generally will not be subject to federal income tax to the extent that we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate rates and would not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Failing to qualify as a REIT could materially and adversely affect our net income and results of operations.

Market Outlook

The global COVID-19 pandemic and resulting shutdown of large components of the U.S. economy has created significant uncertainty and enhanced investment risk across many asset classes, including real estate. The degree to which our business is impacted by the COVID-19 pandemic will depend on a number of variables, including access to testing and vaccines, the reimposition of “shelter in place” orders, new strains of the virus and the continuation of new COVID-19 cases throughout the world.

While all property classes have been adversely impacted by last year’s economic downturn, we believe we are well-positioned to navigate this unprecedented period. We believe multifamily properties have been less adversely impacted than hospitality and retail properties, and our portfolio of moderate-income apartments should continue to outperform most other classes of multifamily properties as we benefit from favorable long-run economic and demographic trends. Home ownership rates should remain low. Millennials and Baby Boomers, the two largest demographic groups comprising roughly half of the total population in the United States, are expected to continue to increasingly choose rental housing over home ownership. Baby Boomers are downsizing their suburban homes and relocating to multifamily apartments while Millennials are renting multifamily apartments due to high levels of student debt and increased credit standards in order to qualify for a home mortgage. These factors should lead to continued growth as the economy recovers.

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Our Real Estate Portfolio

As of September 30, 2021, we owned the 70 multifamily apartment communities and three parcels of land held for the development of apartment homes listed below:

								Average Monthly Occupancy(1)				Average Monthly Rent(2)
	Property Name	Location	Purchase Date	Number of Homes	Purchase Price		Mortgage Debt Outstanding(3)	Sep 30, 2021		Dec 31, 2020		Sep 30, 2021		Dec 31, 2020
1	Villages at Spring    Hill Apartments	Spring Hill, TN	5/22/2014	176	$	14,200,000	(4)	98.9	%	95.5	%	$	1,163	$	1,093
2	Harrison Place    Apartments	Indianapolis, IN	6/30/2014	307	27,864,250		(4)	96.4	%	96.1	%	1,035		967
3	The Residences on    McGinnis Ferry	Suwanee, GA	10/16/2014	696	98,500,000		(4)	95.7	%	95.1	%	1,440		1,331
4	The 1800 at Barrett    Lakes	Kennesaw, GA	11/20/2014	500	49,000,000		40,684,145	96.4	%	95.4	%	1,152		1,089
5	The Oasis	Colorado Springs, CO	12/19/2014	252	40,000,000		39,551,880	95.2	%	94.4	%	1,516		1,411
6	Columns on    Wetherington	Florence, KY	2/26/2015	192	25,000,000		(4)	99.0	%	95.3	%	1,249		1,134
7	Preston Hills at    Mill Creek	Buford, GA	3/10/2015	464	51,000,000		(4)	97.8	%	96.6	%	1,262		1,193
8	Eagle Lake   Landing    Apartments	Speedway, IN	3/27/2015	277	19,200,000		(4)	96.8	%	91.3	%	901		826
9	Reveal on    Cumberland	Fishers, IN	3/30/2015	220	29,500,000		20,888,067	97.3	%	96.8	%	1,170		1,125
10	Heritage Place    Apartments	Franklin, TN	4/27/2015	105	9,650,000		8,610,219	96.2	%	96.2	%	1,215		1,132
11	Rosemont at East    Cobb	Marietta, GA	5/21/2015	180	16,450,000		13,281,722	98.9	%	95.6	%	1,140		1,071
12	Ridge Crossings    Apartments	Hoover, AL	5/28/2015	720	72,000,000		57,759,204	94.9	%	95.1	%	1,067		1,008
13	Bella Terra at City    Center	Aurora, CO	6/11/2015	304	37,600,000		(4)	97.0	%	95.1	%	1,220		1,153
14	Hearthstone at City    Center	Aurora, CO	6/25/2015	360	53,400,000		(4)	96.9	%	93.3	%	1,238		1,149
15	Arbors at    Brookfield	Mauldin, SC	6/30/2015	702	66,800,000		(4)	95.3	%	94.7	%	953		901
16	Carrington Park	Kansas City, MO	8/19/2015	298	39,480,000		(4)	98.0	%	95.0	%	1,106		1,063
17	Delano at North    Richland Hills	North Richland Hills, TX	8/26/2015	263	38,500,000		31,886,617	98.9	%	97.0	%	1,484		1,492
18	Meadows at North    Richland Hills	North Richland Hills, TX	8/26/2015	252	32,600,000		26,644,808	97.6	%	97.2	%	1,463		1,417
19	Kensington by the    Vineyard	Euless, TX	8/26/2015	259	46,200,000		33,188,565	96.9	%	96.5	%	1,548		1,470
20	Monticello by the    Vineyard	Euless, TX	9/23/2015	354	52,200,000		40,662,431	96.6	%	95.2	%	1,372		1,315
21	The Shores	Oklahoma City, OK	9/29/2015	300	36,250,000		23,111,833	94.3	%	96.3	%	1,106		1,031
22	Lakeside at Coppell	Coppell, TX	10/7/2015	315	60,500,000		47,960,360	95.9	%	94.9	%	1,738		1,708
23	Meadows at River    Run	Bolingbrook, IL	10/30/2015	374	58,500,000		41,258,442	95.2	%	95.2	%	1,490		1,421
24	PeakView at    T-Bone Ranch	Greeley, CO	12/11/2015	224	40,300,000		(4)	95.5	%	94.2	%	1,387		1,340
25	Park Valley    Apartments	Smyrna, GA	12/11/2015	496	51,400,000		48,686,240	95.4	%	96.4	%	1,063		1,051
26	PeakView by    Horseshoe Lake	Loveland, CO	12/18/2015	222	44,200,000		38,091,358	97.3	%	95.5	%	1,477		1,396

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PART I — FINANCIAL INFORMATION (continued)

									Average Monthly Occupancy(1)				Average Monthly Rent(2)
	Property Name	Location	Purchase Date	Number of Homes	Purchase Price		Mortgage Debt Outstanding(3)		Sep 30, 2021		Dec 31, 2020		Sep 30, 2021		Dec 31, 2020
27	Stoneridge Farms	Smyrna, TN	12/30/2015	336	$	47,750,000	$	45,412,028	97.3	%	94.6	%	$	1,283	$	1,239
28	Fielder’s Creek	Englewood, CO	3/23/2016	217	32,400,000		(4)		94.5	%	94.9	%	1,220		1,180
29	Landings of    Brentwood	Brentwood, TN	5/18/2016	724	110,000,000		—		97.8	%	95.4	%	1,333		1,252
30	1250 West    Apartments	Marietta, GA	8/12/2016	468	55,772,500		(4)		96.6	%	96.4	%	1,148		1,051
31	Sixteen50 @ Lake    Ray Hubbard	Rockwall, TX	9/29/2016	334	66,050,000		(4)		97.6	%	96.4	%	1,574		1,485
32	Garrison Station(5)	Murfreesboro, TN	5/30/2019	160	29,690,942		18,244,300		85.6	%	—	%	1,236		—
33	Eleven10 @    Farmers Market	Dallas, TX	1/28/2020	313	62,063,929		34,994,043		94.9	%	94.2	%	1,406		1,379
34	Patina Flats at the    Foundry	Loveland, CO	2/11/2020	155	45,123,782		(4)		97.4	%	93.5	%	1,384		1,275
35	Clarion Park    Apartments(6)	Olathe, KS	3/6/2020	220	21,121,795		12,614,109		91.4	%	93.6	%	788		843
36	Spring Creek    Apartments(6)	Edmond, OK	3/6/2020	252	28,186,894		16,894,943		98.4	%	96.0	%	946		895
37	Montclair Parc    Apartment      Homes(6)	Oklahoma City, OK	3/6/2020	360	40,352,125		(7)		95.8	%	96.1	%	972		905
38	Hilliard Park    Apartments(6)	Columbus, OH	3/6/2020	201	28,599,225		11,591,441		96.5	%	97.0	%	1,233		1,149
39	Sycamore Terrace    Apartments(6)	Terre Haute, IN	3/6/2020	250	34,419,259		23,017,688		98.0	%	94.8	%	1,276		1,155
40	Hilliard Summit    Apartments(6)	Columbus, OH	3/6/2020	208	31,087,442		14,018,311		96.2	%	95.7	%	1,319		1,260
41	Forty 57    Apartments(6)	Lexington, KY	3/6/2020	436	63,030,831		33,313,390		96.6	%	95.2	%	1,046		964
42	Riverford Crossing    Apartments(6)	Frankfort, KY	3/6/2020	300	38,139,145		18,994,781		97.3	%	95.7	%	1,079		1,002
43	Hilliard Grand    Apartments(6)	Dublin, OH	3/6/2020	314	50,549,232		23,734,176		97.8	%	94.3	%	1,369		1,280
44	Deep Deuce at    Bricktown(6)	Oklahoma City, OK	3/6/2020	294	52,519,973		33,299,429		96.6	%	95.2	%	1,314		1,242
45	Retreat at Quail    North(6)	Oklahoma City, OK	3/6/2020	240	31,945,162		13,449,828		95.8	%	97.1	%	1,049		986
46	Tapestry Park    Apartments(8)	Birmingham, AL	3/6/2020	354	68,840,769		48,701,516		94.4	%	97.2	%	1,440		1,380
47	BriceGrove Park    Apartments(6)	Canal Winchester, OH	3/6/2020	240	27,854,616		(7)		97.1	%	94.6	%	1,013		936
48	Retreat at Hamburg    Place(6)	Lexington, KY	3/6/2020	150	21,341,085		(7)		98.0	%	97.3	%	1,131		1,026
49	Villas at    Huffmeister(6)	Houston, TX	3/6/2020	294	41,720,117		27,295,543		98.3	%	97.6	%	1,198		1,190
50	Villas of    Kingwood(6)	Kingwood, TX	3/6/2020	330	54,428,708		34,722,165		96.1	%	95.5	%	1,232		1,207
51	Waterford Place at    Riata Ranch(6)	Cypress, TX	3/6/2020	228	28,278,262		(7)		98.2	%	95.2	%	1,145		1,122
52	Carrington Place(6)	Houston, TX	3/6/2020	324	42,258,525		(7)		97.8	%	95.7	%	1,087		1,059
53	Carrington at    Champion      Forest(6)	Houston, TX	3/6/2020	284	37,280,704		(7)		96.8	%	94.7	%	1,052		1,103
54	Carrington Park at    Huffmeister(6)	Cypress, TX	3/6/2020	232	33,032,451		20,776,531		96.6	%	97.0	%	1,226		1,179

65

PART I — FINANCIAL INFORMATION (continued)

									Average Monthly Occupancy(1)				Average Monthly Rent(2)
	Property Name	Location	Purchase Date	Number of Homes	Purchase Price		Mortgage Debt Outstanding(3)		Sep 30, 2021		Dec 31, 2020		Sep 30, 2021		Dec 31, 2020
55	Heritage Grand at    Sienna     Plantation(6)	Missouri City, TX	3/6/2020	240	$	32,796,345	$	14,063,329	97.5	%	95.4	%	$	1,069	$	1,104
56	Mallard Crossing    Apartments(6)	Loveland, OH	3/6/2020	350	52,002,345		(7)		96.3	%	94.9	%	1,238		1,150
57	Reserve at    Creekside(6)	Chattanooga, TN	3/6/2020	192	24,522,910		15,041,320		97.9	%	95.8	%	1,206		1,096
58	Oak Crossing    Apartments(6)	Fort Wayne, IN	3/6/2020	222	32,391,032		21,530,159		96.4	%	94.6	%	1,122		1,026
59	Double Creek    Flats(6)	Plainfield, IN	3/6/2020	240	35,490,439		23,521,962		98.8	%	95.8	%	1,138		1,075
60	Jefferson at    Perimeter     Apartments(6)	Dunwoody, GA	3/6/2020	504	113,483,898		73,044,588		95.8	%	96.2	%	1,359		1,334
61	Bristol Village    Apartments(6)	Aurora, CO	3/6/2020	240	62,019,009		34,959,554		96.3	%	96.7	%	1,455		1,400
62	Canyon Resort at    Great Hills     Apartments(6)	Austin, TX	3/6/2020	256	48,319,858		31,647,800		95.7	%	95.3	%	1,434		1,371
63	Reflections on    Sweetwater     Apartments(6)	Lawrenceville, GA	3/6/2020	280	47,727,470		30,818,218		96.8	%	97.5	%	1,189		1,148
64	The Pointe at Vista    Ridge(6)	Lewisville, TX	3/6/2020	300	51,625,394		30,998,587		98.3	%	96.0	%	1,338		1,282
65	Belmar Villas(6)	Lakewood, CO	3/6/2020	318	79,351,923		46,582,693		97.5	%	94.7	%	1,390		1,355
66	Sugar Mill    Apartments(6)	Lawrenceville, GA	3/6/2020	244	42,784,645		24,711,189		97.5	%	96.7	%	1,274		1,154
67	Avery Point    Apartments(6)	Indianapolis, IN	3/6/2020	512	55,706,852		31,112,580		97.1	%	95.3	%	885		841
68	Cottage Trails at    Culpepper     Landing(6)	Chesapeake, VA	3/6/2020	183	34,657,950		23,067,232		98.9	%	97.8	%	1,538		1,410
69	Arista at    Broomfield(8)	Broomfield, CO	3/13/2020	—	23,418,527		—		—	%	—	%	—		—
70	VV&M    Apartments	Dallas, TX	4/21/2020	310	59,969,074		45,302,903		96.1	%	92.6	%	1,389		1,363
71	Flatirons    Apartments(9)	Broomfield, CO	6/19/2020	—	9,168,717		—		—	%	—	%	—		—
72	Los Robles	San Antonio, TX	11/19/2020	306	51,620,836		—		98.4	%	90.5	%	1,344		1,261
73	Ballpark Apartments    at Town Madison	Huntsville, AL	6/29/2021	274	77,466,685		—		93.8	%	—	%	1,491		—
				22,001	$	3,270,939,249	$	1,389,742,227	96.5	%	95.4	%	$	1,237	$	1,173

________________

(1)As of September 30, 2021, our portfolio was approximately 97.7% leased, calculated using the number of occupied and contractually leased apartment homes divided by total apartment homes.

(2)Average monthly rent is based upon the effective rental income for the month of September 2021 after considering the effect of vacancies, concessions and write-offs.

(3)Mortgage debt outstanding is net of deferred financing costs, net and premiums and discounts, net associated with the loans for each individual property listed above but excludes the principal balance of $750,477,000 and associated deferred financing costs of $4,977,103 related to the refinancings pursuant to our credit facilities and revolver, each as described herein.

(4)Properties secured under the terms of the Master Credit Facility Agreement, or MCFA, with Newmark Group Inc., formerly Berkeley Point Capital, LLC, or the Facility Lender.

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PART I — FINANCIAL INFORMATION (continued)

(5)We acquired the Garrison Station property on May 30, 2019, which included unimproved land, currently zoned as a planned unit development, or PUD. The current zoning permits the development of the property into a multifamily community with 176 apartment homes of 1, 2 and 3-bedrooms with a typical mix for this market. On October 16, 2019, we obtained a loan from PNC Bank, National Association, or PNC Bank, in an amount up to a maximum principal balance of $19,800,000 to finance a portion of the development and construction. As of September 30, 2021, eight buildings comprised of 160 apartment homes were placed in service and were 90.5% leased, and are included within total real estate held for investment, net in the accompanying consolidated balance sheets.

(6)We acquired 36 real estate properties in the Mergers on March 6, 2020, for an aggregate purchase price of $1,575,891,924, which represents the fair value of the acquired real estate assets including capitalized transaction costs.

(7)Properties secured under the terms of a Master Credit Facility Agreement with PNC Bank, or the PNC MCFA.

(8)We acquired the Arista at Broomfield property on March 13, 2020, which included unimproved land, currently zoned as a PUD. The current zoning permits the development of the property into a multifamily community with 325 apartment homes of 1, 2 and 3-bedrooms with a typical mix for this market.

(9)We acquired the Flatirons property on June 19, 2020, which included unimproved land, currently zoned as a PUD. The current zoning permits the development of the property into a multifamily community with 296 apartment homes of studio, 1 and 2-bedrooms with a typical mix for this market.

Critical Accounting Policies 

The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at 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. Our critical accounting policies are described in more detail in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K, filed with the SEC on March 12, 2021. There have been no significant changes in our critical accounting policies from those reported in our Annual Report, or the Annual Report, except for the accounting policy regarding casualty loss, which is described below. With respect to these critical accounting policies, we believe that the application of judgments and assessments is consistently applied and produces financial information that fairly depicts the results of operations for all periods presented.

Casualty Loss

We carry liability insurance to mitigate our exposure to certain losses, including those relating to property damage and business interruption. We record the estimated amount of expected insurance proceeds for property damage and other losses incurred as an asset (typically a receivable from the insurer) and income up to the amount of the losses incurred when receipt of insurance proceeds is deemed probable. Any amount of insurance recovery in excess of the amount of the losses incurred is considered a gain contingency and is recorded in other income when the proceeds are received. During the nine months ended September 30, 2021, we incurred property damage and other losses of $23,315,941 as a result of winter storms and extreme cold temperatures that led to power outages and freezing water pipes at some of our properties, which was recorded as general and administrative expenses, with a corresponding insurance recoveries income up to the amount of losses incurred (as described above) within general and administrative expenses in the accompanying consolidated statements of operations.

Distributions

Our board of directors has declared daily distributions that are paid on a monthly basis. We expect to continue paying monthly distributions unless our results of operations, our general financial condition, general economic conditions or other factors prohibit us from doing so. We may declare distributions in excess of our funds from operations. As a result, our distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for tax purposes, we must make distributions equal to at least 90% of our “REIT taxable income” each year.

Distributions declared (1) accrued daily to our stockholders of record as of the close of business on each day, (2) are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month and (3) were calculated at a rate of $0.002466 per share per day during the month of January 2021, which if paid each day over a 365-day period, is equivalent to $0.90 per share, and were calculated at a rate of $0.001438 per share per day commencing on February

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PART I — FINANCIAL INFORMATION (continued)

1, 2021 through September 30, 2021, which if paid each day over a 365-day period, is equivalent to $0.525 per share. As a result of the suspension of the DRP on July 26, 2021, any distributions paid after the distribution payment date in August 2021 will be paid to our stockholders in cash.

The distributions declared and paid during the three fiscal quarters of 2021, along with the amount of distributions reinvested pursuant to the distribution reinvestment plan were as follows:

					Distributions Paid(3)						Sources of Distributions Paid
Period	Distributions Declared(1)		Distributions Declared Per Share(1)(2)		Cash		Reinvested		Total		Cash Flow From Operations		Funds Equal to Amounts Reinvested in our Distribution Reinvestment Plan		Net Cash Provided by Operating Activities
1st Quarter 2021	$	18,909,212	$	0.161	$	18,012,522	$	4,600,603	$	22,613,125	$	4,040,865	$	18,572,260	$	4,040,865
2nd Quarter 2021	15,355,645		0.131		12,412,151		3,108,489		15,520,640		15,520,640		—		25,001,402
3rd Quarter 2021	15,525,324		0.132		13,471,671		2,055,356		15,527,027		15,527,027		—		27,430,618
	$	49,790,181	$	0.425	$	43,896,344	$	9,764,448	$	53,660,792	$	35,088,532	$	18,572,260	$	56,472,885

____________________

(1)Distributions during the month ended January 2021 were based on daily record dates and calculated at a rate of $0.002466 per share per day. On January 12, 2021, our board of directors determined to reduce the distribution rate to $0.001438 per share per day commencing on February 1, 2021 and ending February 28, 2021, which was extended through September 30, 2021, and which if paid each day over a 365-day period is equivalent to $0.525 per share.

(2)Assumes each share was issued and outstanding each day during the period presented.

(3)Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately three days following month end.

For the three and nine months ended September 30, 2021, we paid aggregate distributions of $15,527,027 and $53,660,792, including $13,471,671 and $43,896,344 of distributions paid in cash and 132,177 and 634,155 shares of our common stock issued pursuant to our distribution reinvestment plan for $2,055,356 and $9,764,448, respectively. For the three and nine months ended September 30, 2021, our net loss was $11,646,149 and $40,156,623, we had funds from operations, or FFO, of $22,246,823 and $60,439,823 and net cash provided by operations of $27,430,618 and $56,472,885, respectively. For the three and nine months ended September 30, 2021, we funded $15,527,027 and $35,088,532, or 100% and 65%, of total distributions paid, including shares issued pursuant to our distribution reinvestment plan, from net cash provided by operating activities and $0 and $18,572,260, or 0% and 35%, from funds equal to our distribution reinvestment plan, respectively. Since inception, of the $340,057,852 in total distributions paid through September 30, 2021, including shares issued pursuant to our distribution reinvestment plan, 69% of such amounts were funded from cash flow from operations, 25% were funded from funds equal to amounts reinvested in our distribution reinvestment plan and 6% were funded from net public offering proceeds. For information on how we calculate FFO and the reconciliation of FFO to net loss, see “—Funds from Operations and Modified Funds from Operations.”

Our goal is to pay distributions solely from cash flow from operations. Because we may receive income from interest or rents at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period, and we expect to pay these distributions in advance of our actual receipt of these funds. In these instances, our board of directors has the authority under our organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings or offering proceeds. We have not established a limit on the amount of proceeds we may use from sources other than cash flow from operations to fund distributions. If we pay distributions from sources other than cash flow from operations, we will have fewer funds available for investments.

We continue to monitor the outbreak of the COVID-19 pandemic and its impact on our liquidity. Our operations could be materially negatively affected if the economic downturn is prolonged, which could adversely affect our operating results and therefore our ability to pay our distributions.

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PART I — FINANCIAL INFORMATION (continued)

Inflation

Substantially all of our multifamily property leases are for a term of one year or less. In an inflationary environment, this may allow us to realize increased rents upon renewal of existing leases or the beginning of new leases. Short-term leases generally will minimize our risk from the adverse effects of inflation, although these leases generally permit residents to leave at the end of the lease term and therefore will expose us to the effects of a decline in market rents. In a deflationary rent environment, we may be exposed to declining rents more quickly under these shorter term leases.

With respect to other commercial properties, we expect in the future to include provisions in our leases designed to protect us from the impact of inflation. These provisions include reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements, or in some cases annual reimbursement of operating expenses above a certain allowance.

As of September 30, 2021, we had not entered into any material leases as a lessee, except for a sub-lease entered into in connection with the Internalization Transaction on September 1, 2020. See Note 10 (Related Party Arrangements) to our consolidated financial statements in this Quarterly Report for details.

REIT Compliance

To continue to qualify as a REIT for tax purposes, we are required to distribute at least 90% of our REIT taxable income (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP) to our stockholders. We must also meet certain asset and income tests, as well as other requirements. We monitor the operations and transactions that may potentially impact our REIT status. If we fail to qualify as a REIT in any taxable year following the year we initially elected to be taxed as a REIT, we would be subject to federal income tax on our taxable income at regular corporate rates.

Liquidity and Capital Resources

We use secured borrowings, and intend to use in the future secured and unsecured borrowings. At September 30, 2021, our debt was approximately 56% of the value of our properties, as determined by the most recent valuations performed by an independent third-party appraiser as of December 31, 2020. Going forward, we expect that our borrowings (after debt amortization) will be approximately 55% to 60% of the value of our properties and other real estate-related assets. Under our charter, we are prohibited from borrowing in excess of 300% of the value of our net assets, which generally approximates to 75% of the aggregate cost of our assets, though we may exceed this limit only under certain circumstances.

Our principal demand for funds will be to fund value-enhancement, a portion of development projects and other capital improvement projects, to pay operating expenses and interest on our outstanding indebtedness and to make distributions to our stockholders. Over time, we intend to generally fund our cash needs, other than asset acquisitions, from operations. Otherwise, we expect that our principal sources of working capital will include:

•unrestricted cash balance, which was $122,107,875 as of September 30, 2021;

•various forms of secured and unsecured financing;

•equity capital from joint venture partners; and

•proceeds from our distribution reinvestment plan.

Over the short term, we believe that our sources of capital, specifically our cash balances, cash flow from operations, our ability to raise equity capital from joint venture partners and our ability to obtain various forms of secured and unsecured financing will be adequate to meet our liquidity requirements and capital commitments.

Over the longer term, in addition to the same sources of capital we will rely on to meet our short-term liquidity requirements, we may also conduct additional public or private offerings of our securities, refinance debt or dispose of assets to fund our operating activities, debt service, distributions and future property acquisitions and development projects. We expect these resources will be adequate to fund our ongoing operating activities as well as providing capital for investment in future development and other joint ventures along with potential forward purchase commitments.

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PART I — FINANCIAL INFORMATION (continued)

Credit Facilities

Master Credit Facility

On July 31, 2018, 16 of our indirect wholly-owned subsidiaries terminated the existing mortgage loans with their lenders for an aggregate principal amount of $479,318,649 and entered into the MCFA with the Facility Lender, for an aggregate principal amount of $551,669,000. On February 11, 2020, in connection with the financing of Patina Flats at the Foundry, we and the Facility Lender amended the MCFA to include Patina Flats at the Foundry and an unencumbered multifamily property owned by us as substitute collateral for three multifamily properties disposed of and released from the MCFA. We also increased our outstanding borrowings pursuant to the MCFA by $40,468,000, a portion of which was attributable to the acquisition of Patina Flats at the Foundry. The MCFA provides for four tranches: (1) a fixed rate loan in the aggregate principal amount of $331,001,400 that accrues interest at 4.43% per annum; (2) a fixed rate loan in the aggregate principal amount of $137,917,250 that accrues interest at 4.57% per annum; (3) a variable rate loan in the aggregate principal amount of $82,750,350 that accrues interest at the one-month London Interbank Offered Rate, or LIBOR, plus 1.70% per annum; and (4) a fixed rate loan in the aggregate principal amount of $40,468,000 that accrues interest at 3.34% per annum. The first three tranches have a maturity date of August 1, 2028, and the fourth tranche has a maturity date of March 1, 2030, unless, in each case, the maturity date is accelerated in accordance with the terms of the loan documents. Interest only payments are payable monthly through August 1, 2025 and April 1, 2027 on the first three tranches and fourth tranche, respectively, with interest and principal payments due monthly thereafter. We paid $2,072,480 in the aggregate in loan origination fees to the Facility Lender in connection with the refinancings, and paid our Former Advisor a loan coordination fee of $3,061,855.

PNC Master Credit Facility

On June 17, 2020, seven of our indirect wholly-owned subsidiaries, each a “Borrower” and collectively, the “Facility Borrowers” entered into the PNC MCFA with PNC Bank, for an aggregate principal amount of $158,340,000. The PNC MCFA provides for two tranches: (1) a fixed rate loan in the aggregate principal amount of $79,170,000 that accrues interest at 2.82% per annum; and (2) a variable rate loan in the aggregate principal amount of $79,170,000 that accrues interest at the one-month LIBOR plus 2.135% per annum. If LIBOR is no longer posted through electronic transmission, is no longer available or, in PNC Bank’s determination, is no longer widely accepted or has been replaced as the index for similar financial instruments, PNC Bank will choose a new index taking into account general comparability to LIBOR and other factors, including any adjustment factor to preserve the relative economic positions of the Borrowers and PNC Bank with respect to any advances made pursuant to the PNC MCFA. We paid $633,360 in the aggregate in loan origination fees to PNC Bank in connection with the financings, and paid the Former Advisor a loan coordination fee of $791,700.

Revolving Credit Loan Facility

On June 26, 2020, we entered into a revolving credit loan facility, or the Revolver, with PNC Bank in an amount not to exceed $65,000,000. The Revolver provides for advances, each, a “Revolver Loan”, solely for the purpose of financing the costs in connection with acquisitions and development of real estate projects and for general corporate purposes (subject to certain debt service and loan to value requirements). The Revolver has a maturity date of June 26, 2023, subject to extension, as further described in the loan agreement. Advances made under the Revolver are secured by the Landings at Brentwood property.

We have the option to select the interest rate in respect of the outstanding unpaid principal amount of the Revolver Loans from the following options: (1) a fluctuating rate per annum equal to the sum of the daily LIBOR rate plus the daily LIBOR rate spread or (2) a fluctuating rate per annum equal to the base rate plus the alternate rate spread. No amounts were outstanding on the Revolver as of September 30, 2021 and December 31, 2020.

As of September 30, 2021 and December 31, 2020, the advances obtained and certain financing costs incurred under the MCFA, PNC MCFA and the Revolver, which is included in credit facilities, net, in the accompanying consolidated balance sheets, are summarized in the following table.

	September 30, 2021		December 31, 2020
Principal balance on MCFA, gross	$	592,137,000	$	592,137,000
Principal balance on PNC MCFA, gross	158,340,000		158,340,000
Deferred financing costs, net on MCFA(1)	(3,083,410)		(3,436,850)
Deferred financing costs, net on PNC MCFA(2)	(1,553,045)		(1,689,935)
Deferred financing costs, net on Revolver(3)	(340,648)		(487,329)
Credit facilities, net	$	745,499,897	$	744,862,886

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PART I — FINANCIAL INFORMATION (continued)

_______________

(1)    Accumulated amortization related to deferred financing costs in respect of the MCFA as of September 30, 2021 and December 31, 2020, was $1,651,705 and $1,298,265, respectively.

(2)    Accumulated amortization related to deferred financing costs in respect of the PNC MCFA as of September 30, 2021 and December 31, 2020, was $236,174 and $99,283, respectively.

(3)    Accumulated amortization related to deferred financing costs in respect of the Revolver as of September 30, 2021 and December 31, 2020, was $248,230 and $101,549, respectively.

Forward Contracts

On May 6, 2021 and June 14, 2021, we entered into agreements, or the Forward Contract Obligations, with the general contractor, or GC, to acquire, for a fixed price, a lumber material package and mixed material package to be used in the construction of the Arista at Broomfield development. Under the Forward Contract Obligations, the GC is obligated to deliver the specific package of lumber and mixed materials and we are obligated to pay the agreed upon sum of $8,949,562 and $6,532,344, respectively, to the GC upon delivery, which is estimated to begin in the fourth quarter of 2021. Pursuant to the Forward Contract Obligations, the GC owns and is responsible for storage of the lumber and mixed material packages prior to delivery to us. The Forward Contract Obligations are recorded in the consolidated financial statements in the period in which the Forward Contract Obligations are cancelled or the lumber and or mixed material packages are purchased from the GC for use in the development.

Construction loan

On October 16, 2019, we entered into an agreement with PNC Bank for a construction loan related to the development of Garrison Station, a development project in Murfreesboro, TN, in an aggregate principal amount not to exceed $19,800,000 for a thirty-six month initial term and two twelve month mini-perm extensions. The rate of interest on the construction loan is daily LIBOR plus 2.00%, which then reduces to the daily LIBOR plus 1.80% upon achieving completion as defined in the construction loan agreement and at a debt service coverage ratio of 1.15x. The loan includes a 0.4% fee at closing, a 0.1% fee upon exercising the mini-perm and a 0.1% fee upon extending the mini-perm, each payable to PNC Bank. There is an exit fee of 1% which will be waived if permanent financing is secured through PNC Bank or one of their affiliates. As of September 30, 2021 and December 31, 2020, the principal outstanding balance on the construction loan was $18,244,300 and $6,264,549, respectively.

Assumed Debt as a Result of the Completion of Mergers

On March 6, 2020, upon consummation of the Mergers, we assumed all of SIR’s and STAR III’s obligations under the outstanding mortgage loans secured by 29 properties. We recognized the fair value of the assumed notes payable in the Mergers of $795,431,027, which consisted of the assumed principal balance of $791,020,471 and a net premium of $4,410,556.

The following is a summary of the terms of the assumed loans on the date of the Mergers:

			Interest Rate Range
Type	Number of Instruments	Maturity Date Range	Minimum	Maximum	Principal Outstanding At Merger Date
Variable rate	2	1/1/2027 - 9/1/2027	1-Mo LIBOR + 2.195%	1-Mo LIBOR + 2.31%	$	64,070,000
Fixed rate	27	10/1/2022 - 10/1/2056	3.19%	4.66%	726,950,471
Assumed Principal Mortgage Notes Payable	29				$	791,020,471

Reference Rate Reform

In July 2017, the Financial Conduct Authority announced it intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021. We are monitoring the market transition from LIBOR and other inter bank offered rates to alternative reference rates, such as the secured overnight financing rate, or SOFR, which we refer to as reference rate reform. For more information on reference rate reform, see Note 2 (Summary of Significant Accounting Policies) to our consolidated financial statements in this Quarterly Report for details. We identified the instruments influenced by LIBOR to be our variable rate mortgage notes payable and interest rate cap agreements, a majority of which, are expected to continue to use LIBOR through June 2023 or beyond until lenders and other market participants finalize their transition plans. Once transition plans are finalized, it is expected that SOFR will be used. Given the nature of the expected changes to our interest rate cap agreements and variable rate mortgage notes payable, we expect to meet the conditions of the practical expedients provided by the FASB

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and elect to not apply the modification accounting requirements to our contracts affected by the reference rate reform within the permitted period of December 31, 2022.

Cash Flows Provided by Operating Activities

During the nine months ended September 30, 2021, net cash provided by operating activities was $56,472,885, compared to $42,185,327 for the nine months ended September 30, 2020. The increase in our net cash provided by operating activities is primarily due to the elimination of investment management fees, loan coordination fees, property management fees and property management reimbursements paid to our Former Advisor prior to the Internalization Transaction, partially offset by an increase in interest payments and an increase related to the damage caused to certain multifamily properties impacted by the winter storm that took place in February 2021, compared to the same prior year period.

Cash Flows (Used in) Provided by Investing Activities

During the nine months ended September 30, 2021, net cash used in investing activities was $145,375,935, compared to $57,369,417 of net cash provided by investing activities during the nine months ended September 30, 2020. The increase in our net cash used in investing activities was primarily due to the increase in cash and restricted cash acquired in connection with the Mergers, net of transaction costs, and the decrease in net proceeds from the sale of real estate investments and the decrease in net proceeds from the sale of our unconsolidated joint venture, partially offset by the decrease in the acquisition of land held for the development of apartment homes during the nine months ended September 30, 2021, compared to the same prior year period. Net cash used in investing activities during the nine months ended September 30, 2021, consisted of the following:

•$75,966,685 of cash used for the acquisition of real estate investments;

•$43,476,629 of cash used for improvements to real estate investments;

•$25,363,295 of cash used for additions to real estate held for development;

•$1,500,000 of cash used for escrow deposits for real estate acquisitions;

•$59,700 of cash used to purchase interest rate cap agreements; and

•$990,374 of cash provided by proceeds from insurance claims.

Cash Flows (Used in) Provided by Financing Activities

During the nine months ended September 30, 2021, net cash used in financing activities was $47,826,022, compared to $106,044,570 of net cash provided by financing activities during the nine months ended September 30, 2020. The change from net cash provided by financing activities to net cash used in financing activities was primarily due to a decrease in proceeds received from borrowings on the MCFA and PNC MCFA and an increase in repurchases of common stock from common stockholders during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, partially offset by a decrease in payments on our mortgage notes payable, a decrease in deferred financing costs and an increase in proceeds from the issuance of mortgage notes payable during the nine months ended September 30, 2021, compared to the same prior year period. Net cash used in financing activities during the nine months ended September 30, 2021, consisted of the following:

•$5,200,646 of net cash from the issuance of a mortgage note payable after $6,360,104, of principal payments on mortgage notes payable;

•$43,896,344 of net cash distributions to our stockholders, after giving effect to distributions reinvested by stockholders of $9,764,448;

•$419,000 of loan financing deposits in connection with the IRT Merger; and

•$9,130,324 of cash paid for the repurchase of common stock.

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PART I — FINANCIAL INFORMATION (continued)

Contractual Commitments and Contingencies

As of September 30, 2021, we had (1) indebtedness totaling $2,135,242,124, comprised of an aggregate principal amount of $2,143,426,538, net deferred financing costs of $10,724,664 and net premiums of $2,540,250 and (2) the Forward Contract Obligations of $15,481,906. The following is a summary of our contractual obligations as of September 30, 2021:

			Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Interest payments on outstanding debt obligations(1)	$	556,468,435	$	20,045,419	$	156,760,031	$	145,521,285	$	234,141,700
Principal payments on outstanding debt obligations(2)	2,143,426,538		2,317,869		113,773,400		255,744,781		1,771,590,488
Forward contract obligations(3)	15,481,906		15,481,906		—		—		—
Total	$	2,715,376,879	$	37,845,194	$	270,533,431	$	401,266,066	$	2,005,732,188

________________

(1)Scheduled interest payments on outstanding debt obligations are based on the outstanding principal amounts and interest rates in effect at September 30, 2021. We incurred interest expense of $20,279,374 and $60,174,405 during the three and nine months ended September 30, 2021, including amortization of deferred financing costs totaling $548,726 and $1,646,291, net unrealized loss from the change in fair value of interest rate cap agreements of $40,902 and $39,699, amortization of net loan premiums and discounts of $(428,434) and $(1,269,484), credit facility commitment fees of $32,861 and $98,852, imputed interest on the finance lease portion of the sublease of $65 and $258, and capitalized interest of $284,511 and $844,577, respectively. The capitalized interest is included in real estate on the consolidated balance sheets.

(2)Scheduled principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude net deferred financing costs and any loan premiums or discounts associated with certain notes payable.

(3)Scheduled payments on the Forward Contract Obligations are based on the terms of the forward contract agreements entered into with the GC on May 6, 2021 and June 14, 2021, for the lumber and mixed material packages required to construct the Arista at Broomfield project according to the approved plans, locking in the price of the lumber and mixed materials as of that date.

Our debt obligations contain customary financial and non-financial debt covenants. As of September 30, 2021 and December 31, 2020, we were in compliance with all debt covenants.

Results of Operations

Overview

The discussion that follows is based on our consolidated results of operations for the three and nine months ended September 30, 2021 and 2020. The ability to compare one period to another is primarily affected by (1) the acquisitions and dispositions of multifamily properties inclusive of 36 multifamily properties acquired in the Mergers during the nine months ended September 30, 2020, the acquisition of two multifamily properties since September 30, 2020, the disposition of one multifamily property since September 30, 2020, and to a lesser extent placing into service 160 apartment homes previously held for development during the nine months ended September 30, 2021, and (2) the Internalization Closing. As of September 30, 2021, we owned 70 multifamily properties and three parcels of land held for the development of apartment homes. Our results of operations were also affected by our value-enhancement activity completed through September 30, 2021. Finally, upon completion of the proposed Mergers with IRT, our operations will be combined with those of IRT which will have a significant impact on the results of operations as both companies operate as a single combined company.

To provide additional insight into our operating results, we are also providing a detailed analysis of same-store versus non-same-store net operating income, or NOI. For more information on NOI and a reconciliation of NOI (a non-GAAP financial measure) to net loss, see “—Net Operating Income.”

Our results of operations for the three and nine months ended September 30, 2021 and 2020, are not indicative of those expected in future periods. We continued to perform value-enhancement projects, which may have an impact on our future results of operations. As a result of the Internalization Transaction, we are now a self-managed REIT and no longer bear the

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costs of the various fees and expense reimbursements previously paid to our Former Advisor and its affiliates. However, our expenses include the compensation and benefits of our officers, employees and consultants, as well as overhead previously paid by our Former Advisor and its affiliates.

Additionally, the outbreak of COVID-19 impacted our residents’ ability to pay rent which in turn could impact our future revenues and expenses. The impact of COVID-19 on our future results could be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information, which may emerge concerning the severity of “future waves” of COVID-19 outbreaks, the success of actions taken to contain or treat COVID-19, access to testing and vaccines, and reactions by consumers, companies, governmental entities and capital markets.

Consolidated Results of Operations for the Three Months Ended September 30, 2021, Compared to the Three Months Ended September 30, 2020

The following table summarizes the consolidated results of operations for the three months ended September 30, 2021 and 2020:

	For the Three Months Ended September 30,								$ Change Due to Acquisitions or Dispositions(1)		$ Change Due to Properties Held Throughout Both Periods and Corporate Level Activity(2)
	2021		2020		Change $		Change %
Total revenues	$	90,641,893	$	83,670,508	$	6,971,385	8	%	$	1,183,933	$	5,787,452
Operating, maintenance and management	(23,114,563)		(21,567,499)		(1,547,064)		(7)	%	(282,129)		(1,264,935)
Real estate taxes and insurance	(12,819,459)		(12,935,004)		115,545		1	%	(93,610)		209,155
Fees to affiliates	(4,158)		(8,449,715)		8,445,557		100	%	221,374		8,224,183
Depreciation and amortization	(34,051,286)		(47,564,706)		13,513,420		28	%	(807,676)		14,321,096
Interest expense	(20,279,374)		(20,628,159)		348,785		2	%	309,131		39,654
General and administrative expenses	(14,066,611)		(11,705,698)		(2,360,913)		(20)	%	3,427		(2,364,340)
Gain on sale of real estate, net	—		1,392,434		(1,392,434)		(100)	%	(1,392,434)		—
Interest income	49,382		165,495		(116,113)		(70)	%	381		(116,494)
Insurance proceeds in excess of losses incurred	375,931		112,342		263,589		235	%	—		263,589
Equity in loss from     unconsolidated joint venture	—		(16,711)		16,711		100	%	—		16,711
Fees and other income from affiliates	1,622,096		390,099		1,231,997		316	%	—		1,231,997
Loss on debt extinguishment	—		(621,451)		621,451		100	%	621,451		—
Net loss	$	(11,646,149)	$	(37,758,065)	$	26,111,916	69	%
NOI(3)	$	54,703,713	$	46,519,021	$	8,184,692	18	%
FFO(4)	$	22,246,823	$	8,430,520	$	13,816,303	164	%
MFFO(4)	$	25,649,142	$	15,217,316	$	10,431,826	69	%

________________

(1)    Represents the favorable (unfavorable) dollar amount change for the three months ended September 30, 2021, compared to the three months ended September 30, 2020, related to multifamily properties acquired, disposed of, or placed in service, on or after July 1, 2020.

(2)    Represents the favorable (unfavorable) dollar amount change for the three months ended September 30, 2021, compared to the three months ended September 30, 2020, related to multifamily properties and corporate level entities owned by us throughout both periods presented.    

(3)     NOI is a non-GAAP financial measure used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings. However, the usefulness of NOI is limited because

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it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs, certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of our properties and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs, all of which are significant economic costs. For additional information on how we calculate NOI and a reconciliation of NOI to net loss, see “—Net Operating Income.”

(4)     GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, established the measurement tool of FFO. Since its introduction, FFO has become a widely used non-GAAP financial measure among REITs. Additionally, we use modified funds from operations, or MFFO, as defined by the Institute for Portfolio Alternatives (formerly known as the Investment Program Association), or IPA, as a supplemental measure to evaluate our operating performance. MFFO is based on FFO but includes certain adjustments we believe are necessary due to changes in accounting and reporting under GAAP since the establishment of FFO. Neither FFO nor MFFO should be considered as alternatives to net loss or other measurements under GAAP as indicators of our operating performance, nor should they be considered as alternatives to cash flow from operating activities or other measurements under GAAP as indicators of liquidity. For additional information on how we calculate FFO and MFFO and a reconciliation of FFO and MFFO to net loss, see “—Funds From Operations and Modified Funds From Operations.”

Net loss

For the three months ended September 30, 2021, we had a net loss of $11,646,149 compared to a net loss of $37,758,065 for the three months ended September 30, 2020. The decrease in net loss of $26,111,916 over the comparable prior year period was due to the increase in total revenues of $6,971,385, the decrease in real estate taxes and insurance of $115,545, the decrease in fees to affiliates of $8,445,557, the decrease in depreciation and amortization expense of $13,513,420, the decrease in interest expense of $348,785, the increase in insurance proceeds in excess of losses incurred of $263,589, the decrease in loss from unconsolidated joint venture of $16,711, the increase in fees and other income from affiliates of $1,231,997 and the decrease in loss on debt extinguishment of $621,451, partially offset by the increase in operating, maintenance and management expenses of $1,547,064, the increase in general and administrative expenses of $2,360,913, the decrease in gain on sale of real estate, net of $1,392,434 and the decrease in interest income of $116,113.

Total revenues

Total revenues were $90,641,893 for the three months ended September 30, 2021, compared to $83,670,508 for the three months ended September 30, 2020. The increase of $6,971,385 was primarily due to an increase in occupancy from 95.9% as of September 30, 2020 to 96.5% as of September 30, 2021 coupled with an increase in average monthly rents from $1,172 to $1,237 during the same period. We also experienced an increase of $5,787,452 in total revenues at the multifamily properties held throughout both periods as a result of ordinary monthly rent increases and the completion of value-enhancement projects.

Operating, maintenance and management expenses

Operating, maintenance and management expenses for the three months ended September 30, 2021, were $23,114,563 compared to $21,567,499 for the three months ended September 30, 2020. The increase of $1,547,064 was primarily due to increases in payroll, information technology related expenses and repairs and maintenance during the three months ended September 30, 2021 compared to the same prior year period.

Real estate taxes and insurance

Real estate taxes and insurance expenses were $12,819,459 for the three months ended September 30, 2021, compared to $12,935,004 for the three months ended September 30, 2020. The decrease of $115,545 was primarily due to successful challenges to the assessed real estate tax values at certain properties in our portfolio.

Fees to affiliates

Fees to affiliates were $4,158 for the three months ended September 30, 2021, compared to $8,449,715 for the three months ended September 30, 2020. The net decrease of $8,445,557 was primarily due to the elimination of investment management fees, property management fees, loan coordination fees and the reimbursement of onsite personnel as a result of the Internalization Transaction.

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Depreciation and amortization

Depreciation and amortization expenses were $34,051,286 for the three months ended September 30, 2021, compared to $47,564,706 for the three months ended September 30, 2020. The decrease of $13,513,420 was primarily due to the net decrease in tenant origination and absorption costs acquired in connection with the Mergers, subsequently amortized since September 30, 2020. We expect these amounts to increase slightly in future periods as a result of anticipated future enhancements to our real estate portfolio.

Interest expense

Interest expense for the three months ended September 30, 2021, was $20,279,374 compared to $20,628,159 for the three months ended September 30, 2020. The decrease of $348,785 was primarily due to the decrease in interest expense incurred during the three months ended September 30, 2021 from the sale of one multifamily property during the three months ended September 30, 2020 and the sale of one multifamily property since September 30, 2020.

Included in interest expense is the amortization of deferred financing costs of $548,726 and $573,078, net unrealized loss from the change in fair value of interest rate cap agreements of $40,902 and $29,093, interest on capital leases of $65 and $47, amortization of net loan premiums and discounts of $(428,434) and $(431,387), credit facility commitment fees of $32,861 and $0, net of capitalized interest of $284,511 and $313,902 and interest on construction loans of $64,120 and $0, for the three months ended September 30, 2021 and 2020, respectively. The capitalized interest is included in real estate on the consolidated balance sheets. Our interest expense in future periods will vary based on the impact of changes to LIBOR or the adoption of a replacement to LIBOR, our level of future borrowings, which will depend on the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.

General and administrative expenses

General and administrative expenses for the three months ended September 30, 2021, were $14,066,611 compared to $11,705,698 for the three months ended September 30, 2020. These general and administrative costs consisted primarily of payroll costs, legal fees, IT related expenses, audit fees, other professional fees and independent director compensation. The increase of $2,360,913 was primarily due to an increase of $2,364,340 in general and administrative expenses predominantly due to payroll costs for the acquired personnel as a result of the Internalization Transaction.

Gain on sale of real estate

Gain on sale of real estate for the three months ended September 30, 2021, was $0 compared to $1,392,434 for the three months ended September 30, 2020. The change in gain on sale of real estate consisted of no gain recognized during the three months ended September 30, 2021, compared to the gain on sale from the disposition of one multifamily property at a sales price of $49,500,000 during the three months ended September 30, 2020. Our gain on sales of real estate, computed as the sales price, net of the carrying value of the real estate, selling expenses, and other ancillary costs, will vary in future periods based on the opportunity to sell properties and real estate-related investments.

Interest income

Interest income for the three months ended September 30, 2021, was $49,382 compared to $165,495 for the three months ended September 30, 2020. Interest income consisted of interest earned on our cash, cash equivalents and restricted cash deposits. In general, we expect interest income to fluctuate with the change in our cash, cash equivalents and restricted cash deposits.

Insurance proceeds in excess of losses incurred

Insurance proceeds in excess of losses incurred for the three months ended September 30, 2021, was $375,931 compared to $112,342 for the three months ended September 30, 2020. In general, we expect insurance proceeds in excess of losses incurred to be correlated to the volume and severity of insurance related incidents at our multifamily properties.

Equity in loss from unconsolidated joint venture

Equity in loss from unconsolidated joint venture for the three months ended September 30, 2021, was $0 compared to $16,711 for the three months ended September 30, 2020. Upon consummation of the SIR Merger on March 6, 2020, we acquired a 10% interest in a joint venture. Our investment in the joint venture had been accounted for as an unconsolidated joint venture under the equity method of accounting. On July 16, 2020, we sold our joint venture interest. See Note 5 (Investment in Unconsolidated Joint Venture) to our consolidated financial statements in this Quarterly Report for details.

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Fees and other income from affiliates

Fees and other income from affiliates for the three months ended September 30, 2021, was $1,622,096 compared to $390,099 for the three months ended September 30, 2020. The increase of $1,231,997 was primarily income earned pursuant to the SRI Property Management Agreements and Construction Management Agreements with affiliates of our former sponsor and the Transition Services Agreement entered into in connection with the Internalization Transaction. See Note 10 (Related Party Arrangements) to our consolidated financial statements in this Quarterly Report for details.

Loss on debt extinguishment

Loss on debt extinguishment for the three months ended September 30, 2021, was $0 compared to $621,451 for the three months ended September 30, 2020. The expenses incurred during the three months ended September 30, 2020 consisted of prepayment penalty and the expenses of the unamortized deferred financing costs related to the repayment and extinguishment of the debt in connection with the sale of one multifamily property during the three months ended September 30, 2020. The loss on debt extinguishment will vary in future periods if we repay the remaining outstanding principal prior to the scheduled maturity dates of the notes payable.

Consolidated Results of Operations for the Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020

The following table summarizes the consolidated results of operations for the nine months ended September 30, 2021 and 2020:

	For the Nine Months Ended September 30,								$ Change Due to Acquisitions or Dispositions(1)		$ Change Due to Properties Held Throughout Both Periods and Corporate Level Activity(2)
	2021		2020		Change $		Change %
Total revenues	$	259,424,343	$	217,680,042	$	41,744,301	19	%	$	34,555,616	$	7,188,685
Operating, maintenance and management	(65,213,378)		(53,783,824)		(11,429,554)		(21)	%	(8,806,436)		(2,623,118)
Real estate taxes and insurance	(41,263,876)		(35,346,220)		(5,917,656)		(17)	%	(4,903,263)		(1,014,393)
Fees to affiliates	(12,708)		(30,586,344)		30,573,636		100	%	12,731,112		17,842,524
Depreciation and amortization	(101,203,302)		(129,596,268)		28,392,966		22	%	25,022,865		3,370,101
Interest expense	(60,174,405)		(54,734,431)		(5,439,974)		(10)	%	(6,272,206)		832,232
General and administrative expenses	(37,128,402)		(19,408,854)		(17,719,548)		(91)	%	355,536		(18,075,084)
Impairment of real estate	—		(5,039,937)		5,039,937		100	%	5,039,937		—
Gain on sale of real estate, net	—		12,777,033		(12,777,033)		(100)	%	(12,777,033)		—
Interest income	252,450		553,011		(300,561)		(54)	%	(148,159)		(152,402)
Insurance proceeds in excess of losses incurred	511,291		236,754		274,537		116	%	468,755		(194,218)
Equity in loss from unconsolidated joint venture	—		(3,020,111)		3,020,111		100	%	3,020,111		—
Fees and other income from affiliates	4,651,364		390,099		4,261,265		1,092	%	—		4,261,265
Loss on debt extinguishment	—		(621,451)		621,451		100	%	621,451		—
Net loss	$	(40,156,623)	$	(100,500,501)	$	60,343,878	60	%
NOI(3)	$	152,940,297	$	120,351,797	$	32,588,500	27	%
FFO(4)	$	60,439,823	$	24,993,259	$	35,446,564	142	%
MFFO(4)	$	64,701,030	$	33,162,084	$	31,538,946	95	%

________________

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PART I — FINANCIAL INFORMATION (continued)

(1)    Represents the favorable (unfavorable) dollar amount change for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, related to multifamily properties acquired, disposed of, or placed in service, on or after January 1, 2020.

(2)    Represents the favorable (unfavorable) dollar amount change for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, related to multifamily properties and corporate level entities owned by us throughout both periods presented.    

(3)     See “—Net Operating Income” below for a reconciliation of NOI to net loss.

(4)         See “—Funds From Operations and Modified Funds From Operations” below for a reconciliation of FFO and MFFO to net loss.

Net loss

For the nine months ended September 30, 2021, we had a net loss of $40,156,623 compared to $100,500,501 for the nine months ended September 30, 2020. The decrease in net loss of $60,343,878 over the comparable prior year period was due to an increase in total revenues of $41,744,301, a decrease in fees to affiliates of $30,573,636, a decrease in depreciation and amortization expense of $28,392,966, a decrease in impairment of real estate of $5,039,937, an increase in insurance proceeds in excess of losses incurred of $274,537, a decrease in equity in loss from unconsolidated joint venture of $3,020,111, an increase in fees and other income from affiliates of $4,261,265 and a decrease in loss on debt extinguishment of $621,451, partially offset by an increase in operating, maintenance and management expenses of $11,429,554, an increase in real estate taxes and insurance of $5,917,656, an increase in interest expense of $5,439,974, an increase in general and administrative expenses of $17,719,548, a decrease in gain on sale of real estate, net of $12,777,033, and a decrease in interest income of $300,561.

Total revenues

Total revenues were $259,424,343 for the nine months ended September 30, 2021, compared to $217,680,042 for the nine months ended September 30, 2020. The increase of $41,744,301 was primarily due to the increase in total revenues of $34,555,616 due to the increase in the number of properties in our portfolio, primarily from the Mergers, which experienced a full nine months of operations in 2021. In addition, we experienced an increase of $7,188,685 in total revenues at the multifamily properties held throughout both periods as a result of an increase in occupancy, ordinary monthly rent increases and the completion of value-enhancement projects.

Operating, maintenance and management expenses

Operating, maintenance and management expenses were $65,213,378 for the nine months ended September 30, 2021, compared to $53,783,824 for the nine months ended September 30, 2020. The increase of $11,429,554 was primarily due to the increase in the number of properties in our portfolio, primarily from the Mergers, which experienced a full nine months of operations in 2021. In addition, we experienced an increase of $2,623,118 in operating, maintenance and management expenses at the multifamily properties held throughout both periods due to increases in payroll, information technology related expenses, utilities, repairs and maintenance and turnover costs.

Real estate taxes and insurance

Real estate taxes and insurance expenses were $41,263,876 for the nine months ended September 30, 2021, compared to $35,346,220 for the nine months ended September 30, 2020. The increase of $5,917,656 was primarily due to the increase in the number of properties in our portfolio, primarily from the Mergers, which experienced a full nine months of operations in 2021. In addition, we experienced an increase of $1,014,393 in real estate taxes and insurance expenses at the multifamily properties held throughout both periods.

Fees to affiliates

Fees to affiliates were $12,708 for the nine months ended September 30, 2021, compared to $30,586,344 for the nine months ended September 30, 2020. The decrease of $30,573,636 was primarily due to the elimination of investment management fees, property management fees, loan coordination fees and the reimbursement of onsite personnel as a result of costs savings in connection with the Internalization Transaction.

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PART I — FINANCIAL INFORMATION (continued)

Depreciation and amortization

Depreciation and amortization expenses were $101,203,302 for the nine months ended September 30, 2021, compared to $129,596,268 for the nine months ended September 30, 2020. The decrease of $28,392,966 was primarily due to the net decrease in tenant origination and absorption costs acquired in connection with the Mergers, subsequently amortized since September 30, 2020. In addition, we experienced a decrease of $3,370,101 in depreciation expenses at the properties held throughout both periods. We expect these amounts to increase slightly in future periods as a result of anticipated future enhancements to our real estate portfolio.

Interest expense

Interest expense for the nine months ended September 30, 2021, was $60,174,405 compared to $54,734,431 for the nine months ended September 30, 2020. The increase of $5,439,974 was due to the increase in the number of properties in our portfolio, primarily from the Mergers, and entering into the PNC MCFA in June 2020, which experienced a full nine months of expense in 2021.

Included in interest expense is the amortization of deferred financing costs of $1,646,291 and $1,382,954, net, unrealized loss on derivative instruments of $39,699 and $56,287, amortization of net debt premiums of $(1,269,484) and $(959,827), interest on capital leases of $258 and $47, closing costs associated with the refinancing of debt of $0 and $42,881, credit facility commitment fees of $98,852 and $0, net of capitalized interest of $844,577 and $576,521 and interest on construction loans of $69,515 and $0, for the nine months ended September 30, 2021 and 2020, respectively. The capitalized interest is included in real estate held for development on the consolidated balance sheets. Our interest expense in future periods will vary based on the impact of changes to LIBOR or the adoption of a replacement to LIBOR, our level of future borrowings, which will depend on the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.

General and administrative expenses

General and administrative expenses for the nine months ended September 30, 2021, were $37,128,402 compared to $19,408,854 for the nine months ended September 30, 2020. These general and administrative expenses consisted primarily of payroll costs, legal fees, IT related expenses, insurance premiums, audit fees, other professional fees and independent director compensation. The increase of $17,719,548 was primarily due to an increase of $18,075,084 in general and administrative expenses predominantly due to payroll costs for the acquired personnel as a result of the Internalization Transaction, partially offset by the $355,536 change in general and administrative expenses related to properties acquired and or disposed of since September 30, 2020.

Impairment of real estate assets

Impairment charges of real estate assets for the nine months ended September 30, 2021, were $0 compared to $5,039,937 for the nine months ended September 30, 2020. The decrease in impairment charge of $5,039,937 resulted from our efforts to actively market two multifamily properties for sale at disposition prices that were less than their carrying values during the nine months ended September 30, 2020. No impairment charges were recorded during the nine months ended September 30, 2021.

Gain on sale of real estate

Gain on sale of real estate for the nine months ended September 30, 2021, was $0 compared to $12,777,033 for the nine months ended September 30, 2020. The decrease in gain on sale of real estate was due to the gain recognized on the disposition of one multifamily property during the nine months ended September 30, 2020, compared to the disposition of no multifamily properties during the nine months ended September 30, 2021. Our gain on sale of real estate in future periods will vary based on the opportunity to sell properties and real estate-related investments.

Interest income

Interest income for the nine months ended September 30, 2021, was $252,450 compared to $553,011 for the nine months ended September 30, 2020. Interest income consisted of interest earned on our cash, cash equivalents and restricted cash deposits. In general, we expect interest income to fluctuate with the change in our cash, cash equivalents and restricted cash deposits.

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PART I — FINANCIAL INFORMATION (continued)

Insurance proceeds in excess of losses incurred

Insurance proceeds in excess of losses incurred for the nine months ended September 30, 2021, was $511,291 compared to $236,754 for the nine months ended September 30, 2020. In general, we expect insurance proceeds in excess of losses incurred to be correlated to the volume and severity of insurance related incidents at our multifamily properties.

Equity in loss from unconsolidated joint venture

Equity in loss from unconsolidated joint venture for the nine months ended September 30, 2021, was $0 compared to $3,020,111 for the nine months ended September 30, 2020. Upon consummation of the SIR Merger on March 6, 2020, we acquired a 10% interest in a joint venture. Our investment in the joint venture had been accounted for as an unconsolidated joint venture under the equity method of accounting. On July 16, 2020, we sold our joint venture interest. See Note 5 (Investment in Unconsolidated Joint Venture) to our consolidated financial statements in this Quarterly Report for details.

Fees and other income from affiliates

Fees and other income from affiliates for the nine months ended September 30, 2021, was $4,651,364 compared to $390,099 for the nine months ended September 30, 2020. The increase of $4,261,265 was solely due to income earned pursuant to the SRI Property Management Agreements and Construction Management Agreements with affiliates of our former sponsor and the Transition Services Agreement entered into in connection with the Internalization Transaction. See Note 10 (Related Party Arrangements) to our consolidated financial statements in this Quarterly Report for details.

Loss on debt extinguishment

Loss on debt extinguishment for the nine months ended September 30, 2021, was $0 compared to $621,451 for the nine months ended September 30, 2020. The expenses incurred during the nine months ended September 30, 2020 consisted of prepayment penalty and the expenses of the unamortized deferred financing costs related to the repayment and extinguishment of the debt in connection with the sale of one multifamily property during the nine months ended September 30, 2020. The loss on debt extinguishment will vary in future periods if we repay the remaining outstanding principal prior to the scheduled maturity dates of the notes payable.

Property Operations for the Three Months Ended September 30, 2021, Compared to the Three Months Ended September 30, 2020

For purposes of evaluating comparative operating performance, we categorize our properties as “same-store” or “non-same-store.” A “same-store” property is a property that was owned at July 1, 2020. A “non-same-store” property is a property that was acquired, placed into service or disposed of after July 1, 2020. As of September 30, 2021, 68 of our properties were categorized as same-store properties.

The following table presents the same-store results from operations for the three months ended September 30, 2021 and 2020:

	For the Three Months Ended September 30,
	2021		2020		Change $		Change %
Same-store properties:
Revenues	$	87,552,950	$	81,765,498	$	5,787,452	7.1	%
Operating expenses(1)	34,426,783		36,136,366		(1,709,583)		(4.7)	%
Net operating income	53,126,167		45,629,132		7,497,035		16.4	%
Non-same-store properties:
Net operating income	1,577,546		889,889		687,657
Total Net operating income(2)	$	54,703,713	$	46,519,021	$	8,184,692

________________

(1)Same-store operating expenses include operating, maintenance and management expenses, real estate taxes and insurance, certain fees to affiliates and property-level general and administrative expenses.

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(2)See “—Net Operating Income” below for a reconciliation of NOI to net loss.

Net Operating Income

Same-store net operating income for the three months ended September 30, 2021, was $53,126,167 compared to $45,629,132 for the three months ended September 30, 2020. The 16.4% increase in same-store net operating income was a result of a 7.1% increase in same-store rental revenues and a 4.7% decrease in same-store operating expenses.

Revenues

Same-store revenues for the three months ended September 30, 2021, were $87,552,950 compared to $81,765,498 for the three months ended September 30, 2020. The 7.1% increase in same-store revenues was primarily a result of an increase in same-store occupancy from 95.9% as of September 30, 2020, to 96.6% as of September 30, 2021 and increases in average monthly rents from $1,174 as of September 30, 2020 to $1,232 as of September 30, 2021.

Operating Expenses

Same-store operating expenses for the three months ended September 30, 2021, were $34,426,783 compared to $36,136,366 for the three months ended September 30, 2020. The decrease in same-store operating expenses was primarily attributable to a decrease in property management fees as a result of the Internalization Transaction in addition to a decrease in real estate taxes as a result of successful challenges to assessed property values and a decrease in property related general and administrative expenses, partially offset by increases in insurance and repairs and maintenance costs during the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

Net Operating Income

NOI is a non-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties, to determine trends in earnings and to compute the fair value of our properties as it is not affected by (1) the cost of funds, (2) acquisition costs as applicable, (3) non-operating fees to affiliates, (4) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP, (5) general and administrative expenses (including excess property insurance) and non-operating other gains and losses that are specific to us or (6) impairment of real estate assets or other investments. The cost of funds is eliminated from net income (loss) because it is specific to our particular financing capabilities and constraints. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future. Acquisition costs and non-operating fees to affiliates are eliminated because they do not reflect continuing operating costs of the property owner.

Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our multifamily properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale which will usually change from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed purchases or sales. We believe that eliminating these costs from net income (loss) is useful because the resulting measure captures the actual revenue generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs.

However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs as applicable, certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of properties, impairment charges and non-operating other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income which further limits its usefulness.

NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income (loss) as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income (loss) computed in accordance with GAAP and discussions elsewhere in “—Results of

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Operations” regarding the components of net income (loss) that are eliminated in the calculation of NOI. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.

The following is a reconciliation of our NOI to net loss for the three and nine months ended September 30, 2021 and 2020 computed in accordance with GAAP:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Net loss	$	(11,646,149)	$	(37,758,065)	$	(40,156,623)	$	(100,500,501)
Fees to affiliates(1)	—		5,648,468		—		21,143,650
Depreciation and amortization	34,051,286		47,564,706		101,203,302		129,596,268
Interest expense	20,279,374		20,628,159		60,174,405		54,734,431
Loss on debt extinguishment	—		621,451		—		621,451
General and administrative expenses	14,066,611		11,705,698		37,128,402		19,408,854
Gain on sale of real estate	—		(1,392,434)		—		(12,777,033)
Other gains(2)	(425,313)		(277,837)		(763,741)		(789,765)
Adjustments for investment in unconsolidated joint venture(3)	—		163,001		—		1,816,220
Other-than-temporary impairment of investment in unconsolidated joint venture(4)	—		—		—		2,442,411
Impairment of real estate(5)	—		—		—		5,039,937
Fees and other income from affiliates(6)	(1,622,096)		(390,099)		(4,651,364)		(390,099)
Affiliated rental revenue(7)	—		5,973		5,916		5,973
Net operating income	$	54,703,713	$	46,519,021	$	152,940,297	$	120,351,797

_______________

(1)        Fees to affiliates for the three and nine months ended September 30, 2021, exclude property management fees of $4,158 and $12,708, respectively, that are included in NOI. Fees to affiliates for the three and nine months ended September 30, 2020, exclude property management fees of $1,618,611 and $5,484,468 and other reimbursements of $1,182,636 and $3,958,226, respectively, that are included in NOI.

(2)    Other gains for the three and nine months ended September 30, 2021 and 2020, include non-recurring insurance claim recoveries and interest income that are not included in NOI.

(3) Reflects adjustment to add back our noncontrolling interest share of the adjustments to reconcile our net loss attributable to common stockholders to NOI for our equity investment in the unconsolidated joint venture, which principally consisted of depreciation, amortization and interest expense incurred by the joint venture as well as the amortization of outside basis difference. The adjustment for investment in unconsolidated joint venture also includes a gain on sale of the investment in unconsolidated joint venture of $66,802 for the three and nine months ended September 30, 2020.

(4) Reflects adjustment to add back an other-than-temporary impairment of $2,442,411 in the nine months ended September 30, 2020 related to our investment in BREIT Steadfast MF JV LP (our “Joint Venture”). See Note 5 (Investment in Unconsolidated Joint Venture) to our consolidated unaudited financial statements in this Quarterly Report for details.

(5) Reflects adjustments to add back impairment charges in the nine months ended September 30, 2020 related to our efforts to actively market two multifamily properties for sale at disposition prices that were less than their carrying values.

(6) Reflects adjustment to exclude income earned pursuant to the Transition Services Agreement, Property Management Agreements and Construction Management Agreements entered into in connection with the Internalization Transaction.

(7) Reflects adjustment to add back rental revenue earned from a consolidated entity following the Internalization Transaction that represent intercompany transactions that are eliminated in consolidation.

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PART I — FINANCIAL INFORMATION (continued)

Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, NAREIT, an industry trade group, has promulgated a measure known as FFO, which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income (loss) as determined under GAAP.

We define FFO, a non-GAAP financial measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in December 2018, or the White Paper. The White Paper defines FFO as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of property and non-cash impairment charges of real estate related investments, plus real estate related depreciation and amortization, cumulative effects of accounting changes and after adjustments for unconsolidated partnerships and joint ventures. According to the White Paper, while the majority of equity REITs measure FFO in accordance with NAREIT’s definition, there are variations in the securities to which the reported NAREIT-defined FFO applies (e.g., all equity securities, all common shares, all common shares less shares held by non-controlling interests). While each of these metrics may represent FFO as defined by NAREIT, accurate labeling with respect to applicable securities is important, particularly as it relates to the labeling of the FFO metric and in the reconciliation of GAAP net income (loss) to FFO.

In calculating FFO, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. We adopted Accounting Standards Update, or ASU, 2016-02, Leases, or ASU 2016-02 on January 1, 2019, which requires us, as a lessee, to recognize a liability for obligations under a lease contract and a right-of-use, or ROU, asset. The carrying amount of the ROU asset is amortized over the term of the lease. Because we have no ownership rights (current or residual) in the underlying asset, NAREIT concluded that the amortization of the ROU asset should not be added back to GAAP net income (loss) in calculating FFO. This amortization expense is included in FFO. The White Paper also states that non-real estate depreciation and amortization such as computer software, company office improvements, furniture and fixtures, and other items commonly found in other industries are required to be recognized as expenses by GAAP in the calculation of net income and, similarly, should be included in FFO.

However, FFO, and MFFO as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

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Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation.

Due to the above factors and other unique features of publicly registered, non-listed REITs, the IPA, an industry trade group, has standardized a measure known as MFFO, which the IPA has recommended as a supplemental measure for publicly registered, non-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a public, non-listed REIT having the characteristics described above. MFFO is not equivalent to our net income or loss as determined under GAAP. We believe that, because MFFO excludes costs that we consider more reflective of investing activities and other non-operating items included in FFO and also excludes acquisition fees and expenses that are not capitalized, as discussed below, and affect our operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring our properties and once our portfolio is in place. By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our offering has been completed and our properties have been acquired. We also believe that MFFO is a recognized measure of sustainable operating performance by the public, non-listed REIT industry. Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our offering and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our offering has been completed and properties have been acquired, as it excludes acquisition costs that have a negative effect on our operating performance during the periods in which properties are acquired.

We define MFFO, a non-GAAP financial measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized. We do not retain an outside consultant to review all our hedging agreements. Inasmuch as interest rate hedges are not a fundamental part of our operations, we believe it is appropriate to exclude such non-recurring gains and losses in calculating MFFO, as such gains and losses are not reflective of on-going operations.

Our MFFO calculation complies with the Practice Guideline described above, except with respect to certain acquisition fees and expenses as discussed below. In calculating MFFO, we exclude acquisition related expenses, amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Historically under GAAP, acquisition fees and expenses were characterized as operating expenses in determining operating net income. However, pursuant to Accounting Standards Codification, or ASC 805-50, Business Combinations — Related Issues, or ASC 805, acquisition fees and expenses are capitalized and depreciated under certain conditions. Prior to the completion of the Internalization Transaction, these expenses were paid in cash by us. All paid acquisition fees and expenses had negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties were generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. The acquisition of properties, and the corresponding acquisition fees and expenses, was the key operational feature of our business plan to generate operational income and cash flow to fund distributions to our stockholders. Further, under GAAP, certain

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PART I — FINANCIAL INFORMATION (continued)

contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of derivatives and gains and losses from dispositions of assets as non-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective of on-going operations and are therefore typically adjusted for when assessing operating performance.

Our management uses MFFO and the adjustments used to calculate MFFO in order to evaluate our performance against other public, non-listed REITs with varying targeted exit strategies. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate MFFO allow us to present our performance in a manner that reflects certain characteristics that are unique to public, non-listed REITs, such as defined acquisition period and targeted exit strategy, and hence that the use of such measures is useful to investors. By excluding expensed acquisition costs, that are not capitalized, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

Presentation of this information is intended to provide useful information to investors as they compare the operating performance to that of other public, non-listed REITs, although it should be noted that not all public, non-listed REITs calculate FFO and MFFO the same way, so comparisons with other public, non-listed REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. MFFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining MFFO.

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across the non-listed REIT industry and in response to such standardization we may have to adjust our calculation and characterization of FFO or MFFO accordingly.

Our calculation of FFO and MFFO is presented in the following table for the three and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Reconciliation of net loss to MFFO:
Net loss	$	(11,646,149)	$	(37,758,065)	$	(40,156,623)	$	(100,500,501)
Depreciation of real estate assets	33,320,641		33,055,972		99,073,405		89,122,949
Amortization of lease-related costs(1)	572,331		14,431,485		1,523,041		40,392,592
Gain on sale of real estate, net	—		(1,392,434)		—		(12,777,033)
Impairment of real estate(2)	—		—		—		5,039,937
Impairment of unconsolidated joint venture(3)	—		—		—		2,442,411
Adjustments for investment in unconsolidated          joint venture(4)	—		93,562		—		1,272,904
FFO	22,246,823		8,430,520		60,439,823		24,993,259
Acquisition fees and expenses(5)(6)	3,363,088		6,137,923		4,226,522		7,495,352
Unrealized loss on derivative instruments	40,902		29,093		39,699		56,287
Loss on debt extinguishment	—		621,451		—		621,451
Amortization of below market leases	(1,671)		(1,671)		(5,014)		(4,265)
MFFO	$	25,649,142	$	15,217,316	$	64,701,030	$	33,162,084

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________________

(1)Amortization of lease-related costs for the three and nine months ended September 30, 2021 and 2020, exclude amortization of operating lease ROU assets of $3,367 and $10,101 and $3,367 and $6,845, respectively, and exclude the amortization of Property Management Agreements acquired in connection with the Internalization Transaction of $138,890 and $552,512 and $71,392 and $71,392, respectively, that are included in FFO.

(2)Reflects adjustments to add back impairment charges in the nine months ended September 30, 2020 related to our efforts to actively market two multifamily properties for sale at disposition prices that were less than their carrying values during the nine months ended September 30, 2020.

(3)Reflects adjustments to add back impairment charges in the nine months ended September 30, 2020 related to our investment in our Joint Venture. See Note 5 (Investment in Unconsolidated Joint Venture) to our consolidated unaudited financial statements in this Quarterly Report for details.

(4)Reflects adjustments to add back our noncontrolling interest share of the adjustments to reconcile our net loss attributable to common stockholders to FFO for our equity investment in the unconsolidated joint venture, which principally consisted of depreciation and amortization incurred by the joint venture as well as the amortization of outside basis difference and a gain on sale of the investment in unconsolidated joint venture of $66,802 for the three and nine months ended September 30, 2020.

(5)By excluding expensed acquisition costs that are not capitalized, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our Former Advisor or third parties and are capitalized and depreciated under certain conditions. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to our stockholders.

(6)Acquisition fees and expenses for the three and nine months ended September 30, 2021 and 2020 include acquisition expenses of $3,363,088 and $4,226,522 and $6,137,923 and $7,495,352, respectively, which did not meet the criteria for capitalization under ASC 805, and were recorded in general and administrative expenses in the accompanying consolidated statements of operations. These expenses largely pertained to professional services fees incurred in connection with the ongoing pursuit of strategic alternatives and the acquisition expenses related to real estate projects which did not come to fruition.

FFO and MFFO may be used to fund all or a portion of certain capitalizable items that are excluded from FFO and MFFO, such as tenant improvements, building improvements and deferred leasing costs.

Related-Party Transactions and Agreements

We have entered into agreements with our Former Sponsor and its affiliates, including in connection with the Internalization Transaction. Prior to the Internalization Transaction, we paid certain fees to, or reimbursed certain expenses of, paid other consideration for the performance of services provided to our Former Advisor or its affiliates for acquisition and advisory fees and expenses, financing coordination fees, organization and offering costs, sales commissions, dealer manager fees, asset and property management fees and expenses, leasing fees and reimbursement of certain operating costs. See Note 10 (Related Party Arrangements) to the consolidated financial statements included in this Quarterly Report for a discussion of the various related-party transactions, agreements and fees.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We may be exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund the acquisition, expansion and refinancing of our real estate investment portfolio and operations. We may be also exposed to the effects of changes in interest rates as a result of the acquisition and origination of mortgage, mezzanine, bridge and other loans. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We have managed and will continue to manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that floating rate exposure is kept at an acceptable level. In addition, we may utilize a variety of financial instruments, including interest rate caps, collars, floors and swap

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agreements, in order to limit the effects of changes in interest rates on our operations. When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for distributions to holders of our common stock and that the losses may exceed the amount we invested in the instruments.

We borrow funds and make investments at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. At September 30, 2021, the fair value of our fixed rate debt was $1,951,113,474 and the carrying value of our fixed rate debt was $1,851,126,751. The fair value estimate of our fixed rate debt was estimated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated at September 30, 2021. As we expect to hold our fixed rate instruments to maturity and the amounts due under such instruments would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instruments, would have a significant impact on our operations.

Conversely, movements in interest rates on our variable rate debt will change our future earnings and cash flows, but not significantly affect the fair value of those instruments. However, changes in required risk premiums will result in changes in the fair value of floating rate instruments. At September 30, 2021, the fair value of our variable rate debt was $279,635,713 and the carrying value of our variable rate debt was $284,115,373. Based on interest rates as of September 30, 2021, if interest rates are 100 basis points higher during the 12 months ending September 30, 2022, interest expense on our variable rate debt would increase by $2,911,995 and if interest rates are 100 basis points lower during the 12 months ending September 30, 2022, interest expense on our variable rate debt would decrease by $2,324,317.

At September 30, 2021, the weighted-average interest rate of our fixed rate debt and variable rate debt was 3.95% and 2.08%, respectively. The weighted-average interest rate of our blended fixed and variable rates was 3.70% at September 30, 2021. The weighted-average interest rate represents the actual interest rate in effect at September 30, 2021 (consisting of the contractual interest rate), using interest rate indices as of September 30, 2021, where applicable.

We may also be exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and, therefore, do not have credit risk. We will seek to minimize the credit risk in derivative instruments by entering into transactions with high-quality counterparties. As of September 30, 2021, we did not have counterparty risk on our interest rate cap agreements as the underlying variable rates for each of our interest rate cap agreements as of September 30, 2021 were not in excess of the capped rates. See also Note 14 (Derivative Financial Instruments) to our unaudited consolidated financial statements included in this Quarterly Report.

Item 4. 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 reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily are required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, an evaluation as of September 30, 2021, was conducted under the supervision and with the participation of our management, including our chief executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and principal financial officer concluded that our disclosure controls and procedures, as of September 30, 2021, were effective at the reasonable assurance level.

Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

Item 1. Legal Proceedings

From time to time, we are party to legal proceedings that arise in the ordinary course of our business. Except as described below, management is not aware of any legal proceedings of which the outcome is reasonably possible 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 government agencies.

On October 18, 2021, and October 21, 2021, the Company and each member of the board of directors was named as a defendant in two separate complaints filed in the United States District Court Central District of California Southern Division and in the United States District Court Southern District of New York, (the “Complaints”), respectively. Each Complaint, filed on behalf of someone claiming to be a stockholder of the Company, accuses the defendants of certain violations of Section 14(a) of the Securities Exchange Act of 1934 in connection with the proxy statement mailed to our stockholders soliciting proxies for the IRT Merger. We disagree with the allegations and intend to vigorously defend the Company and its directors.

Item 1A. Risk Factors

The risks set out below represent changes to risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020. The information in this Quarterly Report on Form 10-Q should be read in conjunction with the other factors described in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020.

Unless otherwise stated in these risk factors or the context otherwise requires, references in these risk factors to:

•“combined company” are to IRT and its consolidated subsidiaries after consummation of the pending IRT Mergers;

•“IRT parties” are to IRT, IRT OP and IRT Merger Sub;

•“NYSE” are to the New York Stock Exchange;

•“STAR common stock” are to shares of our common stock, par value $0.01 per share;

•“STAR OP Units” are to units of limited partnership interest in the Operating Partnership; and

•“STAR parties” are to both the Company and the Operating Partnership.

Risks Relating to the IRT Mergers

The IRT Mergers may not be consummated on the terms or timeline currently contemplated, or at all. Consummation of the IRT Mergers is subject to many conditions and if these conditions are not satisfied or waived, the IRT Mergers will not be consummated, which could adversely affect the businesses of the Company, and, in certain circumstances, result in the requirement that the Company pay a termination fee or certain expense reimbursements.

Consummation of the IRT Mergers is subject to certain conditions, including: (1) the receipt of required approvals from the Company’s common stockholders and from IRT’s common stockholders, (2) the authorization for listing of the shares of IRT common stock to be issued in the IRT Mergers or reserved for issuance in connection therewith on the New York Stock Exchange, (3) the absence of any order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the IRT Mergers or any law that makes the consummation of the IRT Mergers illegal, (4) the accuracy of each party’s representations and warranties, subject in most cases to materiality or material adverse effect qualifications, (5) material compliance with each party’s covenants and (6) the receipt by each of the Company and IRT of an opinion to the effect that the Company Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code, and of an opinion as to the qualification of the Company and IRT, respectively, as a REIT under the Internal Revenue Code and (7) the receipt of the Company and IRT of certain lender consents.

The Company cannot provide assurance that the conditions to consummation of the IRT Mergers will be satisfied or waived, and accordingly, that the IRT Mergers will be consummated on the terms or timeline that the parties anticipate, or at all. The Company or IRT may terminate the IRT Merger Agreement under certain circumstances, including, among other reasons, if the IRT Mergers are not consummated by January 31, 2022.

Failure to consummate the IRT Mergers may adversely affect the the Company’s results of operations, financial condition and business prospects for many reasons, including, among others:

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•the Company will have incurred substantial costs relating to the IRT Mergers, such as legal, accounting, financial advisor, filing, printing and mailing fees and integration costs that have already been incurred or will continue to be incurred until the closing of the IRT Mergers, which could adversely affect its financial condition, results of operations and ability to make distributions to its stockholders and to pay the principal of and interest on its outstanding indebtedness;

•the IRT Mergers, whether or not they close, will divert the attention of the management of the Company instead of enabling them to more fully pursue other opportunities that could be beneficial to the Company, without realizing any of the benefits of having consummated the IRT Mergers or the other transactions contemplated by the IRT Merger Agreement; and

•any reputational harm due to the adverse perception of any failure to successfully consummate the IRT Mergers. In addition, if the IRT Merger Agreement is terminated under certain circumstances specified therein, the Company may be required to pay IRT a $74 million termination fee and expense reimbursement of up to $10 million; provided, however, any termination fee payable will be deducted by the expense reimbursement amount.

The Exchange Ratio is fixed and will not be adjusted in the event of any change in the price of IRT’s common stock or in the relative values of the Company and IRT.

At the effective time of the Company Merger, each issued and outstanding share of STAR common stock will be converted into the right to receive 0.905 newly issued shares of IRT common stock (the “Exchange Ratio”), with cash paid in lieu of fractional shares. At the effective time of the Partnership Merger, each issued and outstanding unit of Operating Partnership interest will be converted into the right to receive 0.905 common units of IRT OP. The Exchange Ratio is fixed and will not be adjusted for changes in the market price of IRT common stock or in the relative values of the Company and IRT. The price of IRT common stock at the closing of the IRT Mergers may vary from its price on July 26, 2021, the date the IRT Merger Agreement was executed. Changes in IRT’s common stock price prior to consummation of the IRT Mergers will affect the market value of the merger consideration, which may be more or less than the fair value of the Company’s net assets on the closing date. Changes in IRT’s common stock price may result from a variety of factors (many of which are beyond the control of the Company and IRT), including the following factors:

•changes in IRT’s business, operations, assets, liabilities or prospects;

•changes in market assessments of the business, operations, financial position and prospects of IRT and the Company;

•market assessments of the likelihood that the IRT Mergers will be consummated;

•interest rates, general market and economic conditions and other factors generally affecting the price of IRT common stock;

•federal, state and local legislation, governmental regulation and legal developments in the businesses in which IRT operates; and

•other factors beyond the control of IRT or the Company, including those described under this heading “Risk Factors.”

The pendency of the IRT Mergers could adversely affect the business and operations of the Company and IRT.

In connection with the pending IRT Mergers, current and prospective employees of the Company and IRT may experience uncertainty about their future roles with IRT following the IRT Mergers, which may materially adversely affect the ability of each of the Company and IRT to attract and retain key personnel during the pendency of the IRT Mergers. In addition, due to operating covenants in the IRT Merger Agreement, each of the Company and IRT may be unable (without the other party’s prior written consent), during the pendency of the IRT Mergers, to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions, even if such actions would prove beneficial. Similarly, some current or prospective tenants, operators or vendors of each of the Company and IRT may delay or defer decisions, which could adversely affect the revenues, earnings, funds from operations, cash flows and expenses of the Company and IRT, regardless of whether the IRT Mergers are consummated.

The IRT Mergers and related transactions are subject to certain closing conditions, including approval by stockholders of both the Company and IRT.

In order for the IRT Mergers to be consummated, the Company’s common stockholders must approve the Company Merger, which requires the affirmative vote of the holders of at least a majority of the outstanding shares of STAR common stock entitled to vote on such proposal. In addition, IRT common stockholders must approve the issuance of IRT common stock

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in the IRT Mergers by the affirmative vote of the holders of at least a majority of the votes cast on such proposal. This approval by IRT stockholders is required under applicable NYSE rules.

The IRT Mergers may not be accretive, and may be dilutive, to IRT’s earnings per share, which may negatively affect the market price of IRT common stock received in the merger.

Because shares of IRT common stock will be issued in the IRT Mergers, it is possible that, although IRT currently expects the IRT Mergers to be accretive to earnings per share in the first full year excluding one-time charges, the IRT Mergers may be dilutive to IRT’s earnings per share, which could negatively affect the market price of shares of IRT common stock.

In connection with the completion of the IRT Mergers, based on the number of issued and outstanding shares of STAR common stock as of July 26, 2021, IRT would issue approximately 99.8 million shares of IRT common stock. The issuance of these new shares of IRT common stock could have the effect of depressing the market price of shares of IRT common stock through dilution of earnings per share or otherwise.

In addition, future events and conditions could increase the dilution that is currently projected, including adverse changes in market conditions, additional transaction and integration related costs and other factors such as the failure to realize some or all of the benefits anticipated in the IRT Mergers. Any dilution of, or delay of any accretion to, IRT’s earnings per share could cause the price of shares of IRT common stock to decline or grow at a reduced rate.

The IRT Merger Agreement contains provisions that could discourage a potential competing acquiror of the Company from making a favorable proposal, and, in specified circumstances, could require the Company to make a substantial termination payment to IRT.

The IRT Merger Agreement contains provisions that, subject to limited exceptions, restrict the ability of each of the Company and IRT to initiate, solicit, knowingly encourage or facilitate competing third-party proposals to effect, among other things, a merger, reorganization, share sale, share exchange, asset sale, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving any purchase or sale of 20% or more of the consolidated assets of the Company or IRT. In addition, either the Company or IRT generally has an opportunity to offer to modify the terms of the IRT Merger Agreement in response to any competing “acquisition proposal” that may be made to the other party before the board of directors of such other party may withdraw or modify its recommendation in response to such competing acquisition proposal or may terminate the IRT Merger Agreement to enter into such a competing acquisition proposal. In some circumstances, on termination of the IRT Merger Agreement, one of the parties may be required to pay a substantial termination fee ($74 million if the fee is payable by the Company to the IRT parties and $74 million if the fee is payable by IRT to the STAR parties), and expense reimbursement of up to $10 million; provided, however, any termination fee payable will be reduced by the expense reimbursement amount paid, if any.

These provisions could discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of the Company from considering or proposing such an acquisition, even if it were prepared to pay consideration with a higher value than the value expected to be received by the Company through the IRT Mergers, or might result in a potential competing acquiror proposing to pay a lower price for the Company than it might otherwise have proposed to pay because of the added expense of the termination fee and expense reimbursement that may become payable in certain circumstances under the IRT Merger Agreement.

If the IRT Merger Agreement is terminated and after the termination the Company seeks another business combination, the Company may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the transactions contemplated by the IRT Merger Agreement.

The IRT Mergers will result in changes to the board of directors and management that may affect the strategy and operations of the combined company.

Upon consummation of the IRT Mergers, Scott F. Schaeffer, currently IRT’s Chairman of the Board and Chief Executive Officer, will continue in these positions for the combined company; James J. Sebra, currently IRT’s Chief Financial Officer, will continue in this position for the combined company; Farrell M. Ender, currently IRT’s President, will continue in this position for the combined company; Jessica K. Norman, currently IRT’s Executive Vice President and General Counsel, will serve as Chief Legal Officer of the combined company; and Ella S. Neyland, currently the Company’s President, Chief Financial Officer and Treasurer, will serve as Chief Operating Officer of the combined company. In addition, upon consummation of the IRT Mergers, the board of directors of the combined company will be comprised of the following five incumbent directors of the Company’s board of directors and the following five incumbent directors of IRT’s board of directors: Stephen R. Bowie, Ned W. Brines, Ana Marie del Rio, Ella S. Neyland and Thomas H. Purcell; and Scott F. Schaeffer, Richard D. Gebert, Melinda H. McClure, DeForest Blake Soaries Jr. and Lisa Washington, respectively.This new

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composition of the board of directors and executive management team may affect the combined company’s business strategy and operating decisions following the closing of the IRT Mergers. In addition, there can be no assurances that the new board of directors and executive management team will function effectively as a team and that there will not be any adverse effects on the combined company’s business as a result.

An adverse outcome in any litigation or other legal proceedings relating to the IRT Merger Agreement, or the transactions contemplated thereby, could have a material adverse impact on the businesses of the Company and IRT and their ability to consummate the transactions contemplated by the IRT Merger Agreement.

Transactions similar to the IRT Mergers are frequently the subject of litigation or other legal proceedings, including actions alleging that either parties’ board of directors breached their respective duties to their stockholders or other equity holders by entering into a merger agreement, by failing to obtain a greater value in the transaction for their stockholders or other equity holders or otherwise or any other claims (contractual or otherwise) arising out of a merger or the transactions related thereto. If litigation or other legal proceedings are brought against the Company, IRT or their respective boards of directors or subsidiaries in connection with the IRT Merger Agreement, or the transactions contemplated thereby, the respective parties to the proceeding intend to defend against such actions but they may not be successful in doing so. An adverse outcome in such matters, as well as the costs and efforts of a defense, even if successful, could have a material adverse effect on the Company’s or IRT’s ability to consummate the IRT Mergers or their respective business, results of operation or financial position, including through the possible diversion of either company’s resources or distraction of key personnel.

Directors and executive officers of the Company have interests in the IRT Mergers that are different from, or in addition to, the interests of the Company’s other stockholders.

Directors and executive officers of the Company have interests in the IRT Mergers that are different from, or in addition to, the interests of the Company’s other stockholders generally. These interests include, among others: severance payments under their employment agreements if their employment is terminated in a qualifying termination following closing of the IRT Mergers; certain of the unvested restricted shares of STAR common stock held by the Company’s directors and executive officers will vest upon closing of the IRT Mergers; and rights to ongoing indemnification and insurance coverage by IRT as the surviving company for acts or omissions occurring prior to the IRT Mergers. The Company’s board of directors was aware of and considered those interests, among other matters, in reaching its decision to approve and adopt the IRT Merger Agreement and the IRT Mergers, and to recommend the approval of the IRT Merger Agreement to the Company’s stockholders. These interests, among other things, may have influenced the directors and executive officers of the Company to support or approve the IRT Mergers.

The fairness opinion obtained from the financial advisor to the Company’s Board will not reflect subsequent developments.

In connection with the proposed IRT Mergers, the Company’s Board received an oral opinion on July 24, 2021 from RBC Capital Markets, LLC, later confirmed by delivery of a written opinion dated as of July 26, 2021, as to the fairness, from a financial point of view and as of such date, of the Exchange Ratio to the holders (other than IRT and its affiliates) of STAR common stock, which opinion was based on and subject to the various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken. The opinion does not reflect developments that may occur or may have occurred after the date of the opinion, including changes to the operations and prospects of the Company or IRT, changes in general market and economic conditions or regulatory or other factors. Any such changes, or other factors on which the opinions are based, may materially alter or affect the relative values of the Company and IRT.

Litigation challenging the Company Merger may increase transaction costs and prevent the Company Merger from becoming effective or from becoming effective within the expected time frame.

If any stockholder files a lawsuit challenging the Company Merger, the Company and IRT can provide no assurances as to the outcome of any such lawsuit, including the costs associated with defending these claims or any other liabilities that may be incurred in connection with the litigation or settlement of these claims. If plaintiffs are successful in obtaining an injunction prohibiting the parties from completing the Company Merger on the agreed-upon terms, such an injunction may prevent the completion of the Company Merger in the expected time frame or may prevent it from being completed altogether. Whether or not any such plaintiffs’ claims are successful, this type of litigation is often expensive and diverts management’s attention and resources, which could adversely affect the operations of each company’s business.

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Risks Relating to the Combined Company Following the IRT Mergers

The combined company expects to incur substantial expenses related to the IRT Mergers and the transactions contemplated by the IRT Merger Agreement.

The combined company expects to incur substantial expenses in consummating the IRT Mergers and integrating the business, operations, networks, systems, technologies, policies and procedures of the Company and IRT. There are a large number of systems that must be integrated or separated in connection with the IRT Mergers, and the other transactions contemplated by the IRT Merger Agreement, including leasing, billing, management information, purchasing, accounting and finance, sales, payroll and benefits, fixed asset, lease administration and regulatory compliance. While the Company and IRT have assumed that a certain level of transaction and integration expenses would be incurred, there are a number of factors beyond their control that could affect the total amount or the timing of their integration expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. The expenses in connection with the IRT Mergers and the transactions contemplated by the IRT Merger Agreement are expected to be significant, although the aggregate amount and timing of such charges are uncertain at present.

Following the IRT Mergers, the combined company may be unable to integrate the businesses of the Company and IRT successfully or realize the anticipated synergies and related benefits of the IRT Mergers and the transactions contemplated by the IRT Merger Agreement or do so within the anticipated time frame.

The IRT Mergers involve the combination of the Company and IRT, two companies which currently operate as independent companies. In addition, the Company recently completed the Internalization Transaction, pursuant to which it internalized its previously externalized management functions. The combined company will be required to devote significant management attention and resources to integrating their business practices and operations. Potential difficulties that the Company and IRT may encounter in the integration process include the following:

•the inability to successfully combine the businesses of the Company and IRT, particularly in light of the Internalization Transaction, in a manner that permits the combined company to achieve the cost savings anticipated to result from the IRT Mergers, which would result in some anticipated benefits of the IRT Mergers not being realized in the time frame currently anticipated or at all;

•loss of revenue as a result of certain residents of either of the Company or IRT deciding not to do business with the combined company;

•the complexities associated with managing the combined company out of multiple locations and integrating personnel from the two companies;

•the additional complexities of combining two companies with different histories, regulatory restrictions, markets and customer bases;

•the failure to retain key employees of either the Company or IRT;

•potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the IRT Mergers and the transactions contemplated by the IRT Merger Agreement; and

•performance shortfalls at one or both of the companies as a result of the diversion of management’s attention caused by consummating the IRT Mergers and integrating the Company’s and IRT’s operations into the combined company.

For all these reasons, you should be aware that it is possible that the integration process could result in the distraction of the combined company’s management, the disruption of the combined company’s ongoing business or inconsistencies in the combined company’s services, standards, controls, procedures and policies, any of which could adversely affect the ability of the combined company to maintain relationships with tenants, customers, vendors, joint venture partners and employees or to achieve the anticipated benefits of the IRT Mergers, or could otherwise adversely affect the business and financial results of the combined company.

The combined company’s anticipated level of indebtedness will increase substantially upon consummation of the IRT Mergers and may increase the related risks IRT now faces.

Upon consummation of the IRT Mergers, the combined company intends to assume and/or refinance certain indebtedness of the Company and the Operating Partnership and, as a result, IRT’s consolidated indebtedness will increase substantially and it will be subject to increased risks associated with debt financing, including an increased risk that IRT’s cash flows could be insufficient to meet required payments on its indebtedness or to continue to pay dividends on its common stock. On September 30, 2021, IRT had consolidated indebtedness of approximately $1.02 billion. On September 30, 2021, the Company had

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consolidated indebtedness of approximately $2.14 billion. Taking into account IRT’s consolidated indebtedness as of September 30, 2021, and the assumption, in the IRT Mergers, of the Company’s consolidated indebtedness at fair value as of September 30, 2021, the pro forma total consolidated indebtedness of the combined company, as of September 30, 2021, would have been approximately $3.25 billion if the IRT Mergers had been consummated on September 30, 2021.

The combined company’s increased indebtedness could have important consequences to holders of its common stock, including:

•increasing the combined company’s vulnerability to general adverse economic and industry conditions;

•limiting the combined company’s ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements;

•requiring the combined company to use a substantial portion of its cash flow from operations for the payment of principal and interest on its indebtedness, thereby reducing its ability to use cash flow to fund working capital, acquisitions, capital expenditures and general corporate requirements;

•limiting the combined company’s flexibility in planning for, or reacting to, changes in its business and its industry and economic conditions; and

•putting the combined company at a disadvantage compared to its competitors with less indebtedness.

Additionally, if the combined company defaults under a debt instrument, it will automatically be in default under any other debt instrument that has cross-default provisions and the holders of all such indebtedness may be entitled to demand its immediate repayment. If the combined company defaults under a secured debt instrument, it may lose any property securing that indebtedness.

The combined company may need to incur additional indebtedness in the future.

In connection with executing its business strategy following the IRT Mergers, the combined company expects to evaluate the possibility of acquiring additional properties and making strategic investments, and it may elect to finance these endeavors by incurring additional indebtedness. The amount of such indebtedness could have material adverse consequences for the combined company following the IRT Mergers, including hindering its ability to adjust to changing market, industry or economic conditions; limiting its ability to access the capital markets to refinance maturing debt or to fund acquisitions; limiting the amount of free cash flow available for future operations, acquisitions, dividends, stock repurchases or other uses; making the combined company more vulnerable to economic or industry downturns, including interest rate increases; and placing the combined company at a competitive disadvantage compared to less leveraged competitors.

The combined company will depend on key personnel for its future success, and the loss of key personnel or inability to attract and retain personnel could harm the combined company’s business.

Five members of the Company’s current board of directors, five members of the current IRT board of directors, Ella S. Neyland, the Company’s current President, Chief Financial Officer and Treasurer, and substantially all of IRT’s executive officers will continue as members of the board of directors and executive management of the combined company. The future success of the combined company depends in large part on its ability to hire and retain a sufficient number of qualified personnel. The future success of the combined company also depends upon the continued service of these executive officers, who each have extensive market knowledge and relationships and will exercise substantial influence over the combined company’s operational, financing, acquisition and disposition activity. Among the reasons that they are important to the combined company’s success is that each has a national or regional industry reputation that is expected to attract business and investment opportunities and assist the combined company in negotiations with lenders, existing and potential tenants and industry personnel.

Key employees of the Company or IRT may depart either before or after the IRT Mergers because of issues relating to the uncertainty and difficulty of integration or separation or a desire not to remain with the combined company following the IRT Mergers. Accordingly, no assurance can be given that the combined company, following the IRT Mergers and the transactions contemplated by the IRT Merger Agreement, will be able to retain key employees to the same extent as in the past.

The future results of the combined company will suffer if the combined company does not effectively manage its operations following the IRT Mergers and the transactions contemplated by the IRT Merger Agreement.

Following the IRT Mergers, the combined company may continue to expand its operations through additional acquisitions, development opportunities and other strategic transactions, some of which involve complex challenges. The future success of the combined company will depend, in part, upon the ability of the combined company to manage its expansion opportunities,

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which poses substantial challenges for the combined company to integrate new operations into its existing business in an efficient and timely manner, to successfully monitor its operations, costs, regulatory compliance and service quality and to maintain other necessary internal controls. The Company cannot assure you that following the IRT Mergers, the combined company’s expansion or acquisition opportunities will be successful, or that the combined company will realize its expected operating efficiencies, cost savings, revenue enhancements, synergies or other benefits.

The trading price of shares of the combined company’s common stock following the IRT Mergers may be affected by factors different from those affecting the net asset value per share of STAR common stock and the price of shares of IRT common stock before the IRT Mergers.

If the IRT Mergers are consummated, then, based on the number of shares of STAR common stock and IRT common stock outstanding as of July 26, 2021, immediately following consummation of the IRT Mergers, legacy stockholders of the Company will hold approximately 50% of the outstanding shares of IRT common stock and legacy IRT stockholders will hold approximately 50% of the outstanding shares of IRT common stock. The results of operations of the combined company, as well as the trading price of IRT common stock, after the IRT Mergers may be affected by factors different from those currently affecting the trading prices of IRT common stock and net asset value per share determinations of STAR common stock. These different factors include:

•a greater number of shares of IRT common stock outstanding, as compared to the number of shares of IRT common stock currently outstanding and STAR common stock currently outstanding;

•different stockholders in the combined company;

•the combined company’s increased level of indebtedness; and

•the combined company owning different assets and maintaining different capitalizations.

Accordingly, the historical trading prices of IRT common stock, the historical net asset value per share of STAR common stock, and the historical financial results of IRT and the Company may not be indicative of these matters for the combined company after the IRT Mergers

Holders of certain outstanding indebtedness of IRT and/or the Company may exercise contractual rights under the respective debt agreements in connection with the IRT Mergers.

Each of IRT and the Company is a party to debt agreements that give the lenders under such agreements certain rights following a merger or change of control, including the right to demand immediate repayment upon the merger or change of control absent a waiver or consent by the applicable lenders. Loan agreements covering approximately $2.13 billion of the Company’s indebtedness will require lender waivers or consents for consummation of the IRT Mergers. There is no assurance that any or all of the lenders will provide such waivers or consents and if they do not, then the aggregate amount of indebtedness that would become due and payable upon consummation of the IRT Mergers would be substantial and could result in a material adverse effect on the combined company.

Counterparties to certain agreements with IRT and/or the Company may exercise contractual rights under such agreements in connection with the IRT Mergers.

Each of the Company and IRT is party to certain agreements that may give the counterparty certain rights following a change of control or similar event, including in some cases the right to terminate the agreement. Under some such agreements, the IRT Mergers may constitute a change of control of the Company or IRT, as applicable, or cause certain other triggering events and therefore the counterparty may exercise certain rights under the agreement upon the closing of the IRT Mergers. Any such counterparty may request modifications of its agreement as a condition to granting a waiver or consent under its agreement or it may terminate or seek to terminate its agreement with the Company or IRT, as applicable, as a result of such change of control (if permitted to do so by the applicable agreement). There is no assurance that such counterparties will not exercise their rights under the agreements, including termination rights where available.

Risks Relating to the Status of the Company and IRT as REITs

The combined company may incur adverse tax consequences if the Company or IRT has failed or fails to qualify as a REIT for U.S. federal income tax purposes.

Each of the Company and IRT has operated in a manner that it believes has allowed it to qualify as a REIT for U.S. federal income tax purposes under the Internal Revenue Code and intends to continue to do so through the time of the IRT Mergers. The combined company intends to continue operating in such a manner following the IRT Mergers. Neither the Company nor

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IRT has requested or plans to request a ruling from the IRS that it qualifies as a REIT. Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which there are only limited judicial and administrative interpretations. The determination of various factual matters and circumstances not entirely within the control of the Company or IRT may affect each company’s ability to qualify as a REIT. In order to qualify as a REIT, each of the Company and IRT must satisfy a number of requirements, including requirements regarding the ownership of its stock and the composition of its gross income and assets. Also, a REIT must make distributions to stockholders aggregating annually at least 90% of its net taxable income, excluding any net capital gains.

The closing of the IRT Mergers is conditioned on receipt by IRT of an opinion from Morrison & Foerster LLP to the effect that, for all taxable years commencing with the Company’s taxable year ended December 31, 2014 and through the Company Merger effective time, the Company has been organized and has operated in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code, and receipt by the Company of an opinion from Troutman Pepper Hamilton Sanders LLP to the effect that, for all taxable years commencing with IRT’s taxable year ended December 31, 2011, IRT has been organized and has operated in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code, and its proposed method of operation will enable it to continue to meet the requirements for qualification and taxation as a REIT under the Internal Revenue Code for its taxable year that includes the Company Merger effective time and future taxable years. The foregoing REIT opinions, however, will be based on the factual representations provided by the Company and IRT to counsel and limited by the assumptions set forth therein, and are not a guarantee that the Company or IRT, in fact, has qualified, or, in the case of IRT, will continue to qualify as a REIT, nor are such opinions binding on the IRS. Moreover, as noted above, neither the Company nor IRT has requested or plans to request a ruling from the IRS that it qualifies as a REIT.

If the combined company loses its REIT status, or is determined to have lost its REIT status in a prior year, it will face serious tax consequences that would substantially reduce its cash available for distribution, including cash available to pay dividends to its stockholders, because:

•it would be subject to U.S. federal income tax on its net income at regular corporate rates for the years it did not qualify for taxation as a REIT (and, for such years, would not be allowed a deduction for dividends paid to stockholders in computing its taxable income);

•it could be subject to increased state and local taxes for such periods;

•unless it is entitled to relief under applicable statutory provisions, neither it nor any “successor” company could elect to be taxed as a REIT until the fifth taxable year following the year during which it was disqualified; and

•for five years following re-election of REIT status, upon a taxable disposition of an asset owned as of such re-election, it could be subject to corporate level tax with respect to any built-in gain inherent in such asset at the time of re-election.

Even if the combined company retains its REIT status, if the Company is determined to have lost its REIT status for a taxable year ending on or before the IRT Mergers, the combined company would be subject to adverse tax consequences. This could substantially reduce the combined company’s cash available for distribution, including cash available to pay dividends to its stockholders, because, assuming that the combined company otherwise maintains its REIT qualification:

•the combined company generally would be subject to corporate level tax with respect to the built-in gain on each asset of the Company existing at the time of the IRT Mergers if the combined company were to dispose of such asset during the five-year period following the IRT Mergers;

•the combined company would succeed to any earnings and profits accumulated by the Company for taxable periods that it did not qualify as a REIT, and the combined company would have to pay a special dividend before the end of the taxable year in which the IRT Mergers close and/or employ applicable deficiency dividend procedures (including interest payments to the IRS) to eliminate such earnings and profits (or if the combined company does not timely distribute those earnings and profits, the combined company could fail to qualify as a REIT); and

•if the Company incurred any unpaid tax liabilities prior to the IRT Mergers, those tax liabilities would be transferred to the combined company as a result of the IRT Mergers.

If there is an adjustment to the Company’s taxable income or dividends paid deductions for taxable years ending on or prior to the IRT Mergers, the combined company could elect to use the deficiency dividend procedure in order to maintain the Company’s REIT status for such taxable years. That deficiency dividend procedure could require the combined company to make significant distributions to its stockholders and to pay significant interest to the IRS.

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As a result of all these factors, IRT’s or the Company’s failure to qualify as a REIT could impair the combined company’s ability to expand its business and raise capital, and would materially adversely affect the market value of its common stock. In addition, for years in which the combined company does not qualify as a REIT, it would not otherwise be required to make distributions to stockholders.

If the Company Merger does not qualify as a reorganization for federal income tax purposes, the Company’s stockholders may recognize taxable gain or loss in respect of their shares of STAR common stock.

The Company and IRT intend the Company Merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. Although the IRS will not provide a ruling on the matter, the Company and IRT will, as a condition to closing, each obtain an opinion from their respective legal counsel that the Company Merger will constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. These opinions do not bind the IRS or prevent the IRS from adopting a contrary position. If the Company Merger fails to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, then each of the Company’s stockholder generally would recognize gain or loss for U.S. federal income tax purposes on each share of STAR common stock surrendered in an amount equal to the difference between the fair market value of the merger consideration received in exchange for that share upon completion of the Company Merger and the stockholder’s adjusted tax basis in that share.

Risks Relating to an Investment in IRT Common Stock

The market price of IRT common stock may decline as a result of the IRT Mergers and the transactions contemplated by the IRT Merger Agreement.

The market price of IRT common stock may decline as a result of the IRT Mergers and the transactions contemplated by the IRT Merger Agreement if, among other things, the combined company does not achieve the perceived benefits of the IRT Mergers and the transactions contemplated by the IRT Merger Agreement or the effect of the IRT Mergers and the transactions contemplated by the IRT Merger Agreement on the combined company’s results of operations or financial condition is not consistent with the expectations of financial or industry analysts.

In addition, upon consummation of the IRT Mergers and the transactions contemplated by the IRT Merger Agreement, IRT stockholders will own interests in the combined company, which will operate an expanded business with a different mix of properties, risks and liabilities. Stockholders of IRT may not wish to continue to invest in the combined company, or may wish to dispose of some or all of their shares of IRT common stock. If, following the effective time of the IRT Mergers or while the IRT Mergers are pending, large amounts of IRT common stock are sold, the market price of IRT common stock could decline, perhaps substantially.

Following the IRT Mergers and the transactions contemplated by the IRT Merger Agreement, the combined company may not continue to pay dividends at the rate or frequency currently paid by the Company or IRT.

Following consummation of the IRT Mergers, holders of IRT common stock may not receive dividends at the same rate or frequency that they did as stockholders of the Company or IRT prior to the IRT Mergers for a variety of reasons, such as the following:

•the combined company may not have enough cash to pay such dividends due to changes in the combined company’s cash requirements, capital spending plans, cash flow or financial position;

•decisions on whether, when and in what amounts to pay any future dividends will remain at all times entirely at the discretion of the combined company board of directors, which reserves the right to change the combined company’s dividend practices at any time and for any reason; and

•the amount of dividends that the combined company’s subsidiaries may distribute to the combined company may be subject to restrictions imposed by state law and restrictions imposed by the terms of any current or future indebtedness that these subsidiaries may incur.

Stockholders of the combined company will have no contractual or other legal right to dividends that have not been declared by the combined company board of directors.

Shares of IRT common stock to be received by the Company’s stockholders in the Company Merger will have rights different from the shares of STAR common stock.

After the Company Merger effective time, the Company’s stockholders who receive shares of IRT common stock in connection with the Company Merger will have different rights than they currently have as stockholders of the Company and these rights may be, or may be perceived to be, less favorable than their current rights as stockholders of the Company.

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Other Risks

Following the IRT Mergers, the market price and trading volume of IRT common stock may be volatile.

The United States stock markets, including the NYSE, on which the IRT common stock is and, after the IRT Mergers, will continue to be listed under the symbol “IRT,” have experienced significant price and volume fluctuations. As a result, the market price of shares of IRT common stock is likely to be similarly volatile, and investors in shares of IRT common stock may experience a decrease, which could be substantial, in the value of their shares, including decreases unrelated to IRT’s operating performance or prospects. IRT cannot assure you that the market price of shares of IRT’s common stock will not fluctuate or decline significantly in the future.

In addition to the risks listed elsewhere in these “Risk Factors,” a number of factors could negatively affect IRT’s common stock price or result in fluctuations in the price or trading volume of IRT’s common stock, including:

•the annual yield from distributions on IRT common stock as compared to yields on other financial instruments;

•equity issuances by IRT (including issuances of IRT common stock in the IRT Mergers), or future sales of shares of IRT common stock by its current or future stockholders, or the perception that such issuances or sales may occur;

•increases in market interest rates or a decrease in IRT’s distributions to stockholders that lead prospective investors in IRT common stock to seek a higher yield;

•changes in market valuations of similar companies;

•fluctuations in stock market prices and volumes;

•additions or departures of key management personnel;

•IRT’s operating performance and the performance of other similar companies;

•actual or anticipated differences in IRT’s quarterly operating results;

•changes in expectations of future financial performance or changes in estimates of securities analysts;

•publication of research reports about IRT or its industry by securities analysts;

•failure to qualify as a REIT for federal income tax purposes;

•adverse market reaction to any indebtedness IRT incurs in the future, including indebtedness to be assumed or incurred in connection with the IRT Mergers;

•strategic decisions by IRT or its competitors, such as acquisitions, divestments, spin-offs, joint ventures, strategic investments or changes in business strategy;

•the passage of legislation or other regulatory developments that adversely affect IRT or its industry or any failure by IRT to comply with regulatory requirements;

•the expiration or loss of local tax abatements, tax credit programs, or other governmental incentives;

•the imposition of a penalty tax as a result of certain property transfers that may generate prohibited transaction income;

•the inability of IRT to sell properties if and when it would be appropriate to do so;

•speculation in the press or investment community;

•changes in IRT’s results of operations, financial condition or prospects;

•failure to satisfy the listing requirements of the NYSE;

•failure to comply with the requirements of the Sarbanes-Oxley Act of 2002;

•actions by institutional stockholders of IRT;

•changes in accounting principles;

•changes in environmental conditions or the potential impact of climate change;

•terrorist attacks or other acts of violence or war in areas in which IRT’s properties are located or markets on which IRT’s securities are traded; and

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•general economic and/or market conditions, including factors unrelated to IRT’s performance.

In the past, securities class action litigation has often been instituted against companies following periods of volatility in the price of their common stock. This type of litigation could result in substantial costs and divert IRT’s management’s attention and resources, which could have a material adverse effect on IRT’s cash flows, its ability to execute its business strategy and IRT’s ability to make distributions to its stockholders.

Sales of substantial amounts of IRT common stock in the public markets, or the perception that they might occur, could reduce the price of the IRT common stock.

Upon the completion of the IRT Mergers, a total of approximately 204.9 million shares of IRT common stock will be outstanding. Prior to the IRT Mergers, the STAR common stock was not listed on any national securities exchange and the ability of the Company’s stockholders to liquidate their investments was limited. As a result, there may be increased demand to sell shares of IRT common stock upon the closing of the IRT Mergers, at which time shares of STAR common stock will be converted into shares of the IRT common stock, which will be listed on the NYSE and freely tradable. A large volume of sales of shares (or short sales) of the IRT common stock could decrease the prevailing market price of the IRT common stock and could impair the combined company’s ability to raise additional capital through the sale of equity securities in the future. Even if a substantial number of sales of IRT common stock are not effected, the mere perception of the possibility of these sales could depress the market price of the IRT common stock and have a negative effect on the combined company’s ability to raise capital in the future.

The Company and IRT face other risks.

The risks listed above are not exhaustive, and you should be aware that, prior to and following the IRT Mergers and the transactions contemplated by the IRT Merger Agreement, the Company and IRT will face various other risks, including those discussed in reports filed by the Company and IRT with the SEC.

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

On August 13, 2021, we granted 4,923.15 shares of restricted stock to each of our five independent directors pursuant to our independent directors’ compensation plan as compensation for services in connection with their re-election to the board of directors at our annual meeting of stockholders. The shares of restricted stock issued pursuant to our independent directors’ compensation plan were issued in transactions exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

On March 15, 2021, we granted 97,235 shares of restricted stock to our key employees. The grants to key employees were made pursuant to restricted stock grant agreements. Such shares were issued in transactions exempt from registration pursuant to Section 4(a)(2) of the Securities Act. The grants vest ratably over three years following the grant date, subject to the key employee’s continuous employment through the applicable vesting dates, with certain exceptions.

In connection with the approval of the IRT Mergers, on July 26, 2021, we announced that our board of directors, including all of our independent directors, voted to terminate the Amended & Restated SRP as of the effective time of the Company Merger. Our board of directors, including all of our independent directors, also voted to indefinitely suspend the Amended & Restated SRP effective as of the 30th day after notice was provided to stockholders. In addition, as a result of the suspension of the Amended & Restated SRP, we will not process or accept any requests for redemption received after July 26, 2021.

During the three months ended September 30, 2021, we fulfilled repurchase requests and repurchased shares of our common stock pursuant to our share repurchase plan as follows:

	Total Number of Shares Requested to be Repurchased(1)	Total Number of Shares Repurchased	Average Price Paid per Share(2)(3)		Approximate Dollar Value of Shares Available That May Yet Be Repurchased Under the Program
July 2021	—	186,884	$	14.46	(4)
August 2021	—	1,621	14.46		(4)
September 2021	—	7,122	14.46		(4)
	—	195,627

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________________

(1) We generally repurchased shares approximately 30 days following the end of the applicable quarter in which requests                      were received. As of September 30, 2021, we had no shares of outstanding and unfulfilled repurchase requests as a result of the termination of the Amended & Restated SRP.

(2) We repurchased shares at prices determined as follows: 93% of the most recently disclosed estimated value per share regardless of the holding period.

(3) From inception through September 30, 2021, our share repurchases were funded exclusively from the net proceeds we received from the sale of shares under our distribution reinvestment plan.

(4) We are not obligated to repurchase shares of our common stock under the share repurchase plan. In no event will repurchases under the share repurchase plan exceed 5% of the weighted average number of shares of common stock outstanding during the prior calendar year or the $3,000,000 limit for any quarter. As a result of the suspension of the Amended & Restated SRP, we will not process or accept any requests for redemption received after July 26, 2021.

Item 3. Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information

None.

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Item 6.   Exhibits

EXHIBIT LIST

Exhibit	Description
2.1	Agreement and Plan of Merger, dated as of July 26, 2021, by and among Independence Realty Trust, Inc., Independence Realty Operating Partnership, LP, IRSTAR Sub, LLC, Steadfast Apartment REIT, Inc. and Steadfast Apartment REIT Operating Partnership, L.P. (included as Exhibit 2.1 to the Registrants Current Report on Form 8-K (file No. 000-55428) filed with the SEC on July 26, 2021).***
3.1	Articles of Amendment and Restatement of Steadfast Apartment REIT, Inc. (incorporated by reference to Exhibit 3.1 to Pre-Effective Amendment No. 3 to the Registrant’s Registration Statement on Form S-11, filed December 16, 2013, Commission File No. 333-191049).
3.2	Bylaws of Steadfast Apartment REIT, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form S-11, filed September 6, 2013, Commission File No. 333-191049).
4.1	Form of Restricted Stock Award Agreement (included as Exhibit 4.7 to the Registrant's Quarterly Report on Form 10-Q (File No. 000-55428) filed with the SEC on May 14, 2021, and incorporated herein by reference).
10.1	Indemnity Letter, dated as of July 26, 2021, by and among Steadfast REIT Investments, Inc., Steadfast Apartment REIT, Inc. and Steadfast Apartment REIT Operating Partnership, L.P. (included as Exhibit 10.1 to the Registrants Current Report on Form 8-K (File No.000-55428) filed with the SEC on July 26, 2021).
10.2	Amendment No. 2 to Employment Agreement, dated as of July 26, 2021, by and between Ella S. Neyland, STAR REIT Services, LLC, Steadfast Apartment REIT, Inc. and Steadfast Apartment REIT Operating Partnership, L.P. (included as Exhibit 10.2 to the Registrants Current Report on Form 8-K (File No.000-55428) filed with the SEC on July 26, 2021)
10.3	Amendment No. 3 to Transition Services Agreement, dated as of September 24, 2021, by and between Steadfast Investment Properties, Inc. and Steadfast Apartment REIT, Inc. (included as Exhibit 10.1 to the Registrants Current Report on Form 8-K (File No.000-55428) filed with the SEC on September 27, 2021)

31.1*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002.
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
104*	Cover Page Interactive Data File - (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

______________

*	Filed herewith.
**	In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
***	Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. IRT agrees to furnish supplementally to the SEC a copy of any omitted schedule upon request by the SEC.

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SIGNATURES 

Pursuant to the requirements 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.

		Steadfast Apartment REIT, Inc.
Date:	October 27, 2021	By:	/s/ Rodney F. Emery
			Rodney F. Emery
			Chief Executive Officer and Chairman of the Board
			(Principal Executive Officer)
Date:	October 27, 2021	By:	/s/ Ella S. Neyland
			Ella S. Neyland
			President, Chief Financial Officer and Treasurer
			(Principal Financial and Accounting Officer)

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