10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2017

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 001-36663

NexPoint Residential Trust, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	47-1881359
(State or other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

300 Crescent Court, Suite 700, Dallas, Texas	75201
(Address of Principal Executive Offices)	(Zip Code)

(972) 628-4100

(Telephone Number, Including Area Code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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	☐	(Do not check if a smaller reporting company)	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 31, 2017, the registrant had 21,059,269 shares of common stock, $0.01 par value, outstanding.

NEXPOINT RESIDENTIAL TRUST, INC.

Form 10-Q

Quarter Ended September 30, 2017

Page
Cautionary Statement Regarding Forward-Looking Statements		ii
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of September 30, 2017 (Unaudited) and December 31, 2016	1
	Consolidated Unaudited Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2017 and 2016	2
	Consolidated Unaudited Statement of Equity for the Nine Months Ended September 30, 2017	3
	Consolidated Unaudited Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016	4
	Notes to Consolidated Unaudited Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 4.	Controls and Procedures	56
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3.	Defaults Upon Senior Securities	57
Item 4.	Mine Safety Disclosures	57
Item 5.	Other Information	57
Item 6.	Exhibits	58
Signatures		59

i

Cautionary Statement Regarding Forward-Looking Statements

This quarterly report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. In particular, statements relating to our liquidity and capital resources, the performance of our properties and results of operations contain forward-looking statements. Furthermore, all of the statements regarding future financial performance (including market conditions and demographics) are forward-looking statements. We caution investors that any forward-looking statements presented in this quarterly report are based on management’s current beliefs and assumptions made by, and information currently available to, management. When used, the words “anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” “would,” “result” and similar expressions that do not relate solely to historical matters are intended to identify forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions.

Forward-looking statements are subject to risks, uncertainties and assumptions and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We caution you therefore against relying on any of these forward-looking statements.

Some of the risks and uncertainties that may cause our actual results, performance, liquidity or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:

• unfavorable changes in market and economic conditions in the United States and globally and in the specific markets where our properties are located;

• risks associated with ownership of real estate;

• limited ability to dispose of assets because of the relative illiquidity of real estate investments;

• intense competition in the real estate market that, combined with low residential mortgage rates that could encourage potential renters to purchase residences rather than lease them, may limit our ability to acquire or lease and re-lease property or increase or maintain rent;

• risks associated with increases in interest rates and our ability to issue additional debt or equity securities in the future;

• failure of acquisitions to yield anticipated results;

• risks associated with our strategy of acquiring value-enhancement multifamily properties, which involves greater risks than more conservative investment strategies;

• the lack of experience of NexPoint Real Estate Advisors, L.P. (our “Adviser”) in operating under the constraints imposed by real estate investment trust (“REIT”) requirements;

• the risk that we may not replicate the historical results achieved by other entities managed or sponsored by affiliates of our Adviser, members of our Adviser’s management team or by Highland Capital Management, L.P. (our “Sponsor” or “Highland”) or its affiliates;

• loss of key personnel of our Sponsor, our Adviser and our property manager;

• risks associated with our Adviser’s ability to terminate the Advisory Agreement;

• our ability to change our major policies, operations and targeted investments without stockholder consent;

• the substantial fees and expenses we will pay to our Adviser and its affiliates;

• risks associated with the potential internalization of our management functions;

• the risk that we may compete with other entities affiliated with our Sponsor or property manager for tenants;

• conflicts of interest and competing demands for time faced by our Adviser, our Sponsor and their officers and employees;

• the risk that we may fail to consummate our pending property acquisitions;

• failure to maintain our status as a REIT;

• compliance with REIT requirements, which may limit our ability to hedge our liabilities effectively and cause us to forgo otherwise attractive opportunities, liquidate certain of our investments or incur tax liabilities;

• failure of our operating partnership to be taxable as a partnership for federal income tax purposes, possibly causing us to fail to qualify for or to maintain REIT status;

ii

• risks associated with our ownership of interests in taxable REIT subsidiaries;

• the recognition of taxable gains from the sale of properties as a result of the inability to complete certain like-kind exchanges in accordance with Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”);

• the risk that the Internal Revenue Service (the “IRS”) may consider certain sales of properties to be prohibited transactions, resulting in a 100% penalty tax on any taxable gain;

• our dependence on information systems;

• lack of or insufficient amounts of insurance;

• contingent or unknown liabilities related to properties or businesses that we have acquired or may acquire;

• high costs associated with the investigation or remediation of environmental contamination, including asbestos, lead-based paint, chemical vapor, subsurface contamination and mold growth;

• the risk that our environmental assessments may not identify all potential environmental liabilities and our remediation actions may be insufficient;

• high costs associated with the compliance with various accessibility, environmental, building and health and safety laws and regulations, such as the ADA and FHA;

• risks associated with our high concentrations of investments in the Southeastern and Southwestern United States;

• risks associated with limited warranties we may obtain when purchasing properties;

• exposure to decreases in market rents due to our short-term leases;

• risks associated with operating through joint ventures and funds;

• potential reforms to Freddie Mac and Fannie Mae;

• risks associated with our reduced public company reporting requirements as an “emerging growth company”;

• costs associated with being a public company, including compliance with securities laws;

• risks associated with breaches of our data security;

• the risk that our business could be adversely impacted if there are deficiencies in our disclosure controls and procedures or internal control over financial reporting;

• risks associated with our substantial current indebtedness and indebtedness we may incur in the future;

• risks associated with derivatives or hedging activity;

• the risk that we may be unable to achieve some or all of the benefits that we expect to achieve from the Spin-Off (as defined below);

• the ineligibility of dividends payable by REITs for the reduced tax rates available for some dividends;

• risks associated with the stock ownership restrictions of the Code for REITs and the stock ownership limit imposed by our charter;

• the ability of our board of directors (the “Board”) to revoke our REIT qualification without stockholder approval;

• potential legislative or regulatory tax changes or other actions affecting REITs;

• risks associated with the market for our common stock and the general volatility of the capital and credit markets;

• failure to generate sufficient cash flows to service our outstanding indebtedness or pay distributions at expected levels;

• risks associated with limitations of liability for and our indemnification of our directors and officers; or

• any other risks included under Part I, Item 1A, “Risk Factors” of our annual report on Form 10-K, filed with the Securities and Exchange Commission on March 15, 2017.

While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. They are based on estimates and assumptions only as of the date of this quarterly report. We undertake no obligation to update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes, except as required by law.

iii

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

	September 30, 2017			December 31, 2016
	(Unaudited)
ASSETS
Operating Real Estate Investments
Land	$	167,245		$	165,863
Buildings and improvements		768,499			733,374
Intangible lease assets		3,021			5,140
Construction in progress		1,850			2,828
Furniture, fixtures, and equipment		41,190			36,616
Total Gross Operating Real Estate Investments		981,805			943,821
Accumulated depreciation and amortization		(78,387	)		(60,214	)
Total Net Operating Real Estate Investments		903,418			883,607
Real estate held for sale, net of accumulated depreciation of $3,397 and $6,099, respectively		32,915			79,430
Total Net Real Estate Investments		936,333			963,037
Cash and cash equivalents		92,695			22,705
Restricted cash		29,417			32,556
Accounts receivable		3,298			3,008
Prepaid and other assets		3,923			1,678
Fair market value of interest rate swaps		11,759			12,413
TOTAL ASSETS	$	1,077,425		$	1,035,397
LIABILITIES AND EQUITY
Liabilities:
Mortgages payable, net	$	694,968		$	367,453
Mortgages payable held for sale, net		30,327			55,685
Credit facilities, net		29,803			310,492
Bridge facility, net		54,531			29,874
Accounts payable and other accrued liabilities		5,229			5,551
Accrued real estate taxes payable		11,443			6,534
Accrued interest payable		1,820			1,067
Security deposit liability		1,451			1,364
Prepaid rents		1,627			1,275
Total Liabilities		831,199			779,295
Redeemable noncontrolling interests in the Operating Partnership (see Note 10)		2,110			—
Equity:
Preferred stock, $0.01 par value: 100,000,000 shares authorized; 0 shares issued		—			—
Common stock, $0.01 par value: 500,000,000 shares authorized; 21,095,769 and 21,043,669 shares issued and outstanding, respectively		211			213
Additional paid-in capital		206,613			241,450
Accumulated earnings less dividends		28,960			(14,584	)
Accumulated other comprehensive income		8,332			9,052
Common stock held in treasury at cost; 0 and 250,156 shares, respectively		—			(4,587	)
Total Stockholders' Equity		244,116			231,544
Noncontrolling interests		—			24,558
Total Equity		244,116			256,102
TOTAL LIABILITIES AND EQUITY	$	1,077,425		$	1,035,397

See Notes to Consolidated Financial Statements

1

NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(in thousands, except per share amounts)

(Unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues
Rental income	$	32,148		$	28,632		$	94,564		$	87,406
Other income		4,949			4,447			14,758			12,841
Total revenues		37,097			33,079			109,322			100,247
Expenses
Property operating expenses		10,075			9,874			29,611			28,947
Acquisition costs		—			386			—			386
Real estate taxes and insurance		4,853			3,973			14,911			12,326
Property management fees (1)		1,110			989			3,280			3,007
Advisory and administrative fees (2)		1,870			1,698			5,544			4,944
Corporate general and administrative expenses		1,623			1,023			4,842			2,649
Property general and administrative expenses		1,594			1,527			4,756			4,473
Depreciation and amortization		11,215			8,667			35,866			26,363
Total expenses		32,340			28,137			98,810			83,095
Operating income		4,757			4,942			10,512			17,152
Interest expense		(8,257	)		(4,791	)		(22,479	)		(15,650	)
Loss on extinguishment of debt and modification costs		(914	)		(888	)		(5,717	)		(1,722	)
Gain on sales of real estate		58,490			9,562			78,386			25,932
Net income		54,076			8,825			60,702			25,712
Net income attributable to noncontrolling interests		—			1,735			2,836			4,047
Net income attributable to redeemable noncontrolling interests in the Operating Partnership		162			—			162			—
Net income attributable to common stockholders	$	53,914		$	7,090		$	57,704		$	21,665
Other comprehensive income (loss)
Unrealized gains (losses) on interest rate derivatives		214			(1,084	)		(835	)		(1,128	)
Total comprehensive income		54,290			7,741			59,867			24,584
Comprehensive income attributable to noncontrolling interests		—			1,627			2,720			3,935
Comprehensive income attributable to redeemable noncontrolling interests in the Operating Partnership		163			—			163			—
Comprehensive income attributable to common stockholders	$	54,127		$	6,114		$	56,984		$	20,649
Weighted average common shares outstanding - basic		21,085			21,260			21,057			21,282
Weighted average common shares outstanding - diluted		21,453			21,376			21,407			21,322
Earnings per share - basic	$	2.56		$	0.33		$	2.74		$	1.02
Earnings per share - diluted	$	2.51		$	0.33		$	2.70		$	1.02
Dividends declared per common share	$	0.220		$	0.206		$	0.660		$	0.618

(1) Fees incurred to an unaffiliated third party that is an affiliate of the noncontrolling limited partner of the Company’s operating partnership (see Notes 10 and 11).

(2) Fees incurred to the Company’s adviser (see Note 11).

See Notes to Consolidated Financial Statements

2

NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EQUITY

(dollars in thousands)

(Unaudited)

	Preferred Stock				Common Stock						Additional			Accumulated Earnings			Accumulated Other			Common Stock Held in
	Number of Shares		Par Value		Number of Shares			Par Value			Paid-in Capital			Less Dividends			Comprehensive Income (Loss)			Treasury at Cost			Noncontrolling Interests			Total
Balances, December 31, 2016		—	$	—		21,293,825		$	213		$	241,450		$	(14,584	)	$	9,052		$	(4,587	)	$	24,558		$	256,102
Net income attributable to common stockholders												—			57,704			—			—			—			57,704
Net income attributable to noncontrolling interests												—			—			—			—			2,836			2,836
Contributions by noncontrolling interests												—			—			—			—			38			38
Distributions to noncontrolling interests												—			—			—			—			(4,789	)		(4,789	)
Purchase of noncontrolling interests												(31,313	)		—			—			—			(22,527	)		(53,840	)
Repurchase of common stock												—			—			—			(1,354	)		—			(1,354	)
Retirement of common stock held in treasury						(308,313	)		(3	)		(5,938	)		—			—			5,941			—			—
Vesting of stock-based compensation						110,257			1			2,414			—			—			—			—			2,415
Common stock dividends declared												—			(14,160	)		—			—			—			(14,160	)
Other comprehensive loss												—			—			(720	)		—			(116	)		(836	)
Balances, September 30, 2017		—	$	—		21,095,769		$	211		$	206,613		$	28,960		$	8,332		$	—		$	—		$	244,116

See Notes to Consolidated Financial Statements

3

NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	For the Nine Months Ended September 30,
	2017			2016
Cash flows from operating activities
Net income	$	60,702		$	25,712
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sales of real estate		(78,386	)		(25,932	)
Depreciation and amortization		35,866			26,363
Amortization/write-off of deferred financing costs		2,551			1,782
Change in fair value on derivative instruments included in interest expense		1,235			331
Net cash paid for derivative settlements		(777	)		(430	)
Amortization of fair market value adjustment of assumed debt		(155	)		(98	)
Vesting of stock-based compensation		2,415			296
Changes in operating assets and liabilities, net of effects of acquisitions:
Operating assets		(413	)		(2,273	)
Operating liabilities		4,461			530
Net cash provided by operating activities		27,499			26,281
Cash flows from investing activities
Net proceeds from sales of real estate		224,416			131,786
Prepaid acquisition deposits		(1,500	)		(1,425	)
Additions to real estate investments		(17,192	)		(18,022	)
Acquisitions of real estate investments		(138,106	)		(6,474	)
Net cash provided by investing activities		67,618			105,865
Cash flows from financing activities
Mortgage proceeds received		583,713			—
Mortgage payments		(275,840	)		(271,274	)
Credit facilities proceeds received		25,000			200,000
Credit facilities payments		(310,000	)		—
Bridge facility proceeds received		65,875			—
Bridge facility payments		(41,278	)		(29,000	)
Deferred financing costs paid		(3,742	)		(2,538	)
Repurchase of common stock		(1,354	)		(1,524	)
Dividends paid to common stockholders		(13,996	)		(13,154	)
Distributions to redeemable noncontrolling interests in the Operating Partnership		(53	)		—
Contributions from noncontrolling interests		38			710
Distributions to noncontrolling interests		(4,789	)		(8,884	)
Purchase of noncontrolling interests		(51,840	)		(1,381	)
Net cash used in financing activities		(28,266	)		(127,045	)
Net increase in cash and restricted cash		66,851			5,101
Cash and restricted cash, beginning of period		55,261			63,095
Cash and restricted cash, end of period	$	122,112		$	68,196

See Notes to Consolidated Financial Statements

4

NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

Supplemental Disclosure of Cash Flow Information
Interest paid	$	19,098	$	15,255
Prepayment penalties paid		2,701		827
Supplemental Disclosure of Noncash Activities
Issuance of operating partnership units for purchase of noncontrolling interests		2,000		—
Capitalized construction costs included in accounts payable and other accrued liabilities		1,245		935
Change in fair value on derivative instruments designated as hedges		835		1,128
Liabilities assumed from acquisitions		690		232
Other assets acquired from acquisitions		84		63
Assumed debt on acquisition of real estate investment		—		15,812
Increase in dividends payable on restricted stock units		164		43

See Notes to Consolidated Financial Statements

5

NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Description of Business

NexPoint Residential Trust, Inc. (the “Company”, “we”, “our”) was incorporated in Maryland on September 19, 2014, and has elected to be taxed as a real estate investment trust (“REIT”). The Company is focused on “value-add” multifamily investments primarily located in the Southeastern and Southwestern United States. Substantially all of the Company’s business is conducted through NexPoint Residential Trust Operating Partnership, L.P. (the “OP”), the Company’s operating partnership. The Company owns its properties (the “Portfolio”) through the OP and its wholly owned taxable REIT subsidiary (“TRS”). The OP owns approximately 99.9% of the Portfolio; the TRS owns approximately 0.1% of the Portfolio. The Company’s wholly owned subsidiary, NexPoint Residential Trust Operating Partnership GP, LLC (the “OP GP”), is the sole general partner of the OP. As of September 30, 2017, there were 21,116,902 common units in the OP (“OP Units”) outstanding, of which 21,043,669, or 99.7%, were owned by the Company and 73,233, or 0.3%, were owned by an unaffiliated limited partner (see Note 10).

The Company began operations on March 31, 2015 as a result of the transfer and contribution by NexPoint Credit Strategies Fund (“NHF”) of all but one of the multifamily properties owned by NHF through its wholly owned subsidiary NexPoint Real Estate Opportunities, LLC (fka Freedom REIT, LLC) (“NREO”). We use the term “predecessor” to mean the carve-out business of NREO. On March 31, 2015, NHF distributed all of the outstanding shares of the Company's common stock held by NHF to holders of NHF common shares. We refer to the distribution of our common stock by NHF as the “Spin-Off.”

The Company is externally managed by NexPoint Real Estate Advisors, L.P. (the “Adviser”) through an agreement dated March 16, 2015, as amended, and renewed on March 13, 2017 for a one-year term set to expire on March 16, 2018 (the “Advisory Agreement”), by and among the Company, the OP and the Adviser. The Adviser conducts substantially all of the Company’s operations and provides asset management services for its real estate investments. The Company expects it will only have accounting employees while the Advisory Agreement is in effect. All of the Company’s investment decisions are made by the Adviser, subject to general oversight by the Adviser’s investment committee and the Company’s board of directors (the “Board”). The Adviser is wholly owned by NexPoint Advisors, L.P., which is an affiliate of Highland Capital Management, L.P. (the “Sponsor” or “Highland”).

The Company’s investment objectives are to maximize the cash flow and value of properties owned, acquire properties with cash flow growth potential, provide quarterly cash distributions and achieve long-term capital appreciation for its stockholders through targeted management and a value-add program. Consistent with the Company’s policy to acquire assets for both income and capital gain, the Company intends to hold at least majority interests in its properties for long-term appreciation and to engage in the business of directly or indirectly acquiring, owning, and operating well-located multifamily properties with a value-add component in large cities and suburban submarkets of large cities primarily in the Southeastern and Southwestern United States consistent with its investment objectives. Economic and market conditions may influence the Company to hold properties for different periods of time. From time to time, the Company may sell a property if, among other deciding factors, the sale would be in the best interest of its stockholders.

The Company may also participate with third parties in property ownership through limited liability companies (“LLCs”), funds or other types of co-ownership or acquire real estate or interests in real estate in exchange for the issuance of common stock, OP Units, preferred stock or options to purchase stock. These types of investments may permit the Company to own interests in larger assets without unduly restricting diversification, which provides flexibility in structuring the Company’s portfolio.

The Company may allocate up to thirty percent of the portfolio to investments in real estate-related debt and securities with the potential for high current income or total returns. These allocations may include first and second mortgages and subordinated, bridge, mezzanine, construction and other loans, as well as debt securities related to or secured by multifamily real estate and common and preferred equity securities, which may include securities of other REITs or real estate companies.

2. Summary of Significant Accounting Policies

Predecessor

With the exception of a nominal amount of initial cash funded at inception, the Company did not own any assets prior to March 31, 2015. The business and operations of the Company prior to March 31, 2015 occurred under the predecessor. The predecessor included all of the properties in the Portfolio that were held directly or indirectly by NREO prior to the Spin-Off that occurred on March 31, 2015. However, the Company’s consolidated financial statements reflect operations of the predecessor through March 31, 2015 as if they were incurred by the Company. The predecessor was determined in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). References throughout these consolidated financial statements to the “Company”, “we”, or “our”, include the activity of the predecessor defined above.

6

Basis of Accounting

The accompanying unaudited consolidated financial statements have been prepared according to the rules and regulations of the SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted according to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading.

In the opinion of management, all adjustments and eliminations necessary for the fair presentation of the Company’s financial position as of September 30, 2017, and results of operations for the three and nine months ended September 30, 2017 and 2016 have been included. Such adjustments are normal and recurring in nature. The interim results presented are not necessarily indicative of future financial results. The unaudited information included in this quarterly report on Form 10-Q should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2016 and notes thereto included in its annual report on Form 10-K filed with the SEC on March 15, 2017.

The accompanying unaudited consolidated financial statements are presented in accordance with GAAP. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the unaudited consolidated financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates. All significant intercompany accounts and transactions have been eliminated in consolidation. There have been no significant changes to the Company’s significant accounting policies during the nine months ended September 30, 2017.

Principles of Consolidation

The Company accounts for subsidiary partnerships, joint ventures and other similar entities in which it holds an ownership interest in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation. The Company first evaluates whether each entity is a variable interest entity ("VIE"). Under the VIE model, the Company consolidates an entity when it has control to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Under the voting model, the Company consolidates an entity when it controls the entity through ownership of a majority voting interest. The consolidated financial statements include the accounts of the Company and its subsidiaries, including the OP.

Revenue Recognition

The Company’s primary operations consist of rental income earned from its residents under lease agreements typically with terms of one year or less. Rental income is recognized when earned. This policy effectively results in income recognition on the straight-line method over the related terms of the leases. Resident reimbursements and other income consist of charges billed to residents for utilities, carport and garage rental, and pets, administrative, application and other fees and are recognized when earned. 

Real Estate Investments

Upon acquisition of a property, the purchase price and related acquisition costs (“total consideration”) are allocated to land, buildings, improvements, furniture, fixtures, and equipment, and intangible lease assets in accordance with FASB ASC 805, Business Combinations, and Accounting Standards Update (“ASU”) 2017-01, Clarifying the Definition of a Business (Topic 805) (“ASU 2017-01”), which the Company early adopted on October 1, 2016 (see “Recent Accounting Pronouncements” below). The Company believes most future acquisition costs will be capitalized in accordance with ASU 2017-01. Prior to the Company’s adoption of ASU 2017-01, acquisition costs were expensed as incurred.

The allocation of total consideration, which is determined using inputs that are classified within Level 3 of the fair value hierarchy established by FASB ASC 820, Fair Value Measurement and Disclosures (see Note 7), is based on management’s estimate of the property’s “as-if” vacant fair value and is calculated by using all available information such as the replacement cost of such asset, appraisals, property condition reports, market data and other related information. The allocation of the total consideration to intangible lease assets represents the value associated with the in-place leases, which may include lost rent, leasing commissions, legal and other related costs, which the Company, as buyer of the property, did not have to incur to obtain the residents. If any debt is assumed in an acquisition, the difference between the fair value, which is estimated using inputs that are classified within Level 2 of the fair value hierarchy, and the face value of debt is recorded as a premium or discount and amortized as interest expense over the life of the debt assumed.

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Real estate assets, including land, buildings, improvements, furniture, fixtures and equipment, and intangible lease assets are stated at historical cost less accumulated depreciation and amortization. Costs incurred in making repairs and maintaining real estate assets are expensed as incurred. Expenditures for improvements, renovations, and replacements are capitalized at cost. Real estate-related depreciation and amortization are computed on a straight-line basis over the estimated useful lives as described in the following table:

Land	Not depreciated
Buildings	30 years
Improvements	15 years
Furniture, fixtures, and equipment	3 years
Intangible lease assets	6 months

Construction in progress includes the cost of renovation projects being performed at the various properties. Once a project is complete, the historical cost of the renovation is placed into service in one of the categories above depending on the type of renovation project and is depreciated over the estimated useful lives as described in the table above.

Real estate assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In such cases, the Company will evaluate the recoverability of such real estate assets based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provide for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate asset. If impaired, the real estate asset will be written down to its estimated fair value.

The Company periodically classifies real estate assets as held for sale when certain criteria are met, in accordance with GAAP. At that time, the Company presents the net real estate assets and the net debt associated with the real estate held for sale separately in its consolidated balance sheet, and the Company ceases recording depreciation and amortization expense related to that property. Real estate held for sale is reported at the lower of its carrying amount or its estimated fair value less estimated costs to sell.

Reclassifications

Certain reclassifications have been made to amounts in the prior year consolidated statements of operations and comprehensive income to conform to current year presentations as a result of an accounting policy election to classify certain expenses incurred in connection with the extinguishment or modification of debt separately from interest expense. These expenses are recorded in loss on extinguishment of debt and modification costs on the consolidated statements of operations and comprehensive income. As a result, for the three and nine months ended September 30, 2016, interest expense decreased by approximately $0.9 million and $1.7 million, respectively. See Note 6 for additional information.

Reportable Segment

Substantially all of the Company’s net income (loss) is from investments in real estate properties within the multifamily sector that the Company owns through LLCs. The Company evaluates operating performance on an individual property level and views its real estate assets as one industry segment and, accordingly, its properties are aggregated into one reportable segment.

Income Taxes

The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Code and expects to continue to qualify as a REIT. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to distribute annually at least 90% of its “REIT taxable income,” as defined by the Code, to its stockholders. As a REIT, the Company will be subject to federal income tax on its undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions it pays with respect to any calendar year are less than the sum of (1) 85% of its ordinary income, (2) 95% of its capital gain net income and (3) 100% of its undistributed income from prior years. The Company intends to operate in such a manner so as to qualify as a REIT, but no assurance can be given that the Company will operate in a manner so as to qualify as a REIT. Taxable income from certain non-REIT activities is managed through a TRS and is subject to applicable federal, state, and local income and margin taxes. The Company has no significant taxes associated with its TRS for the nine months ended September 30, 2017 and 2016.

If the Company fails to meet these requirements, it could be subject to federal income tax on all of the Company’s taxable income at regular corporate rates for that year. The Company would not be able to deduct distributions paid to stockholders in any year in which it fails to qualify as a REIT. Additionally, the Company will also be disqualified from electing to be taxed as a REIT for the four taxable years following the year during which qualification was lost unless the Company is entitled to relief under specific statutory provisions. As of September 30, 2017, the Company believes it is in compliance with all applicable REIT requirements.

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The Company evaluates the accounting and disclosure of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” (greater than 50 percent probability) of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. The Company’s management is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which include federal and certain states. The Company has no examinations in progress and none are expected at this time.

The Company recognizes its tax positions and evaluates them using a two-step process. First, the Company determines whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Second, the Company will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement.

The Company had no material unrecognized tax benefit or expense, accrued interest or penalties as of September 30, 2017. The Company and its subsidiaries are subject to federal income tax as well as income tax of various state and local jurisdictions. The 2016 and 2015 tax years remain open to examination by tax jurisdictions to which the Company and its subsidiaries are subject. When applicable, the Company recognizes interest and/or penalties related to uncertain tax positions on its consolidated statements of operations and comprehensive income.

Recent Accounting Pronouncements

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 13(a) of the Exchange Act, for complying with new or revised accounting standards applicable to public companies. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to take advantage of this extended transition period. As a result of this election, the Company’s financial statements may not be comparable to companies that comply with public company effective dates for such new or revised standards. The Company may elect to comply with public company effective dates at any time, and such election would be irrevocable pursuant to Section 107(b) of the JOBS Act. The following recent accounting pronouncements reflect effective dates that delay the adoption until those standards would otherwise apply to private companies.

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business (Topic 805), which clarifies the definition of a business and provides further guidance for evaluating whether a transaction will be accounted for as an acquisition of an asset or a business. The ASU provides a test to determine whether a set of assets and activities acquired is a business. When substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. Under the updated guidance, an acquisition of a single property will likely be treated as an asset acquisition as opposed to a business combination and associated transaction costs will be capitalized rather than expensed as incurred. Additionally, assets acquired, liabilities assumed, and any noncontrolling interest will be measured at their relative fair values. The Company early adopted ASU 2017-01 on October 1, 2016, on a prospective basis, and there was no material impact on its consolidated financial statements or disclosures. The Company believes most of its future acquisitions of properties will qualify as asset acquisitions and most future transaction costs associated with these acquisitions will be capitalized.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which clarifies the presentation of restricted cash and restricted cash equivalents in the statements of cash flows. Under ASU 2016-18, restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statements of cash flows. The Company adopted ASU 2016-18 during the three months ended December 31, 2016 on a retrospective basis. As a result, net cash provided by operating activities decreased by $2.2 million in the nine months ended September 30, 2016. Net cash provided by investing activities increased by $10.6 million in the nine months ended September 30, 2016. Beginning-of-period cash and restricted cash total increased by $46.9 million in 2016. The following is a summary of the Company’s cash and restricted cash total as presented in the consolidated statements of cash flows for the nine months ended September 30, 2017 and 2016 (in thousands):

	September 30, 2017		September 30, 2016
Cash and cash equivalents	$	92,695	$	34,086
Restricted cash		29,417		34,110
Total cash and restricted cash	$	122,112	$	68,196

In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis, which changes the way reporting enterprises evaluate whether (1) they should consolidate limited partnerships and similar entities, (2) fees paid to a decision maker or service provider are variable interests in a VIE, and (3) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. The ASU also significantly changes how to evaluate voting rights for entities

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that are not similar to limited partnerships when determining whether the entity is a VIE, which may affect entities for which the decision making rights are conveyed through a contractual arrangement. The Company implemented the provisions of ASU 2015-02 as of January 1, 2017 and there was no material impact on its consolidated financial statements. Upon issuing OP Units to an unaffiliated limited partner on August 1, 2017, the OP became a VIE as such limited partner of the OP lacks substantive kick-out rights and substantive participating rights. The Company is the primary beneficiary of, and continues to consolidate, the OP.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends several aspects of the accounting for share-based payment transactions, including the income tax consequences, accrual of compensation cost, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this standard must be applied prospectively, retrospectively, or as of the beginning of the earliest comparative period presented in the year of adoption, depending on the type of amendment. The Company implemented the provisions of ASU 2016-09 as of January 1, 2017 and there was no material impact on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should also disclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date, which amends ASU 2014-09 to defer the effective date by one year. The new standard is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Entities are allowed to use either the full or modified retrospective approach when transitioning to the ASU. The Company expects to implement the provisions of ASU 2014-09 as of January 1, 2019 and has not yet selected a transition method. The Company is continuing to evaluate ASU 2014-09 (and related clarifying guidance issued by the FASB); however, the Company does not expect its adoption to have a material impact on its consolidated financial statements, as a substantial portion of its revenue consists of rental income from leasing arrangements, which is specifically excluded from ASU 2014-09.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which changes certain recognition, measurement, presentation, and disclosure requirements for financial instruments. The ASU requires all equity investments, except those accounted for under the equity method of accounting or resulting in consolidation, to be measured at fair value with changes in fair value recognized in net income. The ASU also simplifies the impairment assessment for equity investments without readily determinable fair values, amends the presentation requirements for changes in the fair value of financial liabilities, requires presentation of financial instruments by measurement category and form of financial asset, and eliminates the requirement to disclose the methods and significant assumptions used in estimating the fair value of financial instruments. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. The Company expects to implement the provisions of ASU 2016-01 as of January 1, 2019, and does not expect the new standard to have a material impact on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which supersedes the current accounting for leases and while retaining two distinct types of leases, finance and operating, (1) requires lessees to record a right of use asset and a related liability for the rights and obligations associated with a lease, regardless of lease classification, and recognize lease expense in a manner similar to current accounting, (2) eliminates most real estate specific lease provisions, and, (3) aligns many of the underlying lessor model principles with those in the new revenue standard. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Entities are required to use a modified retrospective approach when transitioning to the ASU for leases that exist as of or are entered into after the beginning of the earliest comparative period presented in the financial statements. The Company expects to implement the provisions of ASU 2016-02 as of January 1, 2019 in conjunction with the adoption of ASU 2014-09 discussed above. As lessors, substantially all of the Company’s agreements have a term of 12 months or less. Based on a preliminary assessment, the Company expects most of its operating leases will be subject to the new guidance and recognized as operating lease liabilities and right-of-use assets upon adoption, resulting in an immaterial increase in the assets and liabilities on its consolidated balance sheets. The Company is continuing its evaluation, which may identify additional impacts this standard will have on its consolidated financial statements and related disclosures.

3. Investments in Subsidiaries

The Company has in the past and may in the future invest in joint ventures. The Company consolidates the entities that it controls as well as any VIEs where it is the primary beneficiary. In connection with its indirect equity investments in the properties acquired, the Company, through the OP and the TRS, directly or indirectly holds 100% of the membership interests in single-asset LLCs that directly own the properties. All of the properties the Company has acquired are consolidated in the Company’s financial statements. The assets of each entity can only be used to settle obligations of that particular entity, and the creditors of each entity have no recourse to the assets of other entities or the Company.

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Additionally, the Company has in the past and may in the future enter into purchase and sale transactions structured as reverse like-kind exchanges (“1031 Exchanges”) under Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”). For a reverse 1031 Exchange in which the Company purchases a new property prior to selling the property to be matched in the like-kind exchange (the Company refers to a new property being acquired in the 1031 Exchange prior to the sale of the related property as a “Parked Asset”), legal title to the Parked Asset is held by an Exchange Accommodation Titleholder (“EAT”) engaged to execute the 1031 Exchange until the sale transaction and the 1031 Exchange are completed. The Company, through a wholly owned subsidiary, enters into a master lease agreement with the EAT whereby the EAT leases the acquired property and all other rights acquired in connection with the acquisition to the Company. The term of the master lease agreement is until the earlier of the completion of the reverse 1031 Exchange or 180 days from the date that the property was acquired. The EAT is classified as a VIE as it does not have sufficient equity investment at risk to finance its activities without additional subordinated financial support. The Company consolidates the EAT as its primary beneficiary because it has the ability to control the activities that most significantly impact the EAT's economic performance and the Company retains all of the legal and economic benefits and obligations related to the Parked Assets prior to completion of the 1031 Exchange. As such, the Parked Assets are included in the Company’s consolidated financial statements as VIEs until legal title is transferred to the Company upon either completion of the 1031 Exchange or termination of the master lease agreements, at which time they will be consolidated as wholly owned subsidiaries.

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As of September 30, 2017, the Company was invested in 32 properties. The following table represents the Company’s investments as of September 30, 2017 and December 31, 2016:

Property Name		Location	YearAcquired	Effective Ownership Percentage at September 30, 2017				Effective Ownership Percentage at December 31, 2016
The Miramar Apartments		Dallas, Texas	2013		—		(1)		100	%
Arbors on Forest Ridge		Bedford, Texas	2014		100	%	(2)		90	%
Cutter’s Point		Richardson, Texas	2014		100	%	(2)		90	%
Eagle Crest		Irving, Texas	2014		100	%	(2)		90	%
Silverbrook		Grand Prairie, Texas	2014		100	%	(2)		90	%
Timberglen	(3)	Dallas, Texas	2014		100	%	(2)		90	%
Toscana		Dallas, Texas	2014		—		(1)		90	%
The Grove at Alban		Frederick, Maryland	2014		—		(1)		76	%	(4)
Edgewater at Sandy Springs		Atlanta, Georgia	2014		100	%	(2)		90	%
Beechwood Terrace		Nashville, Tennessee	2014		100	%	(2)		90	%
Willow Grove		Nashville, Tennessee	2014		100	%	(2)		90	%
Woodbridge		Nashville, Tennessee	2014		100	%	(2)		90	%
Abbington Heights		Antioch, Tennessee	2014		100	%	(2)		90	%	(4)
The Summit at Sabal Park		Tampa, Florida	2014		100	%	(2)		90	%	(4)
Courtney Cove		Tampa, Florida	2014		100	%	(2)		90	%	(4)
Radbourne Lake		Charlotte, North Carolina	2014		100	%	(2)		90	%	(4)
Timber Creek		Charlotte, North Carolina	2014		100	%	(2)		90	%	(4)
Belmont at Duck Creek		Garland, Texas	2014		100	%	(2)		90	%	(4)
The Arbors		Tucker, Georgia	2014		—		(1)		90	%	(4)
The Crossings		Marietta, Georgia	2014		—		(1)		90	%	(4)
The Crossings at Holcomb Bridge		Roswell, Georgia	2014		—		(1)		90	%	(4)
The Knolls		Marietta, Georgia	2014		—		(1)		90	%	(4)
Regatta Bay		Seabrook, Texas	2014		—		(1)		90	%	(4)
Sabal Palm at Lake Buena Vista		Orlando, Florida	2014		100	%	(2)		90	%	(4)
Southpoint Reserve at Stoney Creek	(3)	Fredericksburg, Virginia	2014		100	%	(2)		85	%	(4)
Cornerstone		Orlando, Florida	2015		100	%	(2)		90	%	(4)
Twelve 6 Ten at the Park		Dallas, Texas	2015		—		(1)		90	%	(4)
The Preserve at Terrell Mill		Marietta, Georgia	2015		100	%	(2)		90	%	(4)
The Ashlar		Dallas, Texas	2015		100	%	(2)		90	%	(4)
Heatherstone		Dallas, Texas	2015		100	%	(2)		90	%	(4)
Versailles		Dallas, Texas	2015		100	%	(2)		90	%	(4)
Seasons 704 Apartments		West Palm Beach, Florida	2015		100	%	(2)		90	%	(4)
Madera Point		Mesa, Arizona	2015		100	%	(2)		95	%
The Pointe at the Foothills		Mesa, Arizona	2015		100	%	(2)		95	%
Venue at 8651		Fort Worth, Texas	2015		100	%	(2)		95	%
Parc500		West Palm Beach, Florida	2016		100	%	(2)		91	%
The Colonnade		Phoenix, Arizona	2016		100	%	(2)		97	%
Old Farm		Houston, Texas	2016		100	%	(2)		100	%	(5)
Stone Creek at Old Farm		Houston, Texas	2016		100	%	(2)		100	%	(5)
Hollister Place		Houston, Texas	2017		100	%			—		(6)
Rockledge Apartments		Marietta, Georgia	2017		100	%			—		(6)

(1) Properties were sold during the nine months ended September 30, 2017.

(2) The Company purchased 100% of the ownership interest in the property held by the noncontrolling interest holders on June 30, 2017 (see Note 10).

(3) Properties were classified as held for sale as of September 30, 2017.

(4) Properties were considered VIEs at December 31, 2016.

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(5) Properties were Parked Assets and considered VIEs at December 31, 2016. The Company completed the reverse 1031 Exchanges of these properties during the nine months ended September 30, 2017 with the sales of the replacement properties, at which time legal title to the properties transferred to the Company. Upon the transfer of title, the properties were no longer considered Parked Assets or VIEs (see Note 5).

(6) Properties were acquired in 2017; therefore, no ownership as of December 31, 2016.

4. Real Estate Investments Statistics

As of September 30, 2017, the Company is invested in a total of 32 multifamily properties, as listed below:

Property Name		Rentable Square Footage (in thousands)		Number of Units		Date Acquired	Average Effective Monthly Rent Per Unit (1)		% Occupied as of September 30, 2017 (2)			% Occupied as of December 31, 2016 (2)
Arbors on Forest Ridge			155	210		1/31/2014		859		95.2	%		92.9	%
Cutter’s Point			198	196		1/31/2014		1,052		94.4	%		93.9	%
Eagle Crest			396	447		1/31/2014		876		95.3	%		94.4	%
Silverbrook			526	642		1/31/2014		781		95.6	%		93.5	%
Timberglen	(3)		221	304		1/31/2014		846		95.1	%		92.8	%
Edgewater at Sandy Springs			727	760		7/18/2014		929		94.5	%		94.5	%
Beechwood Terrace			272	300		7/21/2014		921		96.0	%		95.3	%
Willow Grove			229	244		7/21/2014		912		93.4	%		96.7	%
Woodbridge			247	220		7/21/2014		945		95.5	%		87.7	%
Abbington Heights			239	274		8/1/2014		879		93.8	%		95.3	%
The Summit at Sabal Park			205	252		8/20/2014		907		95.2	%		90.9	%
Courtney Cove			225	324		8/20/2014		817		93.8	%		94.4	%
Radbourne Lake			247	225		9/30/2014		1,059		93.3	%		96.9	%
Timber Creek			248	352		9/30/2014		819		95.2	%		95.5	%
Belmont at Duck Creek			198	240		9/30/2014		990		95.4	%		95.0	%
Sabal Palm at Lake Buena Vista			371	400		11/5/2014		1,158		93.5	%		95.0	%
Southpoint Reserve at Stoney Creek	(3)		116	156		12/18/2014		1,069		96.8	%		92.9	%
Cornerstone			318	430		1/15/2015		910		94.9	%		95.8	%
The Preserve at Terrell Mill			692	752		2/6/2015		850		93.1	%		92.0	%
The Ashlar			206	264		2/26/2015		819		92.4	%		91.3	%
Heatherstone			116	152		2/26/2015		838		94.1	%		92.8	%
Versailles			301	388		2/26/2015		860		95.1	%		93.0	%
Seasons 704 Apartments			217	222		4/15/2015		1,056		95.9	%		95.0	%
Madera Point			193	256		8/5/2015		797		93.8	%		93.8	%
The Pointe at the Foothills			473	528		8/5/2015		817		92.2	%		92.2	%
Venue at 8651			289	333		10/30/2015		800		94.3	%		90.4	%
Parc500			266	217		7/27/2016		1,167		93.5	%		93.5	%
The Colonnade			256	415		10/11/2016		695		92.0	%		88.0	%
Old Farm			697	734		12/29/2016		1,177		92.8	%		93.6	%
Stone Creek at Old Farm			186	190		12/29/2016		1,186		93.7	%		93.2	%
Hollister Place			246	260		2/1/2017		969		93.5	%		—		(4)
Rockledge Apartments			802	708		6/30/2017		1,153		91.9	%		—		(4)
			10,078		11,395

(1) Average effective monthly rent per unit is equal to the average of the contractual rent for commenced leases as of September 30, 2017 minus any tenant concessions over the term of the lease, divided by the number of units under commenced leases as of September 30, 2017.

(2) Percent occupied is calculated as the number of units occupied as of September 30, 2017 and December 31, 2016, divided by the total number of units, expressed as a percentage.

(3) Properties were classified as held for sale as of September 30, 2017.

(4) Properties were acquired in 2017.

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5. Real Estate Investments

As of September 30, 2017, the major components of the Company’s investments in multifamily properties were as follows (in thousands):

Operating Properties	Land		Buildingsand Improvements			IntangibleLease Assets			Construction in Progress		Furniture, Fixtures and Equipment			Totals
Arbors on Forest Ridge	$	2,330	$	11,073		$	—		$	—	$	794		$	14,197
Cutter’s Point		3,330		12,995			—			—		946			17,271
Eagle Crest		5,450		22,227			—			—		1,231			28,908
Silverbrook		4,860		25,643			—			—		2,363			32,866
Edgewater at Sandy Springs		14,290		43,959			—			9		4,057			62,315
Beechwood Terrace		1,390		20,662			—			78		1,229			23,359
Willow Grove		3,940		10,739			—			—		882			15,561
Woodbridge		3,651		12,995			—			1		1,029			17,676
Abbington Heights		1,770		16,602			—			112		1,101			19,585
The Summit at Sabal Park		5,770		13,355			—			—		1,107			20,232
Courtney Cove		5,880		12,913			—			—		1,055			19,848
Radbourne Lake		2,440		21,801			—			5		1,255			25,501
Timber Creek		11,260		13,429			—			—		1,086			25,775
Belmont at Duck Creek		1,910		17,157			—			—		1,170			20,237
Sabal Palm at Lake Buena Vista		7,580		41,173			—			—		1,024			49,777
Cornerstone		1,500		30,357			—			—		1,395			33,252
The Preserve at Terrell Mill		10,170		48,609			—			—		3,895			62,674
The Ashlar		4,090		12,631			—			—		1,459			18,180
Heatherstone		2,320		7,862			—			—		909			11,091
Versailles		6,720		19,735			—			6		2,155			28,616
Seasons 704 Apartments		7,480		14,071			—			2		867			22,420
Madera Point		4,920		17,369			—			43		1,130			23,462
The Pointe at the Foothills		4,840		46,402			—			108		1,669			53,019
Venue at 8651		2,350		16,910			—			813		1,744			21,817
Parc500		3,860		19,297			—			589		1,217			24,963
The Colonnade		8,340		36,677			—			55		805			45,877
Old Farm		11,078		69,718			—			29		1,304			82,129
Stone Creek at Old Farm		3,493		19,123			—			—		350			22,966
Hollister Place		2,782		20,719			—			—		593			24,094
Rockledge Apartments		17,451		92,296			3,021			—		1,369			114,137
		167,245		768,499			3,021			1,850		41,190			981,805
Accumulated depreciation and amortization		—		(57,876	)		(1,007	)		—		(19,504	)		(78,387	)
Total Operating Properties	$	167,245	$	710,623		$	2,014		$	1,850	$	21,686		$	903,418
Held For Sale Properties
Timberglen		2,510		14,718			—			—		1,049			18,277
Southpoint Reserve at Stoney Creek		6,120		11,252			—			—		663			18,035
		8,630		25,970			—			—		1,712			36,312
Accumulated depreciation and amortization		—		(2,630	)		—			—		(767	)		(3,397	)
Total Held For Sale Properties	$	8,630	$	23,340		$	—		$	—	$	945		$	32,915
Total	$	175,875	$	733,963		$	2,014		$	1,850	$	22,631		$	936,333

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As of December 31, 2016, the major components of the Company’s investments in multifamily properties were as follows (in thousands):

Operating Properties	Land		Buildings and Improvements			Intangible Lease Assets			Construction in Progress		Furniture, Fixtures and Equipment			Totals
Arbors on Forest Ridge	$	2,330	$	11,014		$	—		$	3	$	717		$	14,064
Cutter's Point		3,330		12,871			—			—		810			17,011
Eagle Crest		5,450		21,990			—			—		1,052			28,492
Silverbrook		4,860		25,335			—			—		1,996			32,191
Timberglen		2,510		14,527			—			—		894			17,931
Edgewater at Sandy Springs		14,290		43,709			—			123		3,295			61,417
Beechwood Terrace		1,390		20,561			—			—		940			22,891
Willow Grove		3,940		10,672			—			—		668			15,280
Woodbridge		3,650		12,708			—			215		759			17,332
Abbington Heights		1,770		16,426			—			75		916			19,187
The Summit at Sabal Park		5,770		13,342			—			9		956			20,077
Courtney Cove		5,880		12,886			—			42		910			19,718
Radbourne Lake		2,440		21,445			—			257		1,025			25,167
Timber Creek		11,260		13,252			—			69		864			25,445
Belmont at Duck Creek		1,910		17,034			—			—		941			19,885
The Arbors		1,730		6,587			—			5		413			8,735
The Crossings		3,982		17,662			—			155		1,429			23,228
The Crossings at Holcomb Bridge		5,560		10,925			—			—		1,178			17,663
The Knolls		3,410		17,707			—			8		1,615			22,740
Regatta Bay		1,660		16,155			—			89		891			18,795
Sabal Palm at Lake Buena Vista		7,580		41,147			—			3		874			49,604
Cornerstone		1,500		30,354			—			29		906			32,789
The Preserve at Terrell Mill		10,170		48,163			—			516		2,872			61,721
The Ashlar		4,090		12,348			—			124		1,129			17,691
Heatherstone		2,320		7,521			—			224		749			10,814
Versailles		6,720		20,267			—			286		1,597			28,870
Seasons 704 Apartments		7,480		14,043			—			—		696			22,219
Madera Point		4,920		17,079			—			15		865			22,879
The Pointe at the Foothills		4,840		45,975			—			157		1,289			52,261
Venue at 8651		2,350		16,815			—			311		1,162			20,638
Parc500		3,860		18,700			491			113		504			23,668
The Colonnade		8,340		35,473			723			—		376			44,912
Old Farm		11,078		69,580			3,354			—		1,052			85,064
Stone Creek at Old Farm		3,493		19,101			572			—		276			23,442
		165,863		733,374			5,140			2,828		36,616			943,821
Accumulated depreciation and amortization		—		(46,044	)		(650	)		—		(13,520	)		(60,214	)
Total Operating Properties	$	165,863	$	687,330		$	4,490		$	2,828	$	23,096		$	883,607
Held For Sale Properties
The Grove at Alban		3,640		19,033			—			—		1,318			23,991
The Miramar Apartments		1,580		8,870			—			—		711			11,161
Toscana		1,730		7,341			—			3		684			9,758
Southpoint Reserve at Stoney Creek		6,120		11,218			—			31		605			17,974
Twelve 6 Ten at the Park		3,610		18,088			—			21		925			22,644
		16,680		64,550			—			55		4,243			85,528
Accumulated depreciation and amortization		—		(4,896	)		—			—		(1,202	)		(6,098	)
Total Held For Sale Properties	$	16,680	$	59,654		$	—		$	55	$	3,041		$	79,430
Total	$	182,543	$	746,984		$	4,490		$	2,883	$	26,137		$	963,037

Depreciation expense was $10.0 million and $8.5 million for the three months ended September 30, 2017 and 2016, respectively. Depreciation expense was $29.5 million and $25.5 million for the nine months ended September 30, 2017 and 2016, respectively. 

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Amortization expense related to the Company’s intangible lease assets was $1.2 million and $0.2 million for the three months ended September 30, 2017 and 2016, respectively. Amortization expense related to the Company’s intangible lease assets was $6.4 million and $0.9 million for the nine months ended September 30, 2017 and 2016, respectively. Amortization expense related to the Company’s intangible lease assets for all acquisitions completed through September 30, 2017 is expected to be $2.0 million for the remainder of the year ended December 31, 2017. Due to the six-month useful life attributable to intangible lease assets, the value of intangible lease assets on any acquisition prior to March 31, 2017 has been fully amortized and the assets and related accumulated amortization have been written off as of September 30, 2017.

Acquisitions

The following table presents the Company’s acquisitions of real estate during the nine months ended September 30, 2017 (dollars in thousands); the Company acquired one property for approximately $22.4 million during the nine months ended September 30, 2016 (see Notes 3, 4 and 6). 

Property Name	Location	Date of Acquisition	Purchase Price		Debt (1)		# Units		Effective Ownership
Hollister Place	Houston, Texas	February 1, 2017	$	24,500	$	24,500		260		100	%
Rockledge Apartments	Marietta, Georgia	June 30, 2017		113,500		113,500		708		100	%
			$	138,000	$	138,000		968

(1) For additional information regarding the Company’s debt, see Note 6.

Dispositions

The following table presents the Company’s sales of real estate during the nine months ended September 30, 2017 (in thousands). The Company sold seven properties for approximately $134.0 million during the nine months ended September 30, 2016.

Property Name		Location	Date of Sale	Sales Price		Net Cash Proceeds(1)			Gain on Sale of Real Estate
The Miramar Apartments	(2)	Dallas, Texas	April 3, 2017	$	16,550	$	16,326		$	6,368
Toscana	(3)	Dallas, Texas	April 3, 2017		13,250		13,040			4,283
The Grove at Alban		Frederick, Maryland	April 3, 2017		27,500		27,021			4,514
Twelve 6 Ten at the Park	(2)	Dallas, Texas	April 27, 2017		26,600		26,349			4,731
Regatta Bay	(4)	Seabrook, Texas	July 14, 2017		28,200		27,670			10,423
The Arbors, The Crossings, The Crossings at Holcomb Bridge and The Knolls	(5)	Atlanta, Georgia	September 29, 2017		116,000		114,010			48,067
				$	228,100	$	224,416	(6)	$	78,386

(1) Represents sales price, net of closing costs.

(2) The Company completed the reverse 1031 Exchange of Old Farm with the sales of The Miramar Apartments and Twelve 6 Ten at the Park.

(3) The Company completed the reverse 1031 Exchange of Stone Creek at Old Farm with the sale of Toscana.

(4) The Company completed the reverse 1031 Exchange of Hollister Place with the sale of Regatta Bay.

(5) Properties were sold as a portfolio. The Company completed the reverse 1031 Exchange of Rockledge Apartments with the sales of The Arbors, The Crossings, The Crossings at Holcomb Bridge and The Knolls (the “NAVA Portfolio”). Approximately $14.1 million of the proceeds from the sale of the NAVA Portfolio was placed with a qualified intermediary for use in a forward 1031 Exchange that was completed on October 25, 2017 (see Note 13).

(6) During the nine months ended September 30, 2017, the Company used cash on hand plus its share of the proceeds, net of mortgage repayments and distributions to noncontrolling interests, from the sales of these properties to repay the entire $30.0 million outstanding on its 2016 bridge facility, which retired the bridge facility, to pay down $10.0 million on its $30.0 million credit facility and to pay down approximately $11.3 million on its 2017 bridge facility (see Note 6).

Other Activity

In August and September 2017, parts of Texas and Florida were hit by two hurricanes, causing severe property damage in the affected areas. As of September 30, 2017, the Company owned three properties in the Houston area, two properties in the Miami area,

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two properties in the Tampa Bay area, and two properties in the Orlando area. The Company’s properties in these areas suffered minimal damage, which the Company estimates to be approximately $40,000.

6. Debt

Mortgage Debt

The following table contains summary information concerning the mortgage debt of the Company as of September 30, 2017 (dollars in thousands):

Operating Properties		Type	Term(months)		Outstanding Principal (1)				Interest Rate (2)		Maturity Date
Arbors on Forest Ridge	(3)	Floating		84	$	13,130				2.91%	7/1/2024
Cutter's Point	(3)	Floating		84		16,640				2.91%	7/1/2024
Eagle Crest	(3)	Floating		84		29,510				2.91%	7/1/2024
Silverbrook	(3)	Floating		84		30,590				2.91%	7/1/2024
Edgewater at Sandy Springs	(3)	Floating		84		52,000				2.91%	7/1/2024
Beechwood Terrace	(3)	Floating		84		20,150				2.91%	7/1/2024
Willow Grove	(3)	Floating		84		14,818				3.01%	7/1/2024
Woodbridge	(3)	Floating		84		13,677				3.01%	7/1/2024
The Summit at Sabal Park	(3)	Floating		84		13,560				2.85%	7/1/2024
Courtney Cove	(3)	Floating		84		13,680				2.85%	7/1/2024
The Preserve at Terrell Mill	(3)	Floating		84		42,480				2.85%	7/1/2024
The Ashlar	(3)	Floating		84		14,520				2.85%	7/1/2024
Heatherstone	(3)	Floating		84		8,880				2.85%	7/1/2024
Versailles	(3)	Floating		84		23,880				2.85%	7/1/2024
Seasons 704 Apartments	(3)	Floating		84		17,460				2.85%	7/1/2024
Madera Point	(3)	Floating		84		15,150				2.85%	7/1/2024
The Pointe at the Foothills	(3)	Floating		84		34,800				2.85%	7/1/2024
Venue at 8651	(3)	Floating		84		13,734				3.01%	7/1/2024
The Colonnade	(3)	Floating		84		28,093				2.91%	7/1/2024
Old Farm	(3)	Floating		84		52,886				2.91%	7/1/2024
Stone Creek at Old Farm	(3)	Floating		84		15,274				2.91%	7/1/2024
Timber Creek	(4)	Floating		120		19,482				3.05%	10/1/2024
Radbourne Lake	(4)	Floating		120		19,213				3.04%	10/1/2024
Sabal Palm at Lake Buena Vista	(4)	Floating		120		37,680				3.04%	12/1/2024
Abbington Heights	(5)	Fixed		120		10,053				3.79%	9/1/2022
Belmont at Duck Creek	(6)	Fixed		84		10,995				4.68%	9/1/2018
Cornerstone	(7)	Fixed		120		22,771				4.24%	3/1/2023
Parc500	(8)	Fixed		120		15,793				4.49%	8/1/2025
Hollister Place	(3)	Floating		84		13,475				3.47%	2/1/2024
Rockledge Apartments	(3)	Floating		84		68,100				2.80%	7/1/2024
					$	702,474
Fair market value adjustment						852		(9)
Deferred financing costs, net of accumulated amortization of $592						(8,358	)
					$	694,968
Held for Sale Properties
Timberglen	(3)	Floating		84		17,226				3.11%	7/1/2024
Southpoint Reserve at Stoney Creek	(3)	Floating		84		13,600				3.34%	1/1/2022
					$	30,826
Deferred financing costs, net of accumulated amortization of $80						(499	)
					$	30,327

(1) Mortgage debt that is non-recourse to the Company and encumbers the multifamily properties.

(2) Interest rate is based on one-month LIBOR plus an applicable margin, except for fixed rate mortgage debt. One-month LIBOR as of September 30, 2017 was 1.2322%.

(3) Loan can be pre-paid in the first 12 months of the term at par plus 5.00%. Starting in the 13^th month of the term through the 81^st month of the term, the loan can be pre-paid at par plus 1.00% of the unpaid principal balance and at par during the last three months of the term.

(4) Loan can be pre-paid in the first 12 months of the term at par plus 5.00%. Starting in the 13^th month of the term through the 116^th month of the term, the loan can be pre-paid at par plus 1.00% of the unpaid principal balance and at par during the last four months of the term.

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(5) Debt was assumed upon acquisition of this property at approximated fair value. The loan is open to pre-payment in the last three months of the term.

(6) Debt was assumed upon acquisition of this property at approximated fair value. The loan is open to pre-payment in the last six months of the term.

(7) Debt in the amount of $18.0 million was assumed upon acquisition of this property at approximated fair value. The assumed debt carries a 4.09% fixed rate, was originally issued in March 2013, and had a term of 120 months with an initial 24 months of interest only. At the time of acquisition, the principal balance of the first mortgage remained unchanged and had a remaining term of 98 months with 2 months of interest only. The first mortgage is pre-payable and subject to yield maintenance from month 13 through August 31, 2022 and is pre-payable at par September 1, 2022 until maturity. Concurrently with the acquisition of the property, the Company placed a supplemental second mortgage on the property with a principal amount of approximately $5.8 million, a fixed rate of 4.70%, and with a maturity date that is the same time as the first mortgage. The supplemental second mortgage is pre-payable and subject to yield maintenance from the date of issuance through August 31, 2022 and is pre-payable at par September 1, 2022 until maturity. As of September 30, 2017, the total indebtedness secured by the property had a blended interest rate of 4.24%.

(8) Debt was assumed upon acquisition of this property at approximated fair value. The loan is open to pre-payment in the last four months of the term.

(9) The Company reflected valuation adjustments on its fixed rate debt for Belmont at Duck Creek and Parc500 to adjust it to fair market value on the date of acquisition for the difference between the fair value and the assumed principal amount of debt. The difference is amortized into interest expense over the remaining terms of the mortgages. 

On June 30, 2017, the Company entered into 22 first mortgages, with a combined principal amount of $502.1 million, on certain of its properties, replacing the $168.4 million of existing mortgage debt outstanding on nine properties and the $300.0 million outstanding under a credit facility (the “$300 Million Credit Facility”). The refinancing of the existing mortgage debt incurred approximately $1.7 million of prepayment penalties, which is included in loss on extinguishment of debt and modification costs on the consolidated statements of operations and comprehensive income. The Federal Home Loan Mortgage Corporation (“Freddie Mac”), who was the lender on the existing mortgage debt and the $300 Million Credit Facility, also originated the 22 new first mortgages (the “Freddie Refinance”). In accordance with FASB ASC 470-50, Debt – Modifications and Extinguishments, the Company accounted for the refinancing as a modification of a debt instrument. As such, the existing $4.9 million of net deferred financing costs related to the prior mortgage debt and credit facility debt is included with the approximately $2.9 million of deferred financing costs incurred in connection with the modification. Such costs are recorded as a reduction from mortgages payable on the accompanying consolidated balance sheet as of September 30, 2017 and are amortized over the terms of the new mortgage debt. Additionally, the Company incurred approximately $2.0 million of costs in connection with the Freddie Refinance that were not capitalized as deferred financing costs. Such costs are recorded in loss on extinguishment of debt and modification costs on the accompanying consolidated statements of operations and comprehensive income. The Company used approximately $16.3 million of proceeds from the Freddie Refinance to fund a portion of the purchase of joint venture interests in the Portfolio held by noncontrolling interests (the “BH Buyout”) (see Note 10).

The following nine properties had existing mortgage debt that was refinanced: The Summit at Sabal Park, Courtney Cove, The Preserve at Terrell Mill, The Ashlar, Heatherstone, Versailles, Seasons 704 Apartments, Madera Point and The Pointe at the Foothills. The following twelve properties, which were refinanced as described above, were previously cross-collateralized as security for the $300 Million Credit Facility: Arbors on Forest Ridge, Cutter’s Point, Eagle Crest, Silverbrook, Timberglen, Edgewater at Sandy Springs, Beechwood Terrace, Willow Grove, Woodbridge, Venue at 8651, Old Farm and Stone Creek at Old Farm. The Colonnade, which obtained a first mortgage as described above, was not previously encumbered by mortgage debt or credit facility debt.

During the nine months ended September 30, 2017, the Company sold nine properties and repaid the related mortgage loans that encumbered eight of the properties, as detailed in the table below (in thousands):

Property Name		Date of Sale	Type	Outstanding Principal (1)
The Miramar Apartments		April 3, 2017	Floating	$	8,400
The Grove at Alban		April 3, 2017	Floating		18,374
Twelve 6 Ten at the Park		April 27, 2017	Floating		15,711
Regatta Bay		July 14, 2017	Floating		14,000
The Arbors, The Crossings, The Crossings at Holcomb Bridge and The Knolls	(2)	September 29, 2017	Floating		50,177
				$	106,662

(1) Represents the outstanding principal balance when the loan was repaid.

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(2) Properties were sold as a portfolio.

The ninth property the Company sold, Toscana, was released from the collateral pool of the $300 Million Credit Facility upon its sale on April 3, 2017. The Company incurred prepayment penalties of approximately $0.9 million in connection with the payoff of these mortgage loans and $0.1 million of fees in connection with the release of Toscana, both of which are included in loss on extinguishment of debt and modification costs on the consolidated statements of operations and comprehensive income.

The weighted average interest rate of the Company’s mortgage indebtedness was 3.04% as of September 30, 2017 and 2.95% as of December 31, 2016. The increase between the periods is primarily related to increases in LIBOR, partially offset by a weighted average reduction of 57 basis points in the borrowing spread related to the Freddie Refinance. As of September 30, 2017, the adjusted weighted average interest rate of the Company’s mortgage indebtedness was 3.14%. For purposes of calculating the adjusted weighted average interest rate of the outstanding mortgage indebtedness, the Company has included the weighted average fixed rate of 1.3388% on its combined $650.0 million notional amount of interest rate swap agreements, which effectively fix the interest rate on $650.0 million of the Company’s floating rate mortgage indebtedness (see Note 7). The interest rate cap agreements the Company has entered into effectively cap one-month LIBOR on $293.2 million of the Company’s floating rate mortgage indebtedness at a weighted average rate of 4.20% (see Note 7).

Each of the Company’s mortgages is a non-recourse obligation subject to customary provisions. The loan agreements contain customary events of default, including defaults in the payment of principal or interest, defaults in compliance with the covenants contained in the documents evidencing the loan, defaults in payments under any other security instrument covering any part of the property, whether junior or senior to the loan, and bankruptcy or other insolvency events. As of September 30, 2017, the Company believes it is in compliance with all provisions.

Freddie Mac Multifamily Green Advantage. In order to obtain more favorable pricing on the Company’s mortgage debt financing with Freddie Mac, the Company has decided to participate in Freddie Mac’s new Multifamily Green Advantage program. The Company has escrowed approximately $4.2 million to finance smarter, greener property improvements at 20 of its properties, which will be completed by the summer of 2019. The Company plans to reduce water/sewer costs at each property by at least 15% through the replacement of showerheads, plumbing fixtures and toilets with modern energy efficient upgrades. By participating in this program, the Company was able to lower the interest rate on the properties it refinanced in the Freddie Refinance by 10 basis points.

Credit and Bridge Facilities

The following table contains summary information concerning the Company’s credit and bridge facilities as of September 30, 2017 (dollars in thousands):

	Type	Term(months)		Amortization (months)		Outstanding Principal			Interest Rate (1)		Maturity Date
$30 Million Credit Facility	Floating		24		360	$	30,000			5.23%	12/29/2018
Deferred financing costs, net of accumulated amortization of $115							(197	)
						$	29,803
2017 Bridge Facility	Floating		4		360	$	54,597			4.98%	10/31/2017
Deferred financing costs, net of accumulated amortization of $198							(66	)
						$	54,531

(1) Interest rate is based on one-month LIBOR plus an applicable margin. One-month LIBOR as of September 30, 2017 was 1.2322%.

$30 Million Credit Facility. On December 29, 2016, the Company, through the OP, entered into a $30.0 million credit facility (the “$30 Million Credit Facility”) and immediately drew $15.0 million to fund a portion of the purchase price of Old Farm and Stone Creek at Old Farm. On February 1, 2017, the Company drew $14.0 million and used $12.0 million to fund a portion of the purchase price of Hollister Place and $2.0 million to fund value-add renovations at the Company’s properties. In April 2017, the Company used cash on hand plus its share of the proceeds, net of distributions to noncontrolling interests, from four properties it sold to pay down $10.0 million on the $30 Million Credit Facility. On June 30, 2017, the Company drew $11.0 million to fund a portion of the BH Buyout. The $30 Million Credit Facility is a full-term, interest-only facility, has one 12-month extension option and is guaranteed by the OP.

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2017 Bridge Facility. On June 30, 2017, the Company, through the OP, entered into a $65.9 million bridge facility (the “2017 Bridge Facility”) with KeyBank. The Company drew $44.5 million to fund a portion of the purchase price of Rockledge Apartments and $21.4 million to fund a portion of the BH Buyout. In July 2017, the Company used proceeds from the sale of Regatta Bay to pay down $11.3 million on the 2017 Bridge Facility. The 2017 Bridge Facility is a full-term, interest-only facility with an initial four-month term (see below) and is guaranteed by the Company. Interest accrues on the 2017 Bridge Facility at an interest rate of one-month LIBOR plus 3.75%. In October 2017, the Company used proceeds from the sale of the NAVA Portfolio to pay down approximately $46.0 million on the 2017 Bridge Facility, bringing the outstanding balance to approximately $8.6 million, and also extended the maturity date to March 31, 2018 (see Note 13). The Company intends on paying the outstanding principal balance of the 2017 Bridge Facility with proceeds from the sales of properties classified as held for sale as of September 30, 2017 or cash on hand.

The credit and bridge facilities agreements contain customary provisions with respect to events of default, covenants and borrowing conditions. Certain prepayments may be required upon a breach of covenants or borrowing conditions. As of September 30, 2017, the Company believes it is in compliance with all provisions of the agreements.

$300 Million Credit Facility. On June 6, 2016, the Company, through certain of its subsidiaries, entered into a $200.0 million credit facility, which was expanded to $300.0 million (the “$300 Million Credit Facility”) during the fourth quarter of 2016 to acquire three properties. The $300 Million Credit Facility was cross-collateralized by the following 12 properties: Arbors on Forest Ridge, Cutter’s Point, Eagle Crest, Silverbrook, Timberglen, Edgewater at Sandy Springs, Beechwood Terrace, Willow Grove, Woodbridge, Venue at 8651, Old Farm and Stone Creek at Old Farm.

On June 30, 2017, in connection with the Freddie Refinance, the Company repaid and retired the $300 Million Credit Facility. The refinancing of this existing credit facility debt did not incur prepayment penalties.

2016 Bridge Facility. On December 29, 2016, the Company, through the OP, entered into a $30.0 million bridge facility (the “2016 Bridge Facility”) with KeyBank and drew $30.0 million to fund a portion of the purchase price of Old Farm and Stone Creek at Old Farm. In April 2017, the Company paid down the entire $30.0 million of principal on the 2016 Bridge Facility, which was funded with its share of the proceeds, net of distributions to noncontrolling interests, from properties the Company sold in April 2017. The 2016 Bridge Facility was retired on April 28, 2017.

Deferred Financing Costs

The Company defers costs incurred in obtaining financing and amortizes the costs over the terms of the related loans using the straight-line method, which approximates the effective interest method. Deferred financing costs, net of amortization, are recorded as a reduction from the related debt on the Company’s consolidated balance sheets. Upon repayment of or in conjunction with a material change in the terms of the underlying debt agreement, any unamortized costs are charged to loss on extinguishment of debt and modification costs (see “Loss on Extinguishment of Debt and Modification Costs” below). For the three months ended September 30, 2017 and 2016, the Company wrote-off deferred financing costs of $0.6 million and $0.4 million, respectively, which is included in loss on extinguishment of debt and modification costs on the consolidated statements of operations and comprehensive income. For the nine months ended September 30, 2017 and 2016, the Company wrote-off deferred financing costs of $1.0 million and $0.7 million, respectively, which is included in loss on extinguishment of debt and modification costs on the consolidated statements of operations and comprehensive income. Amortization of deferred financing costs of $0.6 million and $0.4 million is included in interest expense on the consolidated statements of operations and comprehensive income for the three months ended September 30, 2017 and 2016, respectively. Amortization of deferred financing costs of $1.5 million and $1.1 million is included in interest expense on the consolidated statements of operations and comprehensive income for the nine months ended September 30, 2017 and 2016, respectively.

Loss on Extinguishment of Debt and Modification Costs

Upon repayment of or in conjunction with a material change (i.e. a 10% or greater difference in the cash flows between instruments) in the terms of an underlying debt agreement, the Company writes off any unamortized deferred financing costs related to the original debt. Loss on extinguishment of debt and modification costs also includes prepayment penalties incurred on the early repayment of debt and costs incurred in a debt modification that are not capitalized as deferred financing costs.

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Schedule of Debt Maturities

The aggregate scheduled maturities, including amortizing principal payments, of total debt for the next five calendar years subsequent to September 30, 2017 are as follows (in thousands):

	Operating Properties & Other Secured Debt		Held For Sale Properties		Total
2017	$	54,993	$	—	$	54,993
2018		43,352		276		43,628
2019		2,448		309		2,757
2020		2,483		316		2,799
2021		2,531		326		2,857
Thereafter		681,264		29,599		710,863
Total	$	787,071	$	30,826	$	817,897

7. Fair Value of Derivatives and Financial Instruments

Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. As a basis for considering market participant assumptions in fair value measurements, FASB ASC 820, Fair Value Measurement and Disclosures, establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy):

• Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.

• Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals.

• Level 3 inputs are the unobservable inputs for the asset or liability, which are typically based on an entity’s own assumption, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on input from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

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. The Company utilizes independent third parties to perform the allocation of value analysis for each property acquisition and to perform the market valuations on its derivative financial instruments and has established policies, as described above, processes and procedures intended to ensure that the valuation methodologies for investments and derivative financial instruments are fair and consistent as of the measurement date.

Derivative Financial Instruments and Hedging Activities

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

The Company utilizes an independent third party to perform the market valuations on its derivative financial instruments. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an

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expectation of future interest rates (forward curves) derived from observable market interest rate curves. The fair values of interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. To comply with the provisions of ASC 820, the Company incorporates credit valuation adjustments to appropriately reflect both the Company’s own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of the Company’s derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with the Company’s derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. The Company has determined that the significance of the impact of the credit valuation adjustments made to its derivative contracts, which determination was based on the fair value of each individual contract, was not significant to the overall valuation. As a result, all of the Company’s derivatives held as of September 30, 2017 and December 31, 2016 were classified as Level 2 of the fair value hierarchy.

The Company’s main objective in using interest rate derivatives is to add stability to interest expense related to floating rate debt. To accomplish this objective, the Company primarily uses interest rate swaps and caps as part of its interest rate risk management strategy. Interest rate swaps involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The interest rate swaps have terms ranging from four to five years. Interest rate caps involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. The interest rate caps have terms ranging from three to four years. During the nine months ended September 30, 2017 and 2016, such derivatives were used to hedge the variable cash flows associated with a majority of the Company’s floating rate debt. The interest rate cap agreements the Company has entered into effectively cap one-month LIBOR on $293.2 million of the Company’s floating rate mortgage indebtedness at a weighted average rate of 4.20%.

The effective portion of changes in the fair value of derivative financial instruments that are designated as cash flow hedges is recorded in other comprehensive income (loss) (“OCI”) and is subsequently reclassified into net income (loss) in the period that the hedged forecasted transaction affects earnings. Amounts reported in OCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s floating rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in net income (loss) as interest expense. During the three months ended September 30, 2017 and 2016, the Company recorded less than $0.1 million and $0.6 million, respectively, of gain related to the ineffective portion of changes in the fair value of its derivatives designated as cash flow hedges, which is recorded as a reduction to interest expense on the accompanying consolidated statements of operations and comprehensive income. During the nine months ended September 30, 2017 and 2016, the Company recorded approximately $0.1 million and $0.6 million, respectively, of gain related to the ineffective portion of changes in the fair value of its derivatives designated as cash flow hedges. As of September 30, 2016, the Company had four interest rate swap derivatives, with a notional amount of $400.0 million, designated as cash flow hedges.

In order to fix a portion of, and mitigate the risk associated with, the Company’s floating rate indebtedness (without incurring substantial prepayment penalties or defeasance costs typically associated with fixed rate indebtedness when repaid early or refinanced), the Company, through the OP, has entered into seven interest rate swap transactions with KeyBank (the “Counterparty”) with a combined notional amount of $650.0 million. The interest rate swaps the Company has entered into effectively replace the floating interest rate (one-month LIBOR) with respect to that amount with a weighted average fixed rate of 1.3388%. The Company has designated these interest rate swaps as cash flow hedges of interest rate risk.

As of September 30, 2017, the Company had the following outstanding interest rate swaps that were designated as cash flow hedges of interest rate risk (dollars in thousands):

Effective Date	Termination Date	Notional		Fixed Rate				Floating Rate Option (1)
July 1, 2016	June 1, 2021	$	100,000		1.1055	%		One-month LIBOR
July 1, 2016	June 1, 2021		100,000		1.0210	%		One-month LIBOR
July 1, 2016	June 1, 2021		100,000		0.9000	%		One-month LIBOR
September 1, 2016	June 1, 2021		100,000		0.9560	%		One-month LIBOR
April 1, 2017	April 1, 2022		100,000		1.9570	%		One-month LIBOR
May 1, 2017	April 1, 2022		50,000		1.9610	%		One-month LIBOR
July 1, 2017	July 1, 2022		100,000		1.7820	%		One-month LIBOR
		$	650,000		1.3388	%	(2)

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(1) As of September 30, 2017, one-month LIBOR was 1.2322%.

(2) Represents the weighted average fixed rate of the interest rate swaps.

Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements but either do not meet the strict requirements to apply hedge accounting in accordance with FASB ASC 815, Derivatives and Hedging, or the Company has elected not to designate such derivatives. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in net income (loss) as interest expense. As of September 30, 2016, the Company had 36 interest rate cap derivatives, with a notional amount of $578.3 million, which were not designated as hedges in qualifying hedging relationships.

As of September 30, 2017, the Company had the following outstanding derivatives that were not designated as hedges in qualifying hedging relationships (dollars in thousands):

Product	Number of Instruments		Notional
Interest rate caps		17	$	293,184

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of September 30, 2017 and December 31, 2016 (in thousands):

		Asset Derivatives				Liability Derivatives
	Balance Sheet Location	September 30, 2017		December 31, 2016		September 30, 2017			December 31, 2016
Derivatives designated as hedging instruments:
Interest rate swaps	Fair market value of interest rate swaps	$	11,759	$	12,413	$	713	(1)	$	—
Derivatives not designated as hedging instruments:
Interest rate caps	Prepaid and other assets		—		5		—			—
Total		$	11,759	$	12,418	$	713		$	—

(1) Included in accounts payable and other accrued liabilities on the consolidated balance sheet.

The tables below present the effect of the Company’s derivative financial instruments on the consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2017 and 2016 (in thousands):

	Amount of gain (loss) recognized in OCI on derivative (effective portion)						Location of gain (loss) reclassified from accumulated OCI into income	Amount of gain (loss) reclassified from accumulated OCI into income (effective portion)						Location of gain (loss) recognized in income on derivative	Amount of gain (loss) recognized in income on derivative (ineffective portion)*
	2017			2016			(effective portion)	2017			2016			(ineffective portion)*	2017				2016
Derivatives designated as hedging instruments:
For the three months ended September 30,
Interest rate products		(241	)		(1,576	)	Interest expense		(360	)		(479	)	Interest expense		(63	)	(1)		599
For the nine months ended September 30,
Interest rate products		(2,162	)		(1,619	)	Interest expense		(1,142	)		(491	)	Interest expense		(88	)	(2)		599

* Includes amounts excluded from effectiveness testing.

(1) Includes approximately $90,000 of loss reclassified from OCI for missed forecasted transactions due to hedged forecasted transactions being no longer probable.

(2) Includes approximately $185,000 of loss reclassified from OCI for missed forecasted transactions due to hedged forecasted transactions being no longer probable.

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	Location of gain (loss)	Amount of gain (loss) recognized in income on derivative
	recognized in income	2017			2016
Derivatives not designated as hedging instruments:
For the three months ended September 30,
Interest rate products	Interest expense		—			(2	)
For the nine months ended September 30,
Interest rate products	Interest expense		(5	)		(8	)

Other Financial Instruments Carried at Fair Value

Redeemable noncontrolling interests in the OP have a redemption feature and are marked to their redemption value if such value exceeds the carrying value of the redeemable noncontrolling interests in the OP (see Note 10). The redemption value is based on the fair value of the Company’s common stock at the redemption date, and therefore, is calculated based on the fair value of the Company’s common stock at the balance sheet date. Since the valuation is based on observable inputs such as quoted prices for similar instruments in active markets, redeemable noncontrolling interests in the OP are classified as Level 2 if they are adjusted to their redemption value.

Financial Instruments Not Carried at Fair Value

At September 30, 2017 and December 31, 2016, the fair values of cash and cash equivalents, restricted cash, accounts receivable, prepaid assets, accounts payable and other accrued liabilities, accrued real estate taxes payable, accrued interest payable, security deposits and prepaid rent approximated their carrying values because of the short term nature of these instruments. The estimated fair values of other financial instruments were determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company would realize on the disposition of the financial instruments. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts.

Long-term indebtedness is carried at amounts that reasonably approximate their fair value. In calculating the fair value of its long-term indebtedness, the Company used interest rate and spread assumptions that reflect current credit worthiness and market conditions available for the issuance of long-term debt with similar terms and remaining maturities. These financial instruments utilize Level 2 inputs.

Real estate assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In such cases, the Company will evaluate the recoverability of such real estate assets based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provide for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate asset. If impaired, the real estate asset will be written down to its estimated fair value. There can be no assurance that the estimates discussed herein, using Level 3 inputs, are indicative of the amounts the Company could realize on disposition of the real estate asset. For the nine months ended September 30, 2017 and 2016, the Company did not record any impairment charges related to real estate assets.

8. Stockholders’ Equity

Common Stock

The Company began operations on March 31, 2015 as a result of the Spin-Off. During the three and nine months ended September 30, 2017, the Company issued 110,257 shares of common stock pursuant to its long-term incentive plan and retired 308,313 shares of common stock it had repurchased pursuant to its share repurchase program (see “Share Repurchase Program” and “Long Term Incentive Plan” below). As of September 30, 2017, the Company had 21,095,769 shares of common stock, $0.01 par value per share, issued and outstanding.

Share Repurchase Program

On June 15, 2016, the Board authorized the repurchase by the Company of up to $30.0 million of its common stock, $0.01 par value per share. This authorization expires on June 15, 2018. The Company may utilize various methods to effect the repurchases, and the timing and extent of the repurchases will depend upon several factors, including market and business conditions, regulatory requirements and other corporate considerations, including whether the Company’s common stock is trading at a significant discount to net asset value per share. Repurchases under this program may be discontinued at any time. During the nine months ended September 30, 2017, the Company repurchased 58,157 shares of its common stock, $0.01 par value per share, at a total cost of

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approximately $1,354,000, or $23.27 per share. As of September 30, 2017, the Company has repurchased 308,313 shares of its common stock, $0.01 par value per share, at a total cost of approximately $5,941,000, or $19.27 per share.

Treasury Stock

From time to time, in accordance with the Company’s share repurchase program, the Company may repurchase shares of its common stock in the open market. Until any such shares are retired, the cost of the shares is included in common stock held in treasury at cost on the consolidated balance sheet. The number of shares of common stock classified as treasury shares reduces the number of shares of the Company’s common stock outstanding and, accordingly, are considered in the weighted average number of shares outstanding during the period. During the nine months ended September 30, 2017, the Company retired 308,313 shares of its common stock held in treasury. As of September 30, 2017 and December 31, 2016, the Company had 0 shares and 250,156 shares, respectively, of common stock held in treasury.

Long Term Incentive Plan

On June 15, 2016, the Company’s stockholders approved a long-term incentive plan (the “2016 LTIP”) and the Company filed a registration statement on Form S-8 registering 2,100,000 shares of common stock, $0.01 par value per share, that the Company may issue pursuant to the 2016 LTIP. The 2016 LTIP authorizes the compensation committee of the Board to provide equity-based compensation in the form of stock options, appreciation rights, restricted shares, restricted stock units, performance shares, performance units and certain other awards denominated or payable in, or otherwise based on, the Company’s common stock or factors that may influence the value of the Company’s common stock, plus cash incentive awards, for the purpose of providing the Company’s directors, officers and other key employees (and those of the Adviser and the Company’s subsidiaries), the Company’s non-employee directors, and potentially certain non-employees who perform employee-type functions, incentives and rewards for performance.

Restricted Stock Units. Under the 2016 LTIP, restricted stock units may be granted to the Company’s directors, officers and other key employees (andthose of the Adviser and the Company’s subsidiaries) and typically vest over a three to four year period for officers and annually for directors. Beginning on the date of grant, restricted stock units earn dividends that are payable in cash on the vesting date. On August 11, 2016, pursuant to the 2016 LTIP, the Company granted 209,797 restricted stock unitsto its directors and officers. On March 16, 2017, pursuant to the 2016 LTIP, the Company granted 219,802 restricted stock units to its directors and officers.The following table includes the number of restricted stock units granted, vested, forfeited and outstanding as of September 30, 2017:

	2017
	Number of Units				Weighted Average Grant Date Fair Value
Outstanding January 1,		209,797			$	19.20
Granted		219,802				22.57
Vested		(110,257	)			19.20
Forfeited		—				—
Outstanding September 30,		319,342		(1)	$	21.52

(1) 49,768 restricted stock units vest in August 2018 and 49,772 restricted stock units vest in August 2019. 80,742 restricted stock units vest in March 2018 and 69,530 restricted stock units vest in each of March 2019 and March 2020.

As of September 30, 2017, the Company has issued 110,257 shares of common stock under the 2016 LTIP. For the three months ended September 30, 2017 and 2016, the Company recognized approximately $0.8 million and $0.3 million, respectively, of equity-based compensation expense related to grants of restricted stock units, which is included in corporate general and administrative expenses on the consolidated statements of operations and comprehensive income. For the nine months ended September 30, 2017 and 2016, the Company recognized approximately $2.4 million and $0.3 million, respectively, of equity-based compensation expense related to grants of restricted stock units. As of September 30, 2017, the Company has recognized a liability of approximately $0.3 million related to dividends earned on restricted stock units that are payable in cash upon vesting.

9. Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of the Company’s common stock outstanding, which is adjusted for shares classified as treasury shares during the period and excludes any unvested restricted stock units issued pursuant to the 2016 LTIP. Diluted earnings (loss) per share is computed by adjusting basic earnings (loss) per share for the dilutive effect of the assumed vesting of restricted stock units. During

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periods of net loss, the assumed vesting of restricted stock units is anti-dilutive and is not included in the calculation of earnings (loss) per share.

The effect of the conversion of OP Units held by noncontrolling limited partners is not reflected in the computation of basic and diluted earnings (loss) per share, as they are exchangeable for common stock on a one-for-one basis. The income (loss) allocable to such units is allocated on this same basis and reflected as net income attributable to redeemable noncontrolling interests in the Operating Partnership in the accompanying consolidated statements of operations and comprehensive income. As such, the assumed conversion of these units would have no net impact on the determination of diluted earnings (loss) per share. See Note 10 for additional information.

The following table sets forth the computation of basic and diluted earnings per share for the periods presented (in thousands, except per share amounts):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
Numerator for earnings per share:
Net income	$	54,076	$	8,825	$	60,702	$	25,712
Net income attributable to noncontrolling interests		—		1,735		2,836		4,047
Net income attributable to redeemable noncontrolling interests in the Operating Partnership		162		—		162		—
Net income attributable to common stockholders	$	53,914	$	7,090	$	57,704	$	21,665
Denominator for earnings per share:
Weighted average common shares outstanding		21,085		21,260		21,057		21,282
Denominator for basic earnings per share		21,085		21,260		21,057		21,282
Unvested restricted stock units		368		116		350		40
Denominator for diluted earnings per share		21,453		21,376		21,407		21,322
Earnings per weighted average common share:
Basic	$	2.56	$	0.33	$	2.74	$	1.02
Diluted	$	2.51	$	0.33	$	2.70	$	1.02

10. Noncontrolling Interests

Redeemable Noncontrolling Interests in the OP

Interests in the OP held by limited partners are represented by OP Units. Net income (loss) is allocated to holders of OP Units based upon net income (loss) attributable to common stockholders and the weighted average number of OP Units outstanding to total common shares plus OP Units outstanding during the period. Capital contributions, distributions, and profits and losses are allocated to OP Units in accordance with the terms of the partnership agreement of the OP. Each time the OP distributes cash to the Company, outside limited partners of the OP receive their pro-rata share of the distribution.Redeemable noncontrolling interests in the OP have a redemption feature and are marked to their redemption value if such value exceeds the carrying value of the redeemable noncontrolling interests in the OP.

On June 30, 2017, the Company and the OP entered into a contribution agreement (the “Contribution Agreement”) with BH Equities, LLC and its affiliates (collectively, “BH Equity”), whereby the Company purchased 100% of the joint venture interests in the Portfolio owned by BH Equity, representing approximately 8.4% ownership in the Portfolio (the “BH Buyout”), for total consideration of approximately $51.7 million (the “Purchase Amount”). The Purchase Amount consisted of approximately $49.7 million in cash that was paid on June 30, 2017 and 73,233 OP Units (initially valued at $2.0 million) that were issued on August 1, 2017. The number of OP Units issued was calculated by dividing $2.0 million by the midpoint of the range of the Company’s net asset value as publicly disclosed in connection with the Company’s release of its second quarter of 2017 earnings results, which was $27.31 per share. The Company financed the cash portion of the Purchase Amount with $21.4 million of proceeds from the 2017 Bridge Facility, $16.3 million of proceeds from the Freddie Refinance, $11.0 million of proceeds from the $30 Million Credit Facility and $1.0 million of cash on hand.

In connection with the issuance of OP Units to BH Equity on August 1, 2017, the Company and the OP amended the partnership agreement of the OP (the “Amendment”). Pursuant to the Amendment, limited partners holding OP Units have the right to cause the OP to redeem their units at a redemption price equal to and in the form of the Cash Amount (as defined in the partnership agreement

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of the OP), provided that such OP Units have been outstanding for at least one year. The Company, through the OP GP, as the general partner of the OP may, in its sole discretion, purchase the OP Units by paying to the limited partner either the Cash Amount or the REIT Share Amount (one share of common stock of the Company for each OP Unit), as defined in the partnership agreement of the OP. Notwithstanding the foregoing, a limited partner will not be entitled to exercise its redemption right to the extent the issuance of the Company’s common stock to the redeeming limited partner would (1) be prohibited, as determined in the Company’s sole discretion, under the Company’s charter or (2) cause the acquisition of common stock by such redeeming limited partner to be "integrated" with any other distribution of the Company’s common stock for purposes of complying with the Securities Act of 1933, as amended. Accordingly, the Company records the OP Units held by noncontrolling limited partners outside of permanent equity and reports the OP Units at the greater of their carrying value or their redemption value using the Company’s stock price at each balance sheet date.

The following table sets forth the redeemable noncontrolling interests in the OP for the nine months ended September 30, 2017 (in thousands):

Redeemable noncontrolling interests in the OP, December 31, 2016	$	—
Issuance of redeemable noncontrolling interests in the OP		2,000
Net income attributable to redeemable noncontrolling interests in the OP		162
Other comprehensive income attributable to redeemable noncontrolling interests in the OP		1
Distributions to redeemable noncontrolling interests in the OP		(53	)
Redeemable noncontrolling interests in the OP, September 30, 2017	$	2,110

Noncontrolling Interests

Noncontrolling interests have in the past and may in the future be comprised of joint venture partners’ interests in joint ventures the Company consolidates. When applicable, the Company reports its joint venture partners’ interests in its consolidated joint ventures and other subsidiary interests held by third parties as noncontrolling interests. The Company records these noncontrolling interests at their initial fair value, adjusting the basis prospectively for their share of the respective consolidated investment’s net income or loss, equity contributions, return of capital, and distributions. Generally, these noncontrolling interests are not redeemable by the equity holders and are presented as part of permanent equity. Income and losses are allocated to the noncontrolling interest holder based on its economic ownership percentage.

During the period ended June 30, 2017, prior to the BH Buyout, the Company purchased 100% of the noncontrolling interests in three of its joint ventures for approximately $2.0 million. On June 30, 2017, in connection with the BH Buyout, the Company purchased 100% of the outstanding noncontrolling interests in its remaining joint ventures for approximately $51.7 million. On June 30, 2017, prior to the BH Buyout, the carrying value of such noncontrolling interests was approximately $20.5 million. On June 30, 2017, the Company eliminated the carrying value of such noncontrolling interests on its consolidated balance sheet. The remaining $31.2 million of the Purchase Amount resulted in a reduction to additional paid-in capital on the Company’s consolidated balance sheet.

In connection with the Contribution Agreement, the Company fully indemnified BH Equity on all non-recourse carve out guarantees it had previously provided for mortgage indebtedness secured by certain properties in the Portfolio. In consideration of the guarantees previously provided by BH Equity, it was entitled to an additional profit interest in each entity (the “Total Promote”) such that distributions were to be made to the members of the entity pro rata in proportion to their relative percentage interests until the members received an internal rate of return equal to 13%. Then, the proportion of distributions changed to a predetermined allocation according to the agreements between each entity and BH Equity. The Total Promote due by the Company to BH Equity was relinquished in connection with the BH Buyout.

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11. Related Party Transactions

Fees and Reimbursements to BH and its Affiliates

The Company has entered into management agreements with BH Management Services, LLC (“BH”), the Company’s property manager and an independently owned third party, who manages the Company’s properties and supervises the implementation of the Company’s value-add program. BH is an affiliate of BH Equity, who was a noncontrolling interest member of the Company’s joint ventures prior to the BH Buyout on June 30, 2017. Through BH Equity’s noncontrolling interests in such joint ventures, BH Equity was deemed to be a related party. With the completion of the BH Buyout, BH Equity is no longer deemed to be a related party. BH Equity became a noncontrolling limited partner of the OP upon execution of the Amendment. BH and its affiliates do not have common ownership in any joint venture with the Company’s Adviser; there is also no common ownership between BH and its affiliates and the Company’s Adviser.

The property management fee paid to BH is approximately 3% of the monthly gross income from each property managed. Currently, BH manages all of the Company’s properties. Additionally, the Company may pay BH certain other fees, including: (1) a fee of $15.00 per unit for the one-time setup and inspection of properties, (2) a construction supervision fee of 5-6% of total project costs, which is capitalized, (3) acquisition fees and due diligence costs reimbursements, and (4) other owner approved fees at $55 per hour. BH also acts as a paymaster for the properties and is reimbursed at cost for various operating expenses it pays on behalf of the properties. The following is a summary of fees that the properties incurred to BH and its affiliates, as well as reimbursements paid to BH from the properties for various operating expenses, for the three and nine months ended September 30, 2017 and 2016 (in thousands):

		For the Three Months Ended September 30,				For the Nine Months Ended September 30,
		2017		2016		2017		2016
Fees incurred
Property management fees	(1)	$	1,110	$	989	$	3,280	$	3,007
Construction supervision fees	(2)		213		247		651		624
Acquisition fees	(3)		—		139		505		139
Reimbursements
Payroll and benefits	(4)		4,131		4,140		11,855		12,212
Other reimbursements	(5)		432		460		1,457		1,465

(1) Included in property management fees on the consolidated statements of operations and comprehensive income.

(2) Capitalized on the consolidated balance sheets and reflected in buildings and improvements.

(3) Includes due diligence costs. Acquisition fees incurred prior to October 1, 2016 are included in acquisition costs on the consolidated statements of operations and comprehensive income. Acquisition fees incurred for the period beginning on October 1, 2016 are capitalized to operating real estate assets on the consolidated balance sheets.

(4) Included in property operating expenses on the consolidated statements of operations and comprehensive income.

(5) Includes property operating expenses such as repairs and maintenance costs and certain property general and administrative expenses, which are included on the consolidated statements of operations and comprehensive income.

Asset Management Fee

Until the BH Buyout on June 30, 2017, in accordance with the operating agreement of each entity that owns the properties, the Company earned an asset management fee for services provided in connection with monitoring the operations of the properties. The asset management fee was equal to 0.5% per annum of the aggregate effective gross income of the properties, as defined in each of the operating agreements. For the three and six months ended June 30, 2017, the properties incurred asset management fees to the Company of approximately $0.2 million and $0.4 million, respectively. For the three and nine months ended September 30, 2016, the properties incurred asset management fees to the Company of approximately $0.2 million and $0.5 million, respectively. Since the fees were paid to the Company (and not the Adviser) by consolidated properties, they have been eliminated in consolidation. However, because the Company’s previous joint venture partners owned a portion of each of a majority of the properties in the Portfolio, prior to the Company’s purchase of 100% of their joint venture interests, they absorbed their pro rata share of the asset management fee. This amount is reflected on the consolidated statements of operations and comprehensive income in the net income attributable to noncontrolling interests. 

Advisory and Administrative Fee

In accordance with the Advisory Agreement, the Company pays the Adviser an advisory fee equal to 1.00% of the Average Real Estate Assets (as defined below). The duties performed by the Company’s Adviser under the terms of the Advisory Agreement

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include, but are not limited to: providing daily management for the Company, selecting and working with third party service providers, managing the Company’s properties or overseeing the third party property manager, formulating an investment strategy for the Company and selecting suitable properties and investments, managing the Company’s outstanding debt and its interest rate exposure through derivative instruments, determining when to sell assets, and managing the value-add program or overseeing a third party vendor that implements the value-add program. “Average Real Estate Assets” means the average of the aggregate book value of Real Estate Assets before reserves for depreciation or other non-cash reserves, computed by taking the average of the book value of real estate assets at the end of each month (1) for which any fee under the Advisory Agreement is calculated or (2) during the year for which any expense reimbursement under the Advisory Agreement is calculated. “Real Estate Assets” is defined broadly in the Advisory Agreement to include, among other things, investments in real estate-related securities and mortgages and reserves for capital expenditures (the value-add program). The advisory fee is payable monthly in arrears in cash, unless the Adviser elects, in its sole discretion, to receive all or a portion of the advisory fee in shares of common stock, subject to certain limitations.

In accordance with the Advisory Agreement, the Company also pays the Adviser an administrative fee equal to 0.20% of the Average Real Estate Assets. The administrative fee is payable monthly in arrears in cash, unless the Adviser elects, in its sole discretion, to receive all or a portion of the administrative fee in shares of common stock, subject to certain limitations.

The advisory and administrative fees paid to the Adviser on the Contributed Assets (as defined below) are subject to an annual cap of approximately $5.4 million (the “Contributed Assets Cap”) (see “Expense Cap” below).

Pursuant to the terms of the Advisory Agreement, the Company will reimburse the Adviser for all documented Operating Expenses and Offering Expenses it incurs on behalf of the Company. “Operating Expenses” include legal, accounting, financial and due diligence services performed by the Adviser that outside professionals or outside consultants would otherwise perform, the Company’s pro rata share of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the Adviser required for the Company’s operations, and compensation expenses under the 2016 LTIP. Operating Expenses do not include expenses for the advisory and administrative services described in the Advisory Agreement. Certain Operating Expenses, such as the Company’s ratable share of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses incurred by the Adviser or its affiliates that relate to the operations of the Company, may be billed monthly to the Company under a shared services agreement. “Offering Expenses” include all expenses (other than underwriters’ discounts) in connection with an offering, including, without limitation, legal, accounting, printing, mailing and filing fees and other documented offering expenses. For the three and nine months ended September 30, 2017 and 2016, the Adviser did not bill any Operating Expenses or Offering Expenses to the Company and any such expenses the Adviser incurred during the periods are considered to be permanently waived.

Expense Cap

Pursuant to the terms of the Advisory Agreement, expenses paid or incurred by the Company for advisory and administrative fees payable to the Adviser and Operating Expenses will not exceed 1.5% of Average Real Estate Assets per calendar year (or part thereof that the Advisory Agreement is in effect (the “Expense Cap”)). The Expense Cap does not limit the reimbursement of expenses related to Offering Expenses. The Expense Cap also does not apply to legal, accounting, financial, due diligence and other service fees incurred in connection with mergers and acquisitions, extraordinary litigation or other events outside the Company’s ordinary course of business or any out-of-pocket acquisitions or due diligence expenses incurred in connection with the acquisition or disposition of real estate assets. Also, advisory and administrative fees are further limited on Contributed Assets to approximately $5.4 million in any calendar year. Contributed Assets refers to all Real Estate Assets contributed to the Company as part of the Spin-Off. The Contributed Assets Cap is not reduced for dispositions of such assets subsequent to the Spin-Off. Advisory and administrative fees on New Assets are not subject to the above limitation and are based on an annual rate of 1.2% on Average Real Estate Assets, but are subject to the Expense Cap. New Assets are all Real Estate Assets that are not Contributed Assets.

For the three months ended September 30, 2017 and 2016, the Company incurred advisory and administrative fees of $1.9 million and $1.7 million, respectively. The amount paid for the three months ended September 30, 2017 and 2016 represents the maximum fee allowed on Contributed Assets (as defined in the Advisory Agreement) under the Advisory Agreement plus approximately $0.5 million and $0.3 million, respectively, of advisory and administrative fees incurred on New Assets (as defined in the Advisory Agreement). For the nine months ended September 30, 2017 and 2016, the Company incurred advisory and administrative fees of $5.5 million and $4.9 million, respectively. The amount paid for the nine months ended September 30, 2017 and 2016 represents the maximum fee allowed on Contributed Assets (as defined in the Advisory Agreement) under the Advisory Agreement plus approximately $1.5 million and $0.9 million, respectively, of advisory and administrative fees incurred on New Assets (as defined in the Advisory Agreement). These fees are reflected on the consolidated statements of operations and comprehensive income in advisory and administrative fees.

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The increase in advisory and administrative fees on New Assets between both the periods was due to the acquisition of additional properties classified as New Assets after the Spin-Off, for which the Adviser has elected to receive fees on, and the timing of the acquisitions (the Company acquiredone property in July 2016 and one property in October 2016 that the Adviser elected to receive advisory and administrative fees on). For the three and nine months ended September 30, 2017, the Adviser elected to voluntarily waive the advisory and administrative fees incurred on the two properties acquired in December 2016, the property acquired in February 2017 and the property acquired in June 2017, which are considered to be permanently waived for the periods. The Adviser is not contractually obligated to waive fees on New Assets in the future and may cease waiving fees on New Assets at its discretion.

Other Related Party Transactions

The Company has in the past, and may in the future, utilize the services of affiliated parties. For the nine months ended September 30, 2017 and 2016, the Company paid approximately $1.2 million and $0.6 million, respectively, to NexBank Title, Inc. (“NexBank Title”). NexBank Title is an affiliate of the Adviser through common beneficial ownership. NexBank Title provides title insurance and work related to providing title insurance on properties related to acquisitions, dispositions and refinancing transactions. These amounts are either capitalized as real estate assets or deferred financing costs, expensed as loss on extinguishment of debt and modification costs, or expensed as selling costs when determining gain (loss) on sales of real estate, depending on the appropriate accounting as determined for each specific transaction.

12. Commitments and Contingencies

Commitments

In the normal course of business, the Company enters into various rehabilitation construction related purchase commitments with parties that provide these goods and services. In the event the Company were to terminate rehabilitation construction services prior to the completion of projects, the Company could potentially be committed to satisfy outstanding or uncompleted purchase orders with such parties. As of September 30, 2017, management does not anticipate any material deviations from schedule or budget related to rehabilitation projects currently in process.

Contingencies

In the normal course of business, the Company is subject to claims, lawsuits, and legal proceedings. While it is not possible to ascertain the ultimate outcome of all such matters, management believes that the aggregate amount of such liabilities, if any, in excess of amounts provided or covered by insurance, will not have a material adverse effect on the consolidated balance sheets or consolidated statements of operations and comprehensive income of the Company. The Company is not involved in any material litigation nor, to management’s knowledge, is any material litigation currently threatened against the Company or its properties or subsidiaries.

The Company is not aware of any environmental liability with respect to the properties that could have a material adverse effect on the Company’s business, assets, or results of operations. However, there can be no assurance that such a material environmental liability does not exist. The existence of any such material environmental liability could have an adverse effect on the Company’s results of operations and cash flows.

13. Subsequent Events

Acquisition of Multifamily Property

Subsequent to September 30, 2017, the Company acquired the following property through a 1031 Exchange with the NAVA Portfolio and a reverse 1031 Exchange with Timberglen (anticipated to close in the first quarter of 2018) (dollars in thousands) (unaudited):

Property Name	Location	Date of Acquisition	Purchase Price			Debt			# Units		Ownership
Atera	Dallas, Texas	October 25, 2017	$	59,200	(1)	$	29,500	(2)		380		100	%

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(1) The Company used approximately $14.1 million of proceeds from the sale of the NAVA Portfolio to fund part of the equity portion of the purchase price.

(2) The Company placed a first mortgage on the property with a floating interest rate at 1.48% over one-month LIBOR and an 84-month term that is full-term, interest-only.

2017 Bridge Facility

On October 19, 2017, the Company used proceeds from the sale of the NAVA Portfolio to pay down approximately $46.0 million on the 2017 Bridge Facility.

On October 26, 2017, the Company, through the OP, amended the 2017 Bridge Facility (the “Extension”) to extend the maturity date on the remaining balance of approximately $8.6 million to March 31, 2018. The Company paid an amendment fee of approximately $34,000 in connection with the Extension.

Dividends Declared

On October 30, 2017, the Company’s board of directors increased the Company’s quarterly dividend 13.6%, or by $0.03 per share, declaring a quarterly dividend of $0.25 per share, payable on December 29, 2017 to stockholders of record on December 15, 2017.

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

The following is a discussion and analysis of our financial condition and our historical results of operations. The following should be read in conjunction with our financial statements and accompanying notes. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those projected, forecasted, or expected in these forward-looking statements as a result of various factors, including, but not limited to, those discussed below and elsewhere in this quarterly report. See “Cautionary Statement Regarding Forward-Looking Statements” in this report, and “Risk Factors” in Part I, Item 1A, “Risk Factors” of our annual report on Form 10-K (our “Annual Report”), filed with the Securities and Exchange Commission (the “SEC”) on March 15, 2017.

Overview

As of September 30, 2017, our portfolio consisted of 32 multifamily properties (the “Portfolio”) primarily located in the Southeastern and Southwestern United States encompassing 11,395 units of apartment space that was approximately 94.0% leased with a weighted average monthly effective rent per occupied apartment unit of $932. Substantially all of our business is conducted through NexPoint Residential Trust Operating Partnership, L.P. (the “OP”), our operating partnership. We own the Portfolio through the OP and our wholly owned taxable REIT subsidiary (“TRS”). The OP owns approximately 99.9% of the Portfolio; our TRS owns approximately 0.1% of the Portfolio. Our wholly owned subsidiary, NexPoint Residential Trust Operating Partnership GP, LLC (the “OP GP”), is the sole general partner of the OP. As of September 30, 2017, there were 21,116,902 common units in the OP (“OP Units”) outstanding, of which 21,043,669, or 99.7%, were owned by us and 73,233, or 0.3%, were owned by an unaffiliated limited partner (see Note 10 to our consolidated financial statements).

We are primarily focused on directly or indirectly acquiring, owning, and operating well-located multifamily properties with a value-add component in large cities and suburban submarkets of large cities, primarily in the Southeastern and Southwestern United States. We generate revenue primarily by leasing our multifamily properties. We intend to employ targeted management and a value-add program at a majority of our properties in an attempt to improve rental rates and the net operating income (“NOI”) at our properties and achieve long-term capital appreciation for our stockholders. We are externally managed by NexPoint Real Estate Advisors, L.P. (the “Adviser”) through an agreement dated March 16, 2015, as amended (the “Advisory Agreement”), by and among the OP, the Adviser and us. The Advisory Agreement was renewed on March 13, 2017 for a one-year term set to expire on March 16, 2018. The Adviser is wholly owned by NexPoint Advisors, L.P., which is an affiliate of Highland Capital Management, L.P. (the “Sponsor” or “Highland”).

We began operations on March 31, 2015 as a result of the transfer and contribution by NexPoint Credit Strategies Fund (“NHF”) of all but one of the multifamily properties owned by NHF through its wholly owned subsidiary NexPoint Real Estate Opportunities, LLC (fka Freedom REIT, LLC) (“NREO”) in exchange for 100% of its outstanding common stock. We use the term “predecessor” to mean the carve-out business of NREO, which owned all or a majority interest in the multifamily properties transferred or contributed to us by NHF through NREO. On March 31, 2015, NHF distributed all of the outstanding shares of our common stock held by NHF to holders of NHF common shares. We refer to the distribution of our common stock by NHF as the “Spin-Off.” Substantially all of our operations were conducted by our predecessor prior to March 31, 2015. With the exception of a nominal amount of initial cash funded at inception, we did not own any assets prior to March 31, 2015. Our predecessor included all of the properties in our Portfolio that were held indirectly by NREO prior to the Spin-Off. Our predecessor was determined in accordance with the rules and regulations of the SEC. References throughout this report to the “Company,” “we,” or “our,” include the activity of the predecessor defined above.

On June 30, 2017, we and our OP entered into a contribution agreement (the “Contribution Agreement”) with BH Equities, LLC and its affiliates (collectively, “BH Equity”), whereby we purchased 100% of the joint venture interests in the Portfolio owned by BH Equity, representing approximately 8.4% ownership in the Portfolio (the “BH Buyout”), for total consideration of approximately $51.7 million (the “Purchase Amount”). The Purchase Amount consisted of approximately $49.7 million in cash that was paid on June 30, 2017 and 73,233 OP Units (initially valued at $2.0 million) that were issued on August 1, 2017. The number of OP Units issued was calculated by dividing $2.0 million by the midpoint of the range of our net asset value as publicly disclosed in connection with the release of our second quarter of 2017 earnings results, which was $27.31 per share. We financed the cash portion of the Purchase Amount with $21.4 million of proceeds from a bridge facility, $16.3 million of proceeds from refinancing 22 properties, $11.0 million of proceeds from a credit facility and $1.0 million of cash on hand. See Notes 6 and 10 to our consolidated financial statements for additional information.

In connection with the issuance of OP Units to BH Equity on August 1, 2017, we and our OP amended the partnership agreement of the OP (the “Amendment”). Pursuant to the Amendment, limited partners holding OP Units have the right to cause the OP to redeem their units for cash or, at our election, shares of our common stock on a one-for-one basis, subject to adjustment, as provided in the Amendment, provided that the units have been outstanding for at least one year. Notwithstanding the foregoing, a limited partner will not be entitled to exercise its redemption right to the extent the issuance of our common stock to the redeeming limited partner would (1) be prohibited, as determined in our sole discretion, under our charter or (2) cause the acquisition of common

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stock by such redeeming limited partner to be "integrated" with any other distribution of our common stock for purposes of complying with the Securities Act of 1933, as amended. Accordingly, we record the OP Units held by noncontrolling limited partners outside of permanent equity and report the OP Units at the greater of their carrying value or their redemption value using our stock price at each balance sheet date. See Note 10 to our consolidated financial statements for additional information.

On June 30, 2017, we entered into 22 first mortgages, with a combined principal amount of $502.1 million, on certain of our properties, replacing the $168.4 million of existing mortgage debt outstanding on nine properties and the $300.0 million outstanding under a credit facility (the “$300 Million Credit Facility”), which retired the $300 Million Credit Facility. The refinancing of the existing mortgage debt incurred approximately $1.7 million of prepayment penalties, which is included in loss on extinguishment of debt and modification costs on the consolidated statements of operations and comprehensive income. The Federal Home Loan Mortgage Corporation (“Freddie Mac”), who was the lender on the existing mortgage debt and the $300 Million Credit Facility, also originated the 22 new first mortgages (the “Freddie Refinance”). The additional proceeds from the Freddie Refinance were used to fund a portion of the BH Buyout. The Freddie Refinance effectively lowered the borrowing spread on $468.4 million of our floating rate debt by approximately 57 basis points, or $2.7 million on an annualized basis. See Note 6 to our consolidated financial statements for additional information.

During the nine months ended September 30, 2017, we, through our OP, entered into three interest rate swap transactions with a combined notional amount of $250.0 million. As of September 30, 2017, we have entered into seven interest rate swap transactions with a combined notional amount of $650.0 million at a weighted average fixed rate of 1.3388%, effectively fixing the interest rate on approximately 96% of our $673.7 million of floating rate mortgage debt outstanding as of September 30, 2017. As of September 30, 2017, the adjusted weighted average interest rate of our total indebtedness was 3.34% (see Item 3, “Quantitative and Qualitative Disclosures About Market Risk” below, and Notes 6 and 7 to our consolidated financial statements).

On October 25, 2017, we purchased an additional multifamily property, Atera, located in Dallas, Texas, which encompasses 380 units of apartment space (see Note 13 to our consolidated financial statements).

We have elected to be taxed as a REIT under Sections 856 through 860 of the Code and expect to continue to qualify as a REIT. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our REIT taxable income to our stockholders. As a REIT, we will be subject to federal income tax on our undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of (1) 85% of our ordinary income, (2) 95% of our capital gain net income and (3) 100% of our undistributed income from prior years. We believe we qualify for taxation as a REIT under the Code, and we intend to continue to operate in such a manner, but no assurance can be given that we will operate in a manner so as to qualify as a REIT. Taxable income from certain non-REIT activities is managed through a TRS and is subject to applicable federal, state, and local income and margin taxes. We had no significant taxes associated with our TRS for the nine months ended September 30, 2017 and 2016.

Hurricanes Harvey and Irma

In August and September 2017, parts of Texas and Florida were hit by two hurricanes, causing severe property damage in the affected areas. As of September 30, 2017, we owned three properties in the Houston area, two properties in the Miami area, two properties in the Tampa Bay area, and two properties in the Orlando area. Our properties in these areas suffered minimal damage, which we estimate to be approximately $40,000.

Components of Our Revenues and Expenses

Revenues

Rental income. Our earnings are primarily attributable to the rental revenue from our multifamily properties. We anticipate that the leases we enter into for our multifamily properties will typically be for one year or less.

Other income. Other income includes ancillary income earned from tenants such as application fees, late fees, laundry fees, utility reimbursements, and other rental related fees charged to tenants.

Expenses

Property operating expenses. Property operating expenses include property maintenance costs, salary and employee benefit costs, utilities, casualty-related expenses and recoveries and other property operating costs.

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Acquisition costs. Acquisition costs include the costs to acquire additional properties. On October 1, 2016, we early adopted ASU 2017-01, which requires an entity to capitalize acquisition costs associated with an acquisition that is determined to be an acquisition of an asset as opposed to an acquisition of a business. Prior to our adoption of ASU 2017-01, acquisition costs were expensed as incurred. We believe most future acquisition costs will be capitalized in accordance with ASU 2017-01 (see Note 2 to our consolidated financial statements).

Real estate taxes and insurance. Real estate taxes include the property taxes assessed by local and state authorities depending on the location of each property. Insurance includes the cost of commercial, general liability, and other needed insurance for each property.

Property management fees. Property management fees include fees paid to BH Management Services, LLC (“BH”), our property manager, or other third party management companies for managing each property (see Note 11 to our consolidated financial statements).

Advisory and administrative fees. Advisory and administrative fees include the fees paid to our Adviser pursuant to the Advisory Agreement (see Note 11 to our consolidated financial statements).

Corporate general and administrative expenses. Corporate general and administrative expenses include, but are not limited to, payments of reimbursements to the Adviser for operating expenses, audit fees, legal fees, listing fees, board of director fees, equity-based compensation expense and investor relations costs. Corporate general and administrative expenses and the advisory and administrative fees paid to our Adviser (including advisory and administrative fees on properties defined in the Advisory Agreement as New Assets) will not exceed 1.5% of Average Real Estate Assets per calendar year (or part thereof that the Advisory Agreement is in effect), calculated in accordance with the Advisory Agreement, or the Expense Cap. The Expense Cap does not limit the reimbursement by us of expenses related to securities offerings paid by the Adviser. The Expense Cap also does not apply to legal, accounting, financial, due diligence, and other service fees incurred in connection with mergers and acquisitions, extraordinary litigation, or other events outside our ordinary course of business or any out-of-pocket acquisition or due diligence expenses incurred in connection with the acquisition or disposition of real estate assets.

Property general and administrative expenses. Property general and administrative expenses include the costs of marketing, professional fees, general office supplies, and other administrative related costs of each property.

Depreciation and amortization. Depreciation and amortization costs primarily include depreciation of our multifamily properties and amortization of acquired in-place leases.

Other Income and Expense

Interest expense. Interest expense primarily includes the cost of interest expense on debt, the amortization of deferred financing costs and the related impact of interest rate derivatives used to manage our interest rate risk.

Loss on extinguishment of debt and modification costs. Loss on extinguishment of debt and modification costs includes prepayment penalties and the write-off of unamortized deferred financing costs related to the early retirement of debt and costs incurred in a debt modification that are not capitalized as deferred financing costs.

Gain on sales of real estate. Gain on sales of real estate includes the gain recognized upon sales of properties. Gain on sales of real estate is calculated by deducting the carrying value of the real estate and costs incurred to sell the properties from the sales prices of the properties.

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Results of Operations for the Three and Nine Months Ended September 30, 2017 and 2016

The three months ended September 30, 2017 as compared to the three months ended September 30, 2016

The following table sets forth a summary of our operating results for the three months ended September 30, 2017 and 2016 (in thousands):

	For the Three Months Ended September 30,
	2017			2016			$ Change
Total revenues	$	37,097		$	33,079		$	4,018
Total expenses		(32,340	)		(28,137	)		(4,203	)
Operating income		4,757			4,942			(185	)
Interest expense		(8,257	)		(4,791	)		(3,466	)
Loss on extinguishment of debt and modification costs		(914	)		(888	)		(26	)
Gain on sales of real estate		58,490			9,562			48,928
Net income		54,076			8,825			45,251
Net income attributable to noncontrolling interests		—			1,735			(1,735	)
Net income attributable to redeemable noncontrolling interests in the Operating Partnership		162			—			162
Net income attributable to common stockholders	$	53,914		$	7,090		$	46,824

The change in our net income for the three months ended September 30, 2017 as compared to the net income for the three months ended September 30, 2016 primarily relates to increases in gain on sales of real estate and same store operating results, and was partially offset by increases in depreciation and amortization expense and interest expense. The change in our net income between the periods was also due to our acquisition and disposition activity in 2016 and 2017 and the timing of the transactions (we acquired one property in the third quarter of 2016, three properties in the fourth quarter of 2016, one property in the first quarter of 2017 and one property in the second quarter of 2017; we sold three properties in the second quarter of 2016, four properties in the third quarter of 2016, four properties in the second quarter of 2017 and five properties in the third quarter of 2017).

Revenues

Rental income. Rental income was $32.1 million for the three months ended September 30, 2017 compared to $28.6 million for the three months ended September 30, 2016, which was an increase of approximately $3.5 million. The increase between the periods was primarily due to a 9.9% increase in the weighted average monthly effective rent per occupied apartment unit in our Portfolio to $932 as of September 30, 2017 from $848 as of September 30, 2016, primarily driven by the value-add program that we have implemented and organic growth in rents in the markets where our properties are located. The increase between the periods was also due to an increase in the occupancy rate of the Portfolio of 0.4% to 94.0% as of September 30, 2017 from 93.6% as of September 30, 2016.

Other income. Other income was $4.9 million for the three months ended September 30, 2017 compared to $4.4 million for the three months ended September 30, 2016, which was an increase of approximately $0.5 million. The increase between the periods was primarily due to a $0.3 million, or 15.0%, increase in utility reimbursements.

Expenses

Property operating expenses. Property operating expenses were $10.1 million for the three months ended September 30, 2017 compared to $9.9 million for the three months ended September 30, 2016, which was an increase of approximately $0.2 million. The increase between the periods was primarily due to a $0.6 million, or 5.9%, increase in total repairs and maintenance, labor and utility costs, partially offset by a $0.4 million increase in casualty recoveries.

Acquisition costs. No acquisition costs were expensed for the three months ended September 30, 2017 compared to $0.4 million for the three months ended September 30, 2016. During the three months ended September 30, 2017, we did not acquire any properties. During the three months ended September 30, 2016, we acquired one property. For additional information on our accounting policy related to acquisition costs, see Note 2 to our consolidated financial statements. Acquisition costs depend on the specific circumstances of each closing and are one-time costs associated with each acquisition. We believe most future acquisition costs will be capitalized.

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Real estate taxes and insurance. Real estate taxes and insurance costs were $4.9 million for the three months ended September 30, 2017 compared to $4.0 million for the three months ended September 30, 2016, which was an increase of approximately $0.9 million. The increase between the periods was primarily due to a $0.8 million, or 22.2%, increase in property taxes and a $0.1 million, or 21.5%, increase in property liability insurance. Property taxes incurred in the first year of ownership may be significantly less than subsequent years since the purchase price of the property may trigger a significant increase in assessed value by the taxing authority in subsequent years, increasing the costs of real estate taxes.

Property management fees. Property management fees were $1.1 million for the three months ended September 30, 2017 compared to $1.0 million for the three months ended September 30, 2016, which was an increase of approximately $0.1 million. The increase between the periods was primarily due to increases in rental income and other income, which the fee is primarily based on.

Advisory and administrative fees. Advisory and administrative fees were $1.9 million for the three months ended September 30, 2017 compared to $1.7 million for the three months ended September 30, 2016, which was an increase of approximately $0.2 million. The amount incurred during the three months ended September 30, 2017 and 2016 represents the maximum fee allowed on properties defined as Contributed Assets under the Advisory Agreement plus approximately $0.5 million and $0.3 million, respectively, of advisory and administrative fees incurred on certain properties defined as New Assets. The increase in advisory and administrative fees on New Assets between the periods was due to the acquisition of additional properties classified as New Assets after the Spin-Off, for which our Adviser has elected to receive fees on, and the timing of the acquisitions (we acquired one property in July 2016 and one property in October 2016 that our Adviser elected to receive advisory and administrative fees on). For the three months ended September 30, 2017, our Adviser elected to voluntarily waive the advisory and administrative fees incurred on the two properties we acquired in December 2016, the property we acquired in February 2017 and the property we acquired in June 2017, which are considered to be permanently waived for the period. The Adviser is not contractually obligated to waive fees on New Assets in the future and may cease waiving fees on New Assets at its discretion. Advisory and administrative fees may increase in future periods as we acquire additional properties, which will be classified as New Assets.

Corporate general and administrative expenses. Corporate general and administrative expenses were $1.6 million for the three months ended September 30, 2017 compared to $1.0 million for the three months ended September 30, 2016, which was an increase of approximately $0.6 million. The increase between periods primarily relates to $0.8 million of equity-based compensation expense recognized during the three months ended September 30, 2017 related to the grants of restricted stock units to our directors and officers pursuant to our 2016 LTIP, compared to $0.3 million of equity-based compensation expense recognized during the three months ended September 30, 2016 (see Note 8 to our consolidated financial statements). Subject to the Expense Cap, corporate general and administrative expenses may increase in future periods as we acquire additional properties.

Property general and administrative expenses. Property general and administrative expenses were $1.6 million for the three months ended September 30, 2017 compared to $1.5 million for the three months ended September 30, 2016, which was an increase of approximately $0.1 million.

Depreciation and amortization. Depreciation and amortization costs were $11.2 million for the three months ended September 30, 2017 compared to $8.7 million for the three months ended September 30, 2016, which was an increase of approximately $2.5 million. The increase between the periods was primarily due to the amortization of intangible lease assets of $1.2 million related to two properties for the three months ended September 30, 2017 compared to $0.2 million related to one property for the three months ended September 30, 2016, which was an increase of approximately $1.0 million, as well as the acquisition of five properties subsequent to September 30, 2016. The amortization of intangible lease assets over a six-month period from the date of acquisition is expected to increase the amortization expense during the initial year of operations for each property. The increase between the periods was partially offset by a reduction in depreciation expense related to the disposition of nine properties subsequent to September 30, 2016.

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Other Income and Expense

Interest expense. Interest expense was $8.3 million for the three months ended September 30, 2017 compared to $4.8 million for the three months ended September 30, 2016, which was an increase of approximately $3.5 million. The increase between the periods was primarily due to an increase in interest on debt and a reduction in gain recognized related to the ineffective portion of changes in fair value of our interest rate swap derivatives designated as cash flow hedges (see “Debt, Derivatives and Hedging Activity – Interest Rate Swap Agreements” below), as shown in the table below. The following table details the various costs included in interest expense for the three months ended September 30, 2017 and 2016 (in thousands):

	For the Three Months Ended September 30,
	2017			2016			$ Change
Interest on debt	$	7,262		$	4,524		$	2,738
Amortization of deferred financing costs		572			385			187
Interest rate swaps - effective portion		263			472			(209	)
Interest rate swaps - ineffective portion		(32	)		(599	)		567
Interest rate caps expense		192			9			183
Total	$	8,257		$	4,791		$	3,466

Loss on extinguishment of debt and modification costs. Loss on extinguishment of debt and modification costs remained flat at $0.9 million for the three months ended September 30, 2017 compared to $0.9 million for the three months ended September 30, 2016. The following table details the various costs included in loss on extinguishment of debt and modification costs for the three months ended September 30, 2017 and 2016 (in thousands):

	For the Three Months Ended September 30,
	2017			2016		$ Change
Prepayment penalties	$	502		$	474	$	28
Write-off of deferred financing costs		622			414		208
Debt modification costs (reimbursements)		(210	)		—		(210	)
Total	$	914		$	888	$	26

Gain on sales of real estate. Gain on sales of real estate was $58.5 million for the three months ended September 30, 2017 compared to $9.6 million for the three months ended September 30, 2016, which was an increase of approximately $48.9 million. During the three months ended September 30, 2017, we sold five properties; during the three months ended September 30, 2016, we sold four properties.

The nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016

The following table sets forth a summary of our operating results for the nine months ended September 30, 2017 and 2016 (in thousands):

	For the Nine Months Ended September 30,
	2017			2016			$ Change
Total revenues	$	109,322		$	100,247		$	9,075
Total expenses		(98,810	)		(83,095	)		(15,715	)
Operating income		10,512			17,152			(6,640	)
Interest expense		(22,479	)		(15,650	)		(6,829	)
Loss on extinguishment of debt and modification costs		(5,717	)		(1,722	)		(3,995	)
Gain on sales of real estate		78,386			25,932			52,454
Net income		60,702			25,712			34,990
Net income attributable to noncontrolling interests		2,836			4,047			(1,211	)
Net income attributable to redeemable noncontrolling interests in the Operating Partnership		162			—			162
Net income attributable to common stockholders	$	57,704		$	21,665		$	36,039

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The change in our net income for the nine months ended September 30, 2017 as compared to the net income for the nine months ended September 30, 2016 primarily relates to increases in gain on sales of real estate and same store operating results, and was partially offset by increases in depreciation and amortization expense, interest expense and loss on extinguishment of debt and modification costs. The change in our net income between the periods was also due to our acquisition and disposition activity in 2016 and 2017 and the timing of the transactions (we acquired one property in the third quarter of 2016, three properties in the fourth quarter of 2016, one property in the first quarter of 2017 and one property in the second quarter of 2017; we sold three properties in the second quarter of 2016, four properties in the third quarter of 2016, four properties in the second quarter of 2017 and five properties in the third quarter of 2017).

Revenues

Rental income. Rental income was $94.6 million for the nine months ended September 30, 2017 compared to $87.4 million for the nine months ended September 30, 2016, which was an increase of approximately $7.2 million. The increase between the periods was primarily due to an 9.9% increase in the weighted average monthly effective rent per occupied apartment unit in our Portfolio to $932 as of September 30, 2017 from $848 as of September 30, 2016, primarily driven by the value-add program that we have implemented and organic growth in rents in the markets where our properties are located. The increase between the periods was also due to an increase in the occupancy rate of the Portfolio of 0.4% to 94.0% as of September 30, 2017 from 93.6% as of September 30, 2016.

Other income. Other income was $14.8 million for the nine months ended September 30, 2017 compared to $12.8 million for the nine months ended September 30, 2016, which was an increase of approximately $2.0 million. The increase between the periods was primarily due to a $1.1 million, or 16.3%, increase in utility reimbursements.

Expenses

Property operating expenses. Property operating expenses were $29.6 million for the nine months ended September 30, 2017 compared to $28.9 million for the nine months ended September 30, 2016, which was an increase of approximately $0.7 million. The increase between the periods was primarily due to a $1.1 million, or 3.8%, increase in total repairs and maintenance, labor and utility costs, partially offset by a $0.4 million increase in casualty recoveries.

Acquisition costs. No acquisition costs were expensed for the nine months ended September 30, 2017 compared to $0.4 million for the nine months ended September 30, 2016. During the nine months ended September 30, 2017, we acquired two properties. During the nine months ended September 30, 2016, we acquired one property. For additional information on our accounting policy related to acquisition costs, see Note 2 to our consolidated financial statements. Acquisition costs depend on the specific circumstances of each closing and are one-time costs associated with each acquisition. We believe most future acquisition costs will be capitalized.

Real estate taxes and insurance. Real estate taxes and insurance costs were $14.9 million for the nine months ended September 30, 2017 compared to $12.3 million for the nine months ended September 30, 2016, which was an increase of approximately $2.6 million. The increase between the periods was primarily due to a $2.4 million, or 22.9%, increase in property taxes and a $0.2 million, or 10.7%, increase in property liability insurance. Property taxes incurred in the first year of ownership may be significantly less than subsequent years since the purchase price of the property may trigger a significant increase in assessed value by the taxing authority in subsequent years, increasing the costs of real estate taxes.

Property management fees. Property management fees were $3.3 million for the nine months ended September 30, 2017 compared to $3.0 million for the nine months ended September 30, 2016, which was an increase of approximately $0.3 million. The increase between the periods was primarily due to increases in rental income and other income, which the fee is primarily based on.

Advisory and administrative fees. Advisory and administrative fees were $5.5 million for the nine months ended September 30, 2017 compared to $4.9 million for the nine months ended September 30, 2016, which was an increase of approximately $0.6 million. The amount incurred during the nine months ended September 30, 2017 and 2016 represents the maximum fee allowed on properties defined as Contributed Assets under the Advisory Agreement plus approximately $1.5 million and $0.9 million, respectively, of advisory and administrative fees incurred on certain properties defined as New Assets. The increase in advisory and administrative fees on New Assets between the periods was due to the acquisition of additional properties classified as New Assets after the Spin-Off, for which our Adviser has elected to receive fees on, and the timing of the acquisitions (we acquired one property in July 2016 and one property in October 2016 that our Adviser elected to receive advisory and administrative fees on). For the nine months ended September 30, 2017, our Adviser elected to voluntarily waive the advisory and administrative fees incurred on the two properties we acquired in December 2016, the property we acquired in February 2017 and the property we acquired in June 2017, which are considered to be permanently waived for the period. The Adviser is not contractually obligated to waive fees on New Assets in the

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future and may cease waiving fees on New Assets at its discretion. Advisory and administrative fees may increase in future periods as we acquire additional properties, which will be classified as New Assets.

Corporate general and administrative expenses. Corporate general and administrative expenses were $4.8 million for the nine months ended September 30, 2017 compared to $2.6 million for the nine months ended September 30, 2016, which was an increase of approximately $2.2 million. The increase between periods primarily relates to $2.4 million of equity-based compensation expense recognized during the nine months ended September 30, 2017 related to the grants of restricted stock units to our directors and officers pursuant to our 2016 LTIP, compared to $0.3 million of equity-based compensation expense recognized during the nine months ended September 30, 2016 (see Note 8 to our consolidated financial statements). Subject to the Expense Cap, corporate general and administrative expenses may increase in future periods as we acquire additional properties.

Property general and administrative expenses. Property general and administrative expenses were $4.8 million for the nine months ended September 30, 2017 compared to $4.5 million for the nine months ended September 30, 2016, which was an increase of approximately $0.3 million. The increase between the periods was primarily due to a $0.2 million, or 15.9%, increase in advertising and promotional costs.

Depreciation and amortization. Depreciation and amortization costs were $35.9 million for the nine months ended September 30, 2017 compared to $26.4 million for the nine months ended September 30, 2016, which was an increase of approximately $9.5 million. The increase between the periods was primarily due to the amortization of intangible lease assets of $6.4 million related to six properties for the nine months ended September 30, 2017 compared to $0.9 million related to four properties for the nine months ended September 30, 2016, which was an increase of approximately $5.5 million, as well as the acquisition of five properties subsequent to September 30, 2016. The amortization of intangible lease assets over a six-month period from the date of acquisition is expected to increase the amortization expense during the initial year of operations for each property. The increase between the periods was partially offset by a reduction in depreciation expense related to the disposition of nine properties subsequent to September 30, 2016.

Other Income and Expense

Interest expense. Interest expense was $22.5 million for the nine months ended September 30, 2017 compared to $15.7 million for the nine months ended September 30, 2016, which was an increase of approximately $6.8 million. The increase between the periods was primarily due to an increase in interest on debt and a reduction in gain recognized related to the ineffective portion of changes in fair value of our interest rate swap derivatives designated as cash flow hedges (see “Debt, Derivatives and Hedging Activity – Interest Rate Swap Agreements” below), as shown in the table below. The following table details the various costs included in interest expense for the nine months ended September 30, 2017 and 2016 (in thousands):

	For the Nine Months Ended September 30,
	2017			2016			$ Change
Interest on debt	$	19,696		$	14,666		$	5,030
Amortization of deferred financing costs		1,548			1,084			464
Interest rate swaps - effective portion		939			472			467
Interest rate swaps - ineffective portion		(97	)		(599	)		502
Interest rate caps expense		393			27			366
Total	$	22,479		$	15,650		$	6,829

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Loss on extinguishment of debt and modification costs. Loss on extinguishment of debt and modification costs was $5.7 million for the nine months ended September 30, 2017 compared to $1.7 million for the nine months ended September 30, 2016, which was an increase of approximately $4.0 million. The increase between the periods was primarily due to increases in prepayment penalties of approximately $1.9 million and debt modification expenses of approximately $1.8 million. During the nine months ended September 30, 2017 and 2016, we sold nine properties and seven properties, respectively. The following table details the various costs included in loss on extinguishment of debt and modification costs for the nine months ended September 30, 2017 and 2016 (in thousands):

	For the Nine Months Ended September 30,
	2017		2016		$ Change
Prepayment penalties	$	2,701	$	827	$	1,874
Write-off of deferred financing costs		1,003		698		305
Debt modification costs		2,013		197		1,816
Total	$	5,717	$	1,722	$	3,995

Gain on sales of real estate. Gain on sales of real estate was $78.4 million for the nine months ended September 30, 2017 compared to $25.9 million for the nine months ended September 30, 2016, which was an increase of approximately $52.5 million. During the nine months ended September 30, 2017, we sold nine properties; during the nine months ended September 30, 2016, we sold seven properties.

Non-GAAP Measurements

Net Operating Income and Same Store 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 other comparable properties, to determine trends in earnings and to compute the fair value of our properties as NOI is not affected by (1) the cost of funds, (2) acquisition costs, (3) advisory and administrative fees, (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) corporate general and administrative expenses, (6) other gains and losses that are specific to us, (7) casualty-related expenses/(recoveries) and (8) property general and administrative expenses that are not reflective of the continuing operations of the properties or are incurred on behalf of the Company at the property for expenses such as legal, professional and franchise tax fees.

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. Casualty-related expenses and recoveries are excluded because they do not reflect continuing operating costs of the property owner. Entity level general and administrative expenses incurred at the properties are eliminated as they are specific to the way in which we have chosen to hold our properties and are the result of our ownership structuring. Also, expenses that are incurred upon acquisition of a property do not reflect continuing operating costs of the property owner. 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 items from net income is useful because the resulting measure captures the actual ongoing 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 corporate general and administrative expenses, interest expense, loss on extinguishment of debt and modification costs, acquisition costs, certain fees to affiliates such as advisory and administrative fees, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as determined under 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.

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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 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.

We define Same Store NOI as NOI for our properties that are comparable between periods. We view Same Store NOI as an important measure of the operating performance of our properties because it allows us to compare operating results of properties owned for the entirety of the current and comparable periods and therefore eliminates variations caused by acquisitions or dispositions during the periods.

Net Operating Income for the Three Months Ended September 30, 2017 and 2016

The following table reflects the revenues, property operating expenses and NOI for the three months ended September 30, 2017 and 2016 for our Same Store and Non-Same Store properties (dollars in thousands):

	For the Three Months Ended September 30,
	2017		2016		$ Change			% Change
Revenues
Same Store
Rental income	$	22,191	$	20,841	$	1,350			6.5	%
Other income		3,591		3,227		364			11.3	%
Same Store revenues		25,782		24,068		1,714			7.1	%
Non-Same Store
Rental income		9,957		7,791		2,166			27.8	%
Other income		1,358		1,220		138			11.3	%
Non-Same Store revenues		11,315		9,011		2,304			25.6	%
Total revenues		37,097		33,079		4,018			12.1	%
Operating expenses
Same Store
Property operating expenses (1)		7,208		6,983		225			3.2	%
Real estate taxes and insurance		3,201		2,920		281			9.6	%
Property management fees (2)		775		721		54			7.5	%
Property general and administrative expenses (3)		840		857		(17	)		-2.0	%
Same Store operating expenses		12,024		11,481		543			4.7	%
Non-Same Store
Property operating expenses (4)		3,248		2,888		360			12.5	%
Real estate taxes and insurance		1,652		1,053		599			56.9	%
Property management fees (2)		335		268		67			25.0	%
Property general and administrative expenses (5)		327		324		3			0.9	%
Non-Same Store operating expenses		5,562		4,533		1,029			22.7	%
Total operating expenses		17,586		16,014		1,572			9.8	%
NOI
Same Store		13,758		12,587		1,171			9.3	%
Non-Same Store		5,753		4,478		1,275			28.5	%
Total NOI	$	19,511	$	17,065	$	2,446			14.3	%

(1) For the three months ended September 30, 2017 and 2016, excludes approximately $(410,000) and $3,000, respectively, of casualty-related expenses/(recoveries).

(2) Fees incurred to an unaffiliated third party that is an affiliate of the noncontrolling limited partner of the OP.

(3) For the three months ended September 30, 2017 and 2016, excludes approximately $316,000 and $220,000, respectively, of expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional and franchise tax fees.

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(4) For the three months ended September 30, 2017 and 2016, excludes approximately $29,000 and $0, respectively, of casualty-related expenses/(recoveries).

(5) For the three months ended September 30, 2017 and 2016, excludes approximately $111,000 and $126,000, respectively, of expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional and franchise tax fees.

See reconciliation of net income to NOI below under “NOI and Same Store NOI for the Three and Nine Months Ended September 30, 2017 and 2016.”

Same Store Results of Operations for the Three Months Ended September 30, 2017 and 2016

There are 26 properties encompassing 8,871 units of apartment space in our same store pool for the three months ended September 30, 2017 (our “Same Store” properties). As of September 30, 2017, our Same Store properties were approximately 94.4% leased with a weighted average monthly effective rent per occupied apartment unit of $893. As of September 30, 2016, our Same Store properties were approximately 94.4% leased with a weighted average monthly effective rent per occupied apartment unit of $846. For our Same Store properties, we recorded the following operating results for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016:

Revenues

Rental income. Rental income was $22.2 million for the three months ended September 30, 2017 compared to $20.8 million for the three months ended September 30, 2016, which was an increase of approximately $1.4 million, or 6.5%. The majority of the increase is primarily related to a 5.5% increase in the weighted average monthly effective rent per occupied apartment unit to $893 as of September 30, 2017 from $846 as of September 30, 2016.

Other income. Other income was $3.6 million for the three months ended September 30, 2017 compared to $3.2 million for the three months ended September 30, 2016, which was an increase of approximately $0.4 million, or 11.3%. The majority of the increase is related to a $0.2 million, or 10.4%, increase in utility reimbursements and a $0.1 million, or 7.4%, increase in administrative and application fees.

Expenses

Property operating expenses. Property operating expenses were $7.2 million for the three months ended September 30, 2017 compared to $7.0 million for the three months ended September 30, 2016, which was an increase of approximately $0.2 million, or 3.2%. The majority of the increase is related to a $0.2 million, or 10.6%, increase in repairs and maintenance costs.

Real estate taxes and insurance. Real estate taxes and insurance costs were $3.2 million for the three months ended September 30, 2017 compared to $2.9 million for the three months ended September 30, 2016, which was an increase of approximately $0.3 million, or 9.6%. The majority of the increase is related to a $0.2 million, or 9.6%, increase in property taxes and a less than $0.1 million, or 9.8%, increase in property liability insurance.

Property management fees. Property management fees were $0.8 million for the three months ended September 30, 2017 compared to $0.7 million for the three months ended September 30, 2016, which was an increase of approximately $0.1 million, or 7.5%. The majority of the increase is related to a $1.4 million, or 6.5%, increase in rental income, and a $0.4 million, or 11.3%, increase in other income, which the fee is primarily based on.

Property general and administrative expenses. Property general and administrative expenses were $0.8 million for the three months ended September 30, 2017 compared to $0.9 million for the three months ended September 30, 2016, which was a decrease of approximately $0.1 million, or 2.0%. 

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Net Operating Income for the Nine Months Ended September 30, 2017 and 2016

The following table reflects the revenues, property operating expenses and NOI for the nine months ended September 30, 2017 and 2016 for our Same Store and Non-Same Store properties (dollars in thousands):

	For the Nine Months Ended September 30,
	2017		2016		$ Change			% Change
Revenues
Same Store
Rental income	$	65,311	$	61,525	$	3,786			6.2	%
Other income		10,421		9,178		1,243			13.5	%
Same Store revenues		75,732		70,703		5,029			7.1	%
Non-Same Store
Rental income		29,253		25,881		3,372			13.0	%
Other income		4,337		3,663		674			18.4	%
Non-Same Store revenues		33,590		29,544		4,046			13.7	%
Total revenues		109,322		100,247		9,075			9.1	%
Operating expenses
Same Store
Property operating expenses (1)		20,625		19,723		902			4.6	%
Real estate taxes and insurance		9,632		8,704		928			10.7	%
Property management fees (2)		2,274		2,122		152			7.2	%
Property general and administrative expenses (3)		2,698		2,620		78			3.0	%
Same Store operating expenses		35,229		33,169		2,060			6.2	%
Non-Same Store
Property operating expenses (4)		9,337		9,133		204			2.2	%
Real estate taxes and insurance		5,279		3,622		1,657			45.7	%
Property management fees (2)		1,006		885		121			13.7	%
Property general and administrative expenses (5)		1,154		1,226		(72	)		-5.9	%
Non-Same Store operating expenses		16,776		14,866		1,910			12.8	%
Total operating expenses		52,005		48,035		3,970			8.3	%
NOI
Same Store		40,503		37,534		2,969			7.9	%
Non-Same Store		16,814		14,678		2,136			14.6	%
Total NOI	$	57,317	$	52,212	$	5,105			9.8	%

(1) For the nine months ended September 30, 2017 and 2016, excludes approximately $(380,000) and $9,000, respectively, of casualty-related expenses/(recoveries).

(2) Fees incurred to an unaffiliated third party that is an affiliate of the noncontrolling limited partner of the OP.

(3) For the nine months ended September 30, 2017 and 2016, excludes approximately $622,000 and $460,000, respectively, of expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional and franchise tax fees.

(4) For the nine months ended September 30, 2017 and 2016, excludes approximately $29,000 and $82,000, respectively, of casualty-related expenses/(recoveries).

(5) For the nine months ended September 30, 2017 and 2016, excludes approximately $282,000 and $167,000, respectively, of expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional and franchise tax fees.

See reconciliation of net income to NOI below under “NOI and Same Store NOI for the Three and Nine Months Ended September 30, 2017 and 2016.”

Same Store Results of Operations for the Nine Months Ended September 30, 2017 and 2016

There are 26 properties encompassing 8,871 units of apartment space in our same store pool for the nine months ended September 30, 2017 (our “Same Store” properties). As of September 30, 2017, our Same Store properties were approximately 94.4% leased with a weighted average monthly effective rent per occupied apartment unit of $893. As of September 30, 2016, our Same

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Store properties were approximately 94.4% leased with a weighted average monthly effective rent per occupied apartment unit of $846. For our Same Store properties, we recorded the following operating results for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016:

Revenues

Rental income. Rental income was $65.3 million for the nine months ended September 30, 2017 compared to $61.5 million for the nine months ended September 30, 2016, which was an increase of approximately $3.8 million, or 6.2%. The majority of the increase is primarily related to a 5.5% increase in the weighted average monthly effective rent per occupied apartment unit to $893 as of September 30, 2017 from $846 as of September 30, 2016.

Other income. Other income was $10.4 million for the nine months ended September 30, 2017 compared to $9.2 million for the nine months ended September 30, 2016, which was an increase of approximately $1.2 million, or 13.5%. The majority of the increase is related to a $0.6 million, or 11.9%, increase in utility reimbursements and a $0.3 million, or 9.8%, increase in administrative and application fees.

Expenses

Property operating expenses. Property operating expenses were $20.6 million for the nine months ended September 30, 2017 compared to $19.7 million for the nine months ended September 30, 2016, which was an increase of approximately $0.9 million, or 4.6%. The majority of the increase is related to a $0.8 million, or 14.2%, increase in repairs and maintenance costs.

Real estate taxes and insurance. Real estate taxes and insurance costs were $9.6 million for the nine months ended September 30, 2017 compared to $8.7 million for the nine months ended September 30, 2016, which was an increase of approximately $0.9 million, or 10.7%. The majority of the increase is related to a $0.9 million, or 12.1%, increase in property taxes.

Property management fees. Property management fees were $2.3 million for the nine months ended September 30, 2017 compared to $2.1 million for the nine months ended September 30, 2016, which was an increase of approximately $0.2 million, or 7.2%. The majority of the increase is related to a $3.8 million, or 6.2%, increase in rental income, and a $1.2 million, or 13.5%, increase in other income, which the fee is primarily based on.

Property general and administrative expenses. Property general and administrative expenses were $2.7 million for the nine months ended September 30, 2017 compared to $2.6 million for the nine months ended September 30, 2016, which was an increase of approximately $0.1 million, or 3.0%. The majority of the increase primarily related to a $0.2 million, or 21.6%, increase in advertising and promotional costs, partially offset by a $0.1 million, or 2.4%, decrease in other administrative costs.

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NOI and Same Store NOI for the Three and Nine Months Ended September 30, 2017 and 2016

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles our NOI and Same Store NOI for the three and nine months ended September 30, 2017 and 2016 to net income, the most directly comparable GAAP financial measure (in thousands):

		For the Three Months Ended September 30,						For the Nine Months Ended September 30,
		2017			2016			2017			2016
Net income		$	54,076		$	8,825		$	60,702		$	25,712
Adjustments to reconcile net income to NOI:
Advisory and administrative fees			1,870			1,698			5,544			4,944
Corporate general and administrative expenses			1,623			1,023			4,842			2,649
Casualty-related expenses/(recoveries)	(1)		(381	)		3			(351	)		91
Property general and administrative expenses	(2)		427			346			904			627
Depreciation and amortization			11,215			8,667			35,866			26,363
Interest expense			8,257			4,791			22,479			15,650
Loss on extinguishment of debt and modification costs			914			888			5,717			1,722
Gain on sales of real estate			(58,490	)		(9,562	)		(78,386	)		(25,932	)
Acquisition costs			—			386			—			386
NOI		$	19,511		$	17,065		$	57,317		$	52,212
Less Non-Same Store
Revenues			(11,315	)		(9,011	)		(33,590	)		(29,544	)
Operating expenses			5,562			4,533			16,776			14,866
Same Store NOI		$	13,758		$	12,587		$	40,503		$	37,534

(1) Adjustment to net income to exclude certain property operating expenses that are casualty-related expenses/(recoveries).

(2) Adjustment to net income to exclude certain property general and administrative expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional and franchise tax fees.

FFO, Core FFO and AFFO

We believe that net income, as defined by GAAP, is the most appropriate earnings measure. We also believe that funds from operations, or FFO, as defined by the National Association of Real Estate Investment Trusts, or NAREIT, core funds from operations, or Core FFO, and adjusted funds from operations, or AFFO, are important non-GAAP supplemental measures of operating performance for a REIT.

Since the historical cost accounting convention used for real estate assets requires depreciation except on land, such accounting presentation implies that the value of real estate assets diminishes predictably over time. However, since real estate values have historically risen or fallen with market and other conditions, presentations of operating results for a REIT that use historical cost accounting for depreciation could be less informative. Thus, NAREIT created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation and amortization, among other items, from net income, as defined by GAAP. FFO is defined by NAREIT as net income computed in accordance with GAAP, excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization and impairment charges. We compute FFO attributable to common stockholders in accordance with NAREIT’s definition. Our presentation differs slightly in that we begin with net income (loss) before adjusting for amounts attributable to (1) noncontrolling interests in consolidated joint ventures and (2) redeemable noncontrolling interests in the OP; we show the combined amounts attributable to such noncontrolling interests as an adjustment to arrive at FFO attributable to common stockholders.

Core FFO makes certain adjustments to FFO, which are either not likely to occur on a regular basis or are otherwise not representative of the ongoing operating performance of our portfolio. Core FFO adjusts FFO to remove items such as acquisition expenses, losses on extinguishment of debt and modification costs (includes prepayment penalties incurred and the write-off of unamortized deferred loan costs related to the early retirement of debt and costs incurred in connection with a debt modification that are expensed), the amortization of deferred financing costs incurred in connection with obtaining short-term debt financing, the ineffective portion of fair value adjustments on our interest rate derivatives designated as cash flow hedges, and the noncontrolling interests (as described above) related to these items. We believe Core FFO is useful to investors as a supplemental gauge of our operating performance and is useful in comparing our operating performance with other REITs that are not as involved in the aforementioned activities.

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AFFO makes certain adjustments to Core FFO in order to arrive at a more refined measure of the operating performance of our portfolio. There is no industry standard definition of AFFO and practice is divergent across the industry. AFFO adjusts Core FFO to remove items such as equity-based compensation expense and the amortization of deferred financing costs incurred in connection with obtaining long-term debt financing, and the noncontrolling interests (as described above) related to these items. We believe AFFO is useful to investors as a supplemental gauge of our operating performance and is useful in comparing our operating performance with other REITs that are not as involved in the aforementioned activities.

The effect of the conversion of OP Units held by noncontrolling limited partners is not reflected in the computation of basic and diluted FFO, Core FFO and AFFO per share, as they are exchangeable for common stock on a one-for-one basis. The FFO, Core FFO and AFFO allocable to such units is allocated on this same basis and reflected in the adjustments for noncontrolling interests in the table below. As such, the assumed conversion of these units would have no net impact on the determination of diluted FFO, Core FFO and AFFO per share. See Note 9 to our consolidated financial statements for additional information.

We believe that the use of FFO, Core FFO and AFFO, combined with the required GAAP presentations, improves the understanding of operating results of REITs among investors and makes comparisons of operating results among such companies more meaningful. While FFO, Core FFO and AFFO are relevant and widely used measures of operating performance of REITs, they do not represent cash flows from operations or net income (loss) as defined by GAAP and should not be considered as an alternative or substitute to those measures in evaluating our liquidity or operating performance. FFO, Core FFO and AFFO do not purport to be indicative of cash available to fund our future cash requirements. Further, our computation of FFO, Core FFO and AFFO may not be comparable to FFO, Core FFO and AFFO reported by other REITs that do not define FFO in accordance with the current NAREIT definition or that interpret the current NAREIT definition or define Core FFO or AFFO differently than we do.

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The following table reconciles our calculations of FFO, Core FFO and AFFO to net income, the most directly comparable GAAP financial measure, for the three and nine months ended September 30, 2017 and 2016 (in thousands, except per share amounts):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
Net income	$	54,076		$	8,825		$	60,702		$	25,712
Depreciation and amortization		11,215			8,667			35,866			26,363
Gain on sales of real estate		(58,490	)		(9,562	)		(78,386	)		(25,932	)
Adjustment for noncontrolling interests		(21	)		(1,021	)		(1,670	)		(3,401	)
FFO attributable to common stockholders		6,780			6,909			16,512			22,742
FFO per share - basic	$	0.32		$	0.32		$	0.78		$	1.07
FFO per share - diluted	$	0.32		$	0.32		$	0.77		$	1.07
Acquisition costs		—			386			—			386
Loss on extinguishment of debt and modification costs		914			888			5,717			1,722
Change in fair value on derivative instruments - ineffective portion		(32	)		(599	)		(97	)		(599	)
Amortization of deferred financing costs - acquisition term notes		197			—			323			—
Adjustment for noncontrolling interests		(4	)		(104	)		(430	)		(188	)
Core FFO attributable to common stockholders		7,855			7,480			22,025			24,063
Core FFO per share - basic	$	0.37		$	0.35		$	1.05		$	1.13
Core FFO per share - diluted	$	0.37		$	0.35		$	1.03		$	1.13
Amortization of deferred financing costs - long term debt		375			385			1,225			1,084
Equity-based compensation expense		822			296			2,414			296
Adjustment for noncontrolling interests		(3	)		(38	)		(72	)		(93	)
AFFO attributable to common stockholders		9,049			8,123			25,592			25,350
AFFO per share - basic	$	0.43		$	0.38		$	1.22		$	1.19
AFFO per share - diluted	$	0.42		$	0.38		$	1.20		$	1.19
Weighted average common shares outstanding - basic		21,085			21,260			21,057			21,282
Weighted average common shares outstanding - diluted		21,453			21,376			21,407			21,322
Dividends declared per common share	$	0.220		$	0.206		$	0.660		$	0.618
FFO Coverage - diluted	1.44x			1.57x			1.17x			1.73x
Core FFO Coverage - diluted	1.66x			1.7x			1.56x			1.83x
AFFO Coverage - diluted	1.92x			1.84x			1.81x			1.92x

The three months ended September 30, 2017 as compared to the three months ended September 30, 2016

FFO was $6.8 million for the three months ended September 30, 2017 compared to $6.9 million for the three months ended September 30, 2016, which was a decrease of approximately $0.1 million. The change in our FFO between periods primarily relates to increases in total property operating expenses of approximately $0.9 million, interest expense of approximately $3.5 million and corporate general and administrative expenses of approximately $0.6 million, and was partially offset by an increase in total revenues of approximately $4.0 million and adjustments for amounts attributable to noncontrolling interests.

Core FFO was $7.9 million for the three months ended September 30, 2017 compared to $7.5 million for the three months ended September 30, 2016, which was an increase of approximately $0.4 million. The change in our Core FFO between periods primarily

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relates to a decrease in gain recognized related to the ineffective portion of changes in fair value of our interest rate swap derivatives designated as cash flow hedges of approximately $0.6 million, partially offset by decreases in acquisition costs of approximately $0.4 million and FFO.

AFFO was $9.0 million for the three months ended September 30, 2017 compared to $8.1 million for the three months ended September 30, 2016, which was an increase of approximately $0.9 million. The change in our AFFO between periods primarily relates to increases in equity-based compensation expense of approximately $0.5 million and Core FFO.

The nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016

FFO was $16.5 million for the nine months ended September 30, 2017 compared to $22.7 million for the nine months ended September 30, 2016, which was a decrease of approximately $6.2 million. The change in our FFO between periods primarily relates to increases in total property operating expenses of approximately $3.4 million, interest expense of approximately $6.8 million, loss on extinguishment of debt and modification costs of approximately $4.0 million and corporate general and administrative expenses of approximately $2.2 million, and was partially offset by an increase in total revenues of approximately $9.1 million and adjustments for amounts attributable to noncontrolling interests.

Core FFO was $22.0 million for the nine months ended September 30, 2017 compared to $24.1 million for the nine months ended September 30, 2016, which was a decrease of approximately $2.1 million. The change in our Core FFO between periods primarily relates to decreases in gain recognized related to the ineffective portion of changes in fair value of our interest rate swap derivatives designated as cash flow hedges of approximately $0.5 million and FFO, partially offset by a $4.0 million increase in loss on extinguishment of debt and modification costs and adjustments for amounts attributable to noncontrolling interests.

AFFO was $25.6 million for the nine months ended September 30, 2017 compared to $25.4 million for the nine months ended September 30, 2016, which was an increase of approximately $0.2 million. The change in our AFFO between periods primarily relates to an increase in equity-based compensation expense of approximately $2.1 million, partially offset by a decrease in Core FFO.

Liquidity and Capital Resources

Our short-term liquidity requirements consist primarily of funds necessary to pay for debt maturities, operating expenses and other expenditures directly associated with our multifamily properties, including:

• the repayment of the 2017 Bridge Facility if we are unable to extend or refinance the bridge facility;

• capital expenditures to continue our value-add program and to improve the quality and performance of our multifamily properties;

• interest expense and scheduled principal payments on outstanding indebtedness (see “—Obligations and Commitments” below);

• recurring maintenance necessary to maintain our multifamily properties;

• distributions necessary to qualify for taxation as a REIT;

• advisory and administrative fees payable to our Adviser;

• general and administrative expenses;

• reimbursements to our Adviser; and

• property management fees payable to BH.

We expect to meet our short-term liquidity requirements generally through net cash provided by operations and existing cash balances. We intend on paying the outstanding principal balance of the 2017 Bridge Facility with proceeds from the sales of properties classified as held for sale as of September 30, 2017 or cash on hand. As of September 30, 2017, we had approximately $6.3 million of renovation value-add reserves for our planned capital expenditures to implement our value-add program. Renovation value-add reserves are not required to be held in escrow by a third party. We may reallocate these funds, at our discretion, to pursue other investment opportunities or meet our short-term liquidity requirements.

Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of acquiring additional multifamily properties, renovations and other capital expenditures to improve our multifamily properties and scheduled debt payments and distributions. We expect to meet our long-term liquidity requirements through various sources of capital, which may include a revolving credit facility and future debt or equity issuances, existing working capital, net cash provided by operations, long-term mortgage indebtedness and other secured and unsecured borrowings, and property dispositions. However, there are a number of

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factors that may have a material adverse effect on our ability to access these capital sources, including the state of overall equity and credit markets, our degree of leverage, our unencumbered asset base and borrowing restrictions imposed by lenders (including as a result of any failure to comply with financial covenants in our existing and future indebtedness), general market conditions for REITs, our operating performance and liquidity, market perceptions about us and restrictions on sales under the Code. The success of our business strategy will depend, in part, on our ability to access these various capital sources.

In addition to our value-add program, our multifamily properties will require periodic capital expenditures and renovation to remain competitive. Also, acquisitions, redevelopments, or expansions of our multifamily properties will require significant capital outlays. Long-term, we may not be able to fund such capital improvements solely from net cash provided by operations because we must distribute annually at least 90% of our REIT taxable income, determined without regard to the deductions for dividends paid and excluding net capital gains, to qualify and maintain our qualification as a REIT, and we are subject to tax on any retained income and gains. As a result, our ability to fund capital expenditures, acquisitions, or redevelopment through retained earnings long-term is limited. Consequently, we expect to rely heavily upon the availability of debt or equity capital for these purposes. If we are unable to obtain the necessary capital on favorable terms, or at all, our financial condition, liquidity, results of operations, and prospects could be materially and adversely affected.

We believe that our available cash, expected operating cash flows, and potential debt or equity financings will provide sufficient funds for our operations, anticipated scheduled debt service payments and dividend requirements for the twelve-month period following September 30, 2017.

Cash Flows

The following table presents selected data from our consolidated statements of cash flows for the nine months ended September 30, 2017 and 2016 (in thousands):

	For the Nine Months Ended September 30,
	2017			2016
Net cash provided by operating activities	$	27,499		$	26,281
Net cash provided by investing activities		67,618			105,865
Net cash used in financing activities		(28,266	)		(127,045	)
Net increase in cash and restricted cash		66,851			5,101
Cash and restricted cash, beginning of period		55,261			63,095
Cash and restricted cash, end of period	$	122,112		$	68,196

Cash flows from operating activities. During the nine months ended September 30, 2017, net cash provided by operating activities was $27.5 million compared to net cash provided by operating activities of $26.3 million for the nine months ended September 30, 2016. The change in cash flows from operating activities was mainly due to changes in operating assets and liabilities and an increase in NOI, partially offset by increases in interest on debt, prepayment penalties and debt modification expenses paid.

Cash flows from investing activities. During the nine months ended September 30, 2017, net cash provided by investing activities was $67.6 million compared to net cash provided by investing activities of $105.9 million for the nine months ended September 30, 2016. The change in cash flows from investing activities was mainly due to the acquisition of two properties for a combined purchase price of approximately $138.0 million during the period in 2017, compared to the acquisition of one property for a purchase price of approximately $22.4 million during the period in 2016. The change in cash flows from investing activities was partially offset by an increase in net proceeds from sales of real estate; we sold nine properties for net proceeds of approximately $224.4 million during the period in 2017, compared to selling seven properties for net proceeds of approximately $131.8 million during the period in 2016.

Cash flows from financing activities. During the nine months ended September 30, 2017, net cash used in financing activities was $28.3 million compared to net cash used in financing activities of $127.0 million for the nine months ended September 30, 2016. The change in cash flows from financing activities was mainly due to a net increase in debt proceeds of approximately $146.5 million, partially offset by the $51.7 million purchase amount of the BH Buyout during the period in 2017. The proceeds from the net increase in debt proceeds during the period in 2017 were primarily used to acquire two properties for a combined purchase price of approximately $138.0 million and fund a portion of the BH Buyout.

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Debt, Derivatives and Hedging Activity

Mortgage Debt

As of September 30, 2017, our subsidiaries had aggregate mortgage debt outstanding to third parties of approximately $733.3 million at a weighted average interest rate of 3.04% and an adjusted weighted average interest rate of 3.14%. For purposes of calculating the adjusted weighted average interest rate of our mortgage debt outstanding, we have included the weighted average fixed rate of 1.3388% on our combined $650.0 million notional amount of interest rate swap agreements, which effectively fix the interest rate on $650.0 million of our floating rate mortgage debt. See Notes 6 and 7 to our consolidated financial statements for additional information.

We have entered into and expect to continue to enter into interest rate swap and cap agreements with various third parties to fix or cap the floating interest rates on a majority of our floating rate mortgage debt outstanding. The interest rate swap agreements generally have a term of four to five years and effectively establish a fixed interest rate on debt on the underlying notional amounts. The interest rate swap agreements involve the receipt of variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of September 30, 2017, interest rate swap agreements effectively covered $650.0 million, or 96%, of our $673.7 million of floating rate mortgage debt outstanding.

The interest rate cap agreements generally have a term of three to four years and cover the outstanding principal amount of the underlying debt. Under the interest rate cap agreements, we pay a fixed fee in exchange for the counterparty to pay any interest above a maximum rate. As of September 30, 2017, interest rate cap agreements covered $293.2 million of our $673.7 million of floating rate mortgage debt outstanding. These interest rate cap agreements effectively cap one-month LIBOR on $293.2 million of our floating rate mortgage debt at a weighted average rate of 4.20%.

On June 30, 2017, we entered into 22 first mortgages, with a combined principal amount of $502.1 million, on certain of our properties, replacing the $168.4 million of existing mortgage debt outstanding on nine properties and the $300.0 million outstanding under a credit facility (the “$300 Million Credit Facility”). The refinancing of the existing mortgage debt incurred approximately $1.7 million of prepayment penalties, which is included in loss on extinguishment of debt and modification costs on the consolidated statements of operations and comprehensive income. The Federal Home Loan Mortgage Corporation (“Freddie Mac”), who was the lender on the existing mortgage debt and the $300 Million Credit Facility, also originated the 22 new first mortgages (the “Freddie Refinance”). In accordance with FASB ASC 470-50, Debt – Modifications and Extinguishments, we accounted for the refinancing as a modification of a debt instrument. As such, the existing $4.9 million of net deferred financing costs related to the prior mortgage debt and credit facility debt is included with the approximately $4.5 million of deferred financing costs incurred in connection with the modification. Such costs are recorded as a reduction from mortgages payable on the accompanying consolidated balance sheet as of September 30, 2017 and are amortized over the terms of the new mortgage debt. Additionally, we incurred approximately $2.0 million of debt modification costs in connection with the Freddie Refinance that were not capitalized as deferred financing costs. Such costs are recorded in loss on extinguishment of debt and modification costs on the accompanying consolidated statements of operations and comprehensive income. We used approximately $16.3 million of proceeds from the Freddie Refinance to fund a portion of the BH Buyout.

The following nine properties had existing mortgage debt that was refinanced: The Summit at Sabal Park, Courtney Cove, The Preserve at Terrell Mill, The Ashlar, Heatherstone, Versailles, Seasons 704 Apartments, Madera Point and The Pointe at the Foothills. The following twelve properties, which were refinanced as described above, were previously cross-collateralized as security for the $300 Million Credit Facility: Arbors on Forest Ridge, Cutter’s Point, Eagle Crest, Silverbrook, Timberglen, Edgewater at Sandy Springs, Beechwood Terrace, Willow Grove, Woodbridge, Venue at 8651, Old Farm and Stone Creek at Old Farm. The Colonnade, which obtained a first mortgage as described above, was not previously encumbered by mortgage debt or credit facility debt.

For additional information regarding the Freddie Refinance and the BH Buyout, see Notes 6 and 10 to our consolidated financial statements.

We intend to invest in additional multifamily properties as suitable opportunities arise and adequate sources of equity and debt financing are available. We expect that future investments in properties, including any improvements or renovations of current or newly acquired properties, will depend on and will be financed by, in whole or in part, our existing cash, future borrowings and the proceeds from additional issuances of common stock or other securities or property dispositions. In addition, we may seek financing from U.S. government agencies, including through Freddie Mac, the Federal National Mortgage Association, and the U.S. Department of Housing and Urban Development, in appropriate circumstances in connection with the acquisition or refinancing of existing mortgage loans.

Although we expect to be subject to restrictions on our ability to incur indebtedness, we expect that we will be able to refinance existing indebtedness or incur additional indebtedness for acquisitions or other purposes, if needed. However, there can be no

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assurance that we will be able to refinance our indebtedness, incur additional indebtedness or access additional sources of capital, such as by issuing common stock or other debt or equity securities, on terms that are acceptable to us or at all.

Furthermore, following the completion of our value-add and capital expenditures programs and depending on the interest rate environment at the applicable time, we may seek to refinance our floating rate debt into longer-term fixed rate debt at lower leverage levels.

2017 Bridge Facility

On June 30, 2017, we, through our OP, entered into a $65.9 million bridge facility (the “2017 Bridge Facility”) with KeyBank. We drew $44.5 million to fund a portion of the purchase price of Rockledge Apartments and $21.4 million to fund a portion of the BH Buyout. In July 2017, we used proceeds from the sale of Regatta Bay to pay down $11.3 million on the 2017 Bridge Facility. The 2017 Bridge Facility is a full-term, interest-only facility with an initial four-month term (see below). The 2017 Bridge Facility is guaranteed by us. Interest accrues on the 2017 Bridge Facility at an interest rate of one-month LIBOR plus 3.75%. We intend on paying the outstanding principal balance of the 2017 Bridge Facility with proceeds from the sales of properties classified as held for sale as of September 30, 2017 or cash on hand. See Notes 5, 6 and 10 to our consolidated financial statements for additional information.

In October 2017, we used proceeds from the sale of The Arbors, The Crossings, The Crossings at Holcomb Bridge and The Knolls to pay down $46.0 million on the 2017 Bridge Facility, bringing the outstanding principal balance to approximately $8.6 million as of October 31, 2017, and also extended the maturity date to March 31, 2018 (see Note 13 to our consolidated financial statements).

$30 Million Credit Facility

On December 29, 2016, we, through our OP, entered into a $30.0 million credit facility (the “$30 Million Credit Facility”) and immediately drew $15.0 million to fund a portion of the purchase price of Old Farm and Stone Creek at Old Farm. On February 1, 2017, we drew $14.0 million and used $12.0 million to fund a portion of the purchase price of Hollister Place and $2.0 million to fund value-add renovations at our properties. In April 2017, we used cash on hand plus our share of the proceeds, net of distributions to noncontrolling interests, from four properties we sold to pay down $10.0 million on the $30 Million Credit Facility. On June 30, 2017, we drew $11.0 million to fund a portion of the BH Buyout. The $30 Million Credit Facility is a full-term, interest-only facility with an initial term of 24 months and one 12-month extension option and is guaranteed by our OP. See Notes 5, 6 and 10 to our consolidated financial statements for additional information.

As of September 30, 2017, we had $30.0 million outstanding under our $30 Million Credit Facility.

$300 Million Credit Facility

On June 6, 2016, we, through certain of our subsidiaries, entered into a $200.0 million credit facility, which was expanded to $300.0 million (the “$300 Million Credit Facility”) during the fourth quarter of 2016 to acquire three properties. The $300 Million Credit Facility was cross-collateralized by the following 12 properties: Arbors on Forest Ridge, Cutter’s Point, Eagle Crest, Silverbrook, Timberglen, Edgewater at Sandy Springs, Beechwood Terrace, Willow Grove, Woodbridge, Venue at 8651, Old Farm and Stone Creek at Old Farm.

On June 30, 2017, in connection with the Freddie Refinance, we repaid and retired the $300 Million Credit Facility. The refinancing of this existing credit facility debt did not incur prepayment penalties. See Note 6 to our consolidated financial statements for additional information.

2016 Bridge Facility

On December 29, 2016, we, through our OP, entered into a $30.0 million bridge facility (the “2016 Bridge Facility”) with KeyBank and drew $30.0 million to fund a portion of the purchase price of Old Farm and Stone Creek at Old Farm. In April 2017, we paid down the entire $30.0 million of principal on the 2016 Bridge Facility, which was funded with our share of the proceeds, net of distributions to noncontrolling interests, from properties we sold in April 2017. The 2016 Bridge Facility was retired on April 28, 2017. See Notes 5 and 6 to our consolidated financial statements for additional information.

Interest Rate Swap Agreements

In order to fix a portion of, and mitigate the risk associated with, our floating rate indebtedness (without incurring substantial prepayment penalties or defeasance costs typically associated with fixed rate indebtedness when repaid early or refinanced), we, through our OP, have entered into seven interest rate swap transactions with KeyBank, or the Counterparty, with a combined notional

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amount of $650.0 million. As of September 30, 2017, the interest rate swaps we have entered into effectively replace the floating interest rate (one-month LIBOR) with respect to $650.0 million of our floating rate mortgage debt outstanding with a weighted average fixed rate of 1.3388%. During the term of these interest rate swap agreements, we are required to make monthly fixed rate payments of 1.3388%, on a weighted average basis, on the notional amounts, while the Counterparty is obligated to make monthly floating rate payments based on one-month LIBOR to us referencing the same notional amounts. We have designated these interest rate swaps as cash flow hedges of interest rate risk. See Notes 6 and 7 to our consolidated financial statements for additional information.

The following table contains summary information regarding our outstanding interest rate swaps (dollars in thousands):

Effective Date	Termination Date	Notional		Fixed Rate				Floating Rate Option (1)
July 1, 2016	June 1, 2021	$	100,000		1.1055	%		One-month LIBOR
July 1, 2016	June 1, 2021		100,000		1.0210	%		One-month LIBOR
July 1, 2016	June 1, 2021		100,000		0.9000	%		One-month LIBOR
September 1, 2016	June 1, 2021		100,000		0.9560	%		One-month LIBOR
April 1, 2017	April 1, 2022		100,000		1.9570	%		One-month LIBOR
May 1, 2017	April 1, 2022		50,000		1.9610	%		One-month LIBOR
July 1, 2017	July 1, 2022		100,000		1.7820	%		One-month LIBOR
		$	650,000		1.3388	%	(2)

(1) As of September 30, 2017, one-month LIBOR was 1.2322%.

(2) Represents the weighted average fixed rate of the interest rate swaps.

Obligations and Commitments

The following table summarizes our contractual obligations and commitments as of September 30, 2017 for the next five calendar years subsequent to September 30, 2017. We used one-month LIBOR as of September 30, 2017 to calculate interest expense due by period on our floating rate debt and net interest expense due by period on our interest rate swaps.

		Payments Due by Period (in thousands)
		Total		2017		2018		2019		2020		2021		Thereafter
Operating Properties Mortgage Debt
Principal payments		$	702,474	$	396	$	13,352	$	2,448	$	2,483	$	2,531	$	681,264
Interest expense	(1)		144,459		5,622		22,080		21,647		21,616		22,025		51,469
Total		$	846,933	$	6,018	$	35,432	$	24,095	$	24,099	$	24,556	$	732,733
Held For Sale Properties Mortgage Debt
Principal payments		$	30,826	$	—	$	276	$	309	$	316	$	326	$	29,599
Interest expense			5,549		253		1,000		989		981		968		1,358
Total		$	36,375	$	253	$	1,276	$	1,298	$	1,297	$	1,294	$	30,957
Credit Facility & Bridge Facility
Principal payments		$	84,597	$	54,597	$	30,000	$	—	$	—	$	—	$	—
Interest expense			2,184		627		1,557		—		—		—		—
Total		$	86,781	$	55,224	$	31,557	$	—	$	—	$	—	$	—
Total contractual obligations and commitments		$	970,089	$	61,495	$	68,265	$	25,393	$	25,396	$	25,850	$	763,690

(1) Interest expense obligations includes the impact of expected settlements on interest rate swaps which have been entered into in order to fix the interest rate on the hedged portion of our floating rate debt obligations. As of September 30, 2017, we had entered into seven interest rate swap transactions with a combined notional amount of $650.0 million. We have allocated the total impact of expected settlements on the $650.0 million notional amount of interest rate swaps to ‘Operating Properties Mortgage Debt.’ We used one-month LIBOR as of September 30, 2017 to determine our expected settlements through the terms of the interest rate swaps.

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Capital Expenditures and Value-Add Program

We anticipate incurring average annual repairs and maintenance expense of $575-$725 per apartment unit in connection with the ongoing operations of our business. These expenditures are expensed as incurred. In addition, we reserve, on average, approximately $250 to $350 per apartment unit for non-recurring capital expenditures and/or lender required replacement reserves. When incurred, these expenditures are either capitalized or expensed, in accordance with GAAP, depending on the type of the expenditure. Although we will continuously monitor the adequacy of this average, we believe these figures to be sufficient to maintain the properties at a high level in the markets in which we operate. A majority of the properties in our Portfolio were underwritten and acquired with the premise that we would invest $4,000-$10,000 per unit in the first 36 months of ownership, in an effort to add value to the asset’s exterior and interiors. In most cases, we reserved cash at closing to fund these planned capital expenditures and value-add improvements. As of September 30, 2017, we had approximately $6.3 million of renovation value-add reserves for our planned capital expenditures and other expenses to implement our value-add program, which will complete approximately 1,000 planned interior rehabs. The following table sets forth a summary of our capital expenditures related to our value-add program for the three and nine months ended September 30, 2017 and 2016 (in thousands):

		For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Rehab Expenditures		2017		2016		2017		2016
Interior	(1)	$	1,883	$	2,439	$	6,647	$	7,136
Exterior and common area			1,166		1,746		5,067		8,078
Total rehab expenditures		$	3,049	$	4,185	$	11,714	$	15,214

(1) Includes total capital expenditures during the period on completed and in-progress interior rehabs. For the three months ended September 30, 2017 and 2016, we completed full and partial interior rehabs on 422 and 538 units, respectively. For the nine months ended September 30, 2017 and 2016, we completed full and partial interior rehabs on 1,253 and 1,475 units, respectively.

Freddie Mac Multifamily Green Advantage

In order to obtain more favorable pricing on our mortgage debt financing with Freddie Mac, we have decided to participate in Freddie Mac’s new Multifamily Green Advantage program. We have escrowed approximately $4.2 million to finance smarter, greener property improvements at 20 of our properties, which will be completed by the summer of 2019. We plan to reduce water/sewer costs at each property by at least 15% through the replacement of showerheads, plumbing fixtures and toilets with modern energy efficient upgrades. By participating in this program, we were able to lower the interest rate on the properties we refinanced in the Freddie Refinance by 10 basis points.

Emerging Growth Company

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 13(a) of the Exchange Act, for complying with new or revised accounting standards applicable to public companies. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of this extended transition period. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates for such new or revised standards. We may elect to comply with public company effective dates at any time, and such election would be irrevocable pursuant to Section 107(b) of the JOBS Act.

We could remain an “emerging growth company” until the earliest of (1) the last day of the fiscal year following the fifth anniversary of becoming a public company, (2) the last day of the first fiscal year in which we have total annual gross revenue of $1.07 billion or more, (3) the date on which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act (which would occur if the market value of our common stock held by non-affiliates exceeds $700 million, measured as of the last business day of our most recently completed second fiscal quarter, and we have been publicly reporting for at least 12 months) or (4) the date on which we have, during the preceding three year period, issued more than $1.0 billion in non-convertible debt.

Income Taxes

We anticipate that we will continue to qualify to be taxed as a REIT for U.S. federal income tax purposes, and we intend to continue to be organized and to operate in a manner that will permit us to qualify as a REIT. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to stockholders. As a REIT, we will be subject to federal income tax on our undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than

53

the sum of (1) 85% of our ordinary income, (2) 95% of our capital gain net income and (3) 100% of our undistributed income from prior years. Taxable income from certain non-REIT activities is managed through a TRS and is subject to applicable federal, state, and local income and margin taxes. We had no significant taxes associated with our TRS for the nine months ended September 30, 2017 and 2016.

If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate income tax rates, and dividends paid to our stockholders would not be deductible by us in computing taxable income. Any resulting corporate liability could be substantial and could materially and adversely affect our net income and net cash available for distribution to stockholders. Unless we were entitled to relief under certain Code provisions, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify to be taxed as a REIT.

We evaluate the accounting and disclosure of tax positions taken or expected to be taken in the course of preparing our tax returns to determine whether the tax positions are “more-likely-than-not” (greater than 50 percent probability) of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Our management is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which include federal and certain states. We have no examinations in progress and none are expected at this time.

We recognize our tax positions and evaluate them using a two-step process. First, we determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Second, we will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement.

We had no material unrecognized tax benefit or expense, accrued interest or penalties as of September 30, 2017. Our subsidiaries and we are subject to federal income tax as well as income tax of various state and local jurisdictions. The 2016 and 2015 tax years remain open to examination by tax jurisdictions to which our subsidiaries and we are subject. When applicable, we recognize interest and/or penalties related to uncertain tax positions on our consolidated statements of operations and comprehensive income.

Dividends

We intend to make regular quarterly dividend payments to holders of our common stock. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains. As a REIT, we will be subject to federal income tax on our undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of (1) 85% of our ordinary income, (2) 95% of our capital gain net income and (3) 100% of our undistributed income from prior years. We intend to make regular quarterly dividend payments of all or substantially all of our taxable income to holders of our common stock out of assets legally available for this purpose, if and to the extent authorized by our Board. Before we make any dividend payments, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service on our debt payable. If our cash available for distribution is less than our taxable income, we could be required to sell assets, borrow funds or raise additional capital to make cash dividends or we may make a portion of the required dividend in the form of a taxable distribution of stock or debt securities.

We will make dividend payments based on our estimate of taxable earnings per share of common stock, but not earnings calculated pursuant to GAAP. Our dividends and taxable income and GAAP earnings will typically differ due to items such as depreciation and amortization, fair value adjustments, differences in premium amortization and discount accretion, and non-deductible general and administrative expenses. Our quarterly dividends per share may be substantially different than our quarterly taxable earnings and GAAP earnings per share. Our Board declared our third quarterly dividend of 2017 of $0.22 per share on July 31, 2017, which was paid on September 29, 2017 and funded out of cash flows from operations.

Off-Balance Sheet Arrangements

As of September 30, 2017 and December 31, 2016, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

54

Significant Accounting Policies and Critical Accounting Estimates

Our significant accounting policies are those having the most impact on the reporting of our financial condition and results and those requiring significant judgments and estimates. These policies include those related to: (1) revenue recognition and (2) real estate investments, capital expenditures and impairment.

Our significant accounting policies are disclosed in Note 2 “Summary of Significant Accounting Policies” to the consolidated financial statements.

Inflation

The real estate market has not been affected significantly by inflation in the past several years due to a relatively low inflation rate. The majority of our lease terms are for a period of one year or less and reset to market if renewed. The majority of our leases also contain protection provisions applicable to reimbursement billings for utilities. Should inflation return, due to the short-term nature of our leases, we do not believe our results will be materially affected.

Inflation may also affect the overall cost of debt, as the implied cost of capital increases. Currently, interest rates are less than historical averages. However, if the Federal Reserve institutes new monetary policies, tightening credit in response to or in anticipation of inflation concerns, interest rates could rise. We intend to mitigate these risks through long-term fixed interest rate loans and interest rate hedges, which to date have included interest rate cap and interest rate swap agreements.

REIT Tax Election

We have elected to be taxed as a REIT under Sections 856 through 860 of the Code and expect to continue to qualify as a REIT. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our “REIT taxable income,” as defined by the Code, to our stockholders. Taxable income from certain non-REIT activities is managed through a TRS and is subject to applicable federal, state, and local income and margin taxes. We had no significant taxes associated with our TRS for the nine months ended September 30, 2017 and 2016. We believe we qualify for taxation as a REIT under the Code, and we intend to continue to operate in such a manner, but no assurance can be given that we will operate in a manner so as to qualify as a REIT.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the adverse effect on the value of assets and liabilities that results from a change in market conditions. Our primary market risk exposure is interest rate risk with respect to our indebtedness and counterparty credit risk with respect to our interest rate derivatives. In order to minimize counterparty credit risk, we enter into and expect to enter into hedging arrangements only with major financial institutions that have high credit ratings. As of September 30, 2017, we had total indebtedness of $817.9 million at a weighted average interest rate of 3.25%, of which $758.3 million was debt with a floating interest rate. The interest rate swap agreements we have entered into effectively fix the interest rate on $650.0 million, or 96%, of our $673.7 million of floating rate mortgage debt outstanding (see below). As of September 30, 2017, the adjusted weighted average interest rate of our total indebtedness was 3.34%. For purposes of calculating the adjusted weighted average interest rate of the total indebtedness, we have included the weighted average fixed rate of 1.3388% on the $650.0 million notional amount of interest rate swap agreements that we have entered into as of September 30, 2017, which effectively fix the interest rate on $650.0 million of our floating rate mortgage debt outstanding.

An increase in interest rates could make the financing of any acquisition by us costlier. Rising interest rates could also limit our ability to refinance our debt when it matures or cause us to pay higher interest rates upon refinancing and increase interest expense on refinanced indebtedness. We may manage, or hedge, interest rate risks related to our borrowings by means of interest rate cap and interest rate swap agreements. As of September 30, 2017, the interest rate cap agreements we have entered into effectively cap one-month LIBOR on $293.2 million of our floating rate mortgage debt at a weighted average rate of 4.20% for the term of the agreements, which is generally 3-4 years. We also expect to manage our exposure to interest rate risk by maintaining a mix of fixed and floating rates for our indebtedness.

In order to fix a portion of, and mitigate the risk associated with, our floating rate indebtedness (without incurring substantial prepayment penalties or defeasance costs typically associated with fixed rate indebtedness when repaid early or refinanced), we, through our OP, have entered into seven interest rate swap transactions with KeyBank (the “Counterparty”) with a combined notional amount of $650.0 million. The interest rate swaps we have entered into effectively replace the floating interest rate (one-month LIBOR) with respect to that amount with a weighted average fixed rate of 1.3388%. During the term of these interest rate swap agreements, we are required to make monthly fixed rate payments of 1.3388%, on a weighted average basis, on the notional amounts,

55

while the Counterparty is obligated to make monthly floating rate payments based on one-month LIBOR to us referencing the same notional amounts. We have designated these interest rate swaps as cash flow hedges of interest rate risk.

Until our interest rates reach the caps provided by our interest rate cap agreements, each quarter point change in LIBOR would result in an approximate increase to annual interest expense costs on our floating rate indebtedness, reduced by any payments due from the Counterparty under the terms of the interest rate swap agreements we have entered into as of September 30, 2017, of the amounts illustrated in the table below for our indebtedness as of September 30, 2017 (in thousands):

Change in Interest Rates	Annual Increase to Interest Expense
0.25%	$	270
0.50%		540
0.75%		810
1.00%		1,080

There is no assurance that we would realize such expense as such changes in interest rates could alter our liability positions or strategies in response to such changes.

We may also be exposed to credit risk in the derivative financial instruments we use. Credit risk is the failure of the counterparty to perform under the terms of the derivative financial instruments. If the fair value of a derivative financial instrument is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative financial instrument is negative, we will owe the counterparty and, therefore, do not have credit risk. We seek to minimize the credit risk in derivative financial instruments by entering into transactions with high-quality counterparties.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) and Rule 15d-15(b) under the Exchange Act, our management, including our President and Chief Financial Officer, evaluated, as of September 30, 2017, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e). Based on that evaluation, our President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2017, to provide reasonable assurance that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to management, including the President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

We believe, however, that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, within a company have been detected.

Changes in Internal Control over Financial Reporting

There has been no change in internal control over financial reporting that occurred during the quarter ended September 30, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

We have disclosed under Part I, Item 1A, “Risk Factors” in our Annual Report, filed with the U.S. Securities and Exchange Commission on March 15, 2017, risk factors which materially affect our business, financial condition or results of operations. There have been no material changes from the risk factors previously disclosed. You should carefully consider the risk factors set forth in the Annual Report and the other information set forth elsewhere in this quarterly report on Form 10-Q. You should be aware that these risk factors and other information may not describe every risk facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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

Repurchase of Shares

On June 15, 2016, our Board authorized us to repurchase an indeterminate number of shares of our common stock at an aggregate market value of up to $30 million during a two-year period that expires on June 15, 2018. The following table provides information on our purchases of equity securities during the three months ended September 30, 2017:

Period	Total Number of Shares Purchased		Average Price PaidPer Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that may yet be Purchased under the Plans or Programs (in millions)
Beginning Balance		250,156	$	18.34		250,156	$	25.4
July 1 – July 31		—		—		—		25.4
August 1 – August 31		31,616		23.28		31,616		24.7
September 1 – September 30		26,541		23.26		26,541		24.1
Balance as of September 30, 2017		308,313	$	19.27		308,313	$	24.1

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

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Item 6. Exhibits

EXHIBIT INDEX

Exhibit Number	Exhibit Description
10.2*	Amended and Restated Limited Partnership Agreement of NexPoint Residential Trust Operating Partnership, L.P.
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1+	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

⁺ Furnished herewith.

58

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.

NEXPOINT RESIDENTIAL TRUST, INC.

Signature	Title	Date
/s/ Jim Dondero	President	October 31, 2017
Jim Dondero	(Principal Executive Officer)
/s/ Brian Mitts	Chief Financial Officer	October 31, 2017
Brian Mitts	(Principal Financial Officer and Principal Accounting Officer)

59

EX-10.2

Exhibit 10.2

AMENDED AND RESTATED

LIMITED PARTNERSHIP AGREEMENT

OF

NEXPOINT RESIDENTIAL TRUST OPERATING PARTNERSHIP, L.P.

a Delaware limited partnership

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE PARTNERSHIP, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS.

AMENDED AND RESTATED AS OF AUGUST 1, 2017

TABLE OF CONTENTS

Page

ARTICLE 1.	DEFINED TERMS				1
ARTICLE 2.	ORGANIZATIONAL MATTERS				13
Section 2.1		Continuation			13
Section 2.2		Name			13
Section 2.3		Registered Office and Agent; Principal Office			13
Section 2.4		Power of Attorney			14
Section 2.5		Term			15
Section 2.6		Admission of Limited Partners			15
ARTICLE 3.	PURPOSE				15
Section 3.1		Purpose and Business			15
Section 3.2		Powers			15
Section 3.3		Representations and Warranties by the Parties			16
Section 3.4		Not Publicly Traded			17
ARTICLE 4.	CAPITAL CONTRIBUTIONS				18
Section 4.1		Capital Contributions of the Partners			18
Section 4.2		Issuances of Additional Partnership Interests			18
Section 4.3		Additional Funds			18
Section 4.4		Preemptive Rights			19
ARTICLE 5.	DISTRIBUTIONS				19
Section 5.1			Requirement and Characterization of Distributions		19
Section 5.2			Amounts Withheld		20
Section 5.3			Distributions Upon Liquidation		20
Section 5.4			Restricted Distributions		20
Section 5.5			Deemed Limited Partner		20
ARTICLE 6.	ALLOCATIONS				21
Section 6.1				Allocations For Capital Account Purposes	21
ARTICLE 7.	MANAGEMENT AND OPERATIONS OF BUSINESS				21
Section 7.1				Management	21
Section 7.2				Certificate of Limited Partnership	25
Section 7.3				Restrictions on General Partner Authority	25
Section 7.4				Reimbursement of the General Partner and the Company	26
Section 7.5				Outside Activities of the General Partner	27
Section 7.6				Contracts with Affiliates	27
Section 7.7				Indemnification	28
Section 7.8				Liability of the General Partner	29
Section 7.9				Other Matters Concerning the General Partner	30
Section 7.10				Title to Partnership Assets	31
Section 7.11				Reliance by Third Parties	31

i

TABLE OF CONTENTS

(continued)

Page

ARTICLE 8.	RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS					32
Section 8.1		Limitation of Liability				32
Section 8.2		Management of Business				32
Section 8.3		Outside Activities of Limited Partners				33
Section 8.4		Return of Capital				33
Section 8.5		Rights of Limited Partners Relating to the Partnership				33
Section 8.6		Redemption Right				34
ARTICLE 9.	BOOKS, RECORDS, ACCOUNTING AND REPORTS					36
Section 9.1			Records and Accounting			36
Section 9.2			Fiscal Year			36
Section 9.3			Reports			36
ARTICLE 10.	TAX MATTERS					37
Section 10.1				Preparation of Tax Returns		37
Section 10.2				Tax Elections		37
Section 10.3				Tax Matters Partner		37
Section 10.4				Withholding		39
ARTICLE 11.	TRANSFERS AND WITHDRAWALS					40
Section 11.1					Transfer	40
Section 11.2					Transfer of General Partner Interest and Limited Partner Interest	40
Section 11.3					Limited Partners’ Rights to Transfer	41
Section 11.4					Substituted Limited Partners	42
Section 11.5					Assignees	43
Section 11.6					General Provisions	44
ARTICLE 12.	ADMISSION OF PARTNERS					44
Section 12.1					Admission of Successor General Partner	44
Section 12.2					Admission of Additional Limited Partners	45
Section 12.3					Amendment of Agreement and Certificate of Limited Partnership	45
ARTICLE 13.	DISSOLUTION, LIQUIDATION AND TERMINATION					46
Section 13.1					Dissolution	46
Section 13.2					Winding Up	47
Section 13.3					Compliance with Timing Requirements of Regulations	48
Section 13.4					Deemed Contribution and Distribution	48
Section 13.5					Rights of Limited Partners	49
Section 13.6					Notice of Dissolution	49
Section 13.7					Termination of Partnership and Cancellation of Certificate of Limited Partnership	49
Section 13.8					Reasonable Time for Winding Up	49
Section 13.9					Waiver of Partition	49

ii

TABLE OF CONTENTS

(continued)

Page

ARTICLE 14.	AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS			50
Section 14.1			Amendment of Partnership Agreement	50
Section 14.2			Meetings of the Partners	50
ARTICLE 15.	GENERAL PROVISIONS			51
Section 15.1		Addresses and Notice		51
Section 15.2		Titles and Captions		51
Section 15.3		Pronouns and Plurals		51
Section 15.4		Further Action		51
Section 15.5		Binding Effect		52
Section 15.6		Creditors		52
Section 15.7		Waiver		52
Section 15.8		Counterparts		52
Section 15.9		Applicable Law		52
Section 15.10		Invalidity of Provisions		52
Section 15.11		Entire Agreement		52

iii

TABLE OF CONTENTS

(continued)

Page

Exhibit A – Partners’ Contributions and Partnership Interests	A-1
Exhibit B – Capital Account Maintenance	B-1
Exhibit C – Special Allocation Rules	C-1
Exhibit D – Notice of Redemption	D-1
Exhibit E – Constructive Ownership Definition	E-1
Exhibit F – Schedule of Partner’s Ownership with Respect to Tenants	F-1

iv

AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
NEXPOINT RESIDENTIAL TRUST OPERATING PARTNERSHIP, L.P.

THIS AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF NEXPOINT RESIDENTIAL TRUST OPERATING PARTNERSHIP, L.P. (this “Agreement”), dated as of August 1, 2017, is entered into by and among NexPoint Residential Trust Operating Partnership GP, LLC, a Delaware limited liability company (the “General Partner”), and the Persons (as defined below) that are party hereto from time to time and whose names are set forth on Exhibit A attached hereto (as it may be amended from time to time).

WHEREAS, the limited partnership was formed on September 5, 2014 and an original agreement of limited partnership, dated as of September 5, 2014 (the “Prior Agreement”), was entered into between the General Partner, as general partner, and NexPoint Residential Trust, Inc., a Maryland corporation (the “Company”), as the initial limited partner; and

WHEREAS, the General Partner and the Company desire to enter into this Amended and Restated Limited Partnership Agreement of NexPoint Residential Trust Operating Partnership, L.P. (the “Partnership”).

NOW THEREFORE, in consideration of the mutual covenants herein contained, and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE 1.

DEFINED TERMS

The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

“704(c) Value” of any Contributed Property means the fair market value of such property or other consideration at the time of contribution, as determined by the General Partner using such reasonable method of valuation as it may adopt.  Subject to Exhibit B hereof, the General Partner shall, in its sole and absolute discretion, use such method as it deems reasonable and appropriate to allocate the aggregate of the 704(c) Values of Contributed Properties in a single or integrated transaction among the separate properties on a basis proportional to their respective fair market values.

“Act” means the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §17-101, et seq., as it may be amended from time to time, and any successor to such statute.

“Additional Funds” has the meaning set forth in Section 4.3.A hereof.

“Additional Limited Partner” means a Person admitted to the Partnership as a Limited Partner pursuant to Section 12.2 hereof and who is shown as such on the books and records of the Partnership.

“Adjusted Capital Account” means the Capital Account maintained for each Partner as of the end of each Partnership taxable year (i) increased by any amounts which such Partner is obligated to restore pursuant to any provision of this Agreement or is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704‑2(i)(5) and (ii) decreased by the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).  The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

“Adjusted Capital Account Deficit” means, with respect to any Partner, the deficit balance, if any, in such Partner’s Adjusted Capital Account as of the end of the relevant Partnership taxable year.

“Adjusted Property” means any property, the Carrying Value of which has been adjusted pursuant to Exhibit B hereof.

“Affiliate” means, with respect to any Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person; (ii) any Person owning or controlling ten percent (10%) or more of the outstanding voting interests of such Person; (iii) any Person of which such Person owns or controls ten percent (10%) or more of the voting interests; or (iv) any officer, director, general partner or trustee of such Person or of any Person referred to in clauses (i), (ii), or (iii) above.

“Agreed Value” means (i) in the case of any Contributed Property as of the time of its contribution to the Partnership, the 704(c) Value of such property, reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed, and (ii) in the case of any property distributed to a Partner by the Partnership, the Partnership’s Carrying Value of such property at the time such property is distributed, reduced by any indebtedness either assumed by such Partner upon such distribution or to which such property is subject at the time of distribution as determined under Section 752 of the Code and the Regulations thereunder.

“Agreement” means this Amended and Restated Limited Partnership Agreement of the Partnership, as it may be amended, supplemented or restated from time to time.

“Assignee” means a Person to whom all or a portion of a Partnership Interest has been transferred in a manner permitted under this Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5.

“Available Cash” means, with respect to any period for which such calculation is being made,

2

(i)the sum of:

(a)the Partnership’s Net Income or Net Loss (as the case may be) for such period (without regard to adjustments resulting from allocations described in Sections 1.A through 1.E of Exhibit C);

(b)Depreciation and all other noncash charges deducted in determining Net Income or Net Loss for such period;

(c)the amount of any reduction in the reserves of the Partnership referred to in clause (ii)(f) below (including, without limitation, reductions resulting because the General Partner determines such amounts are no longer necessary);

(d)the excess of proceeds from the sale, exchange, disposition, or refinancing of Partnership property for such period over the gain recognized from such sale, exchange, disposition, or refinancing during such period (excluding Terminating Capital Transactions); and

(e)all other cash received by the Partnership for such period that was not included in determining Net Income or Net Loss for such period;

(ii)less the sum of:

(a)all principal debt payments made by the Partnership during such period;

(b)capital expenditures made by the Partnership during such period;

(c)investments made by the Partnership during such period in any entity (including loans made thereto) to the extent that such investments are not otherwise described in clause (ii)(a) or (ii)(b);

(d)all other expenditures and payments not deducted in determining Net Income or Net Loss for such period;

(e)any amount included in determining Net Income or Net Loss for such period that was not received by the Partnership during such period;

(f)the amount of any increase in reserves during such period which the General Partner determines to be necessary or appropriate in its sole and absolute discretion; and

(g)the amount of any working capital accounts and other cash or similar balances which the General Partner determines to be necessary or appropriate, in its sole and absolute discretion.

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Notwithstanding the foregoing, Available Cash shall not include any cash received or reductions in reserves, or take into account any disbursements made or reserves established, after commencement of the dissolution and liquidation of the Partnership.

“Board of Directors” means the Board of Directors of the Company.

“Book-Tax Disparities” means, with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for federal income tax purposes as of such date.  A Partner’s share of the Partnership’s Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such Partner’s Capital Account balance as maintained pursuant to Exhibit B and the hypothetical balance of such Partner’s Capital Account computed as if it had been maintained strictly in accordance with federal income tax accounting principles.

“Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close.

“Capital Account” means the Capital Account maintained for a Partner pursuant to Exhibit B hereof.

“Capital Contribution” means, with respect to any Partner, any cash, cash equivalents or the Agreed Value of Contributed Property which such Partner contributes or is deemed to contribute to the Partnership pursuant to Section 4.1 or 4.2 hereof.

“Carrying Value” means (i) with respect to a Contributed Property or Adjusted Property, the 704(c) Value of such property, reduced (but not below zero) by all Depreciation with respect to such property charged to the Partners’ Capital Accounts following the contribution of or adjustment with respect to such property; and (ii) with respect to any other Partnership property, the adjusted basis of such property for federal income tax purposes, all as of the time of determination.  The Carrying Value of any property shall be adjusted from time to time in accordance with Exhibit B hereof, and to reflect changes, additions or other adjustments to the Carrying Value for dispositions and acquisitions of Partnership properties, as deemed appropriate by the General Partner.

“Cash Amount” means an amount of cash per Partnership Unit equal to the Value on the Valuation Date of the REIT Shares Amount.

“Certificate” means the Certificate of Limited Partnership of the Partnership as filed in the office of the Delaware Secretary of State on September 5, 2014, as amended and/or restated from time to time in accordance with the terms hereof and the Act.

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“Charter” means the Articles of Amendment and Restatement of the Company filed with the State Department of Assessments and Taxation of the State of Maryland on June 15, 2016, as amended and/or restated from time to time.

“Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder.  Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law.

“Common Units” means the Partnership Units other than any series of units of limited partnership interest issued in the future and designated as preferred or otherwise different from the Common Units, including, but not limited to, with respect to the payment of distributions, including distributions upon liquidation.

“Company” means NexPoint Residential Trust, Inc., a Maryland corporation.

“Consent” means the consent or approval of a proposed action by a Partner given in accordance with Section 14.2 hereof.

“Constructive Ownership” or “Constructively Own” means ownership under the constructive ownership rules described in Exhibit E.

“Contributed Property” means each property or other asset, in such form as may be permitted by the Act (but excluding cash), contributed or deemed contributed to the Partnership.  Once the Carrying Value of a Contributed Property is adjusted pursuant to Exhibit B hereof, such property shall no longer constitute a Contributed Property for purposes of Exhibit B hereof, but shall be deemed an Adjusted Property for such purposes.

“Conversion Factor” means 1.0, subject to adjustment as follows:  (i) in case the Company shall (A) make a distribution on the outstanding REIT Shares in REIT Shares, (B) subdivide or reclassify the outstanding REIT Shares into a greater number of REIT Shares, or (C) combine or reclassify the outstanding REIT Shares into a smaller number of REIT Shares, the Conversion Factor in effect at the opening of business on the day following the date fixed for the determination of shareholders entitled to receive such distribution or subject to such subdivision, combination or reclassification shall be proportionately adjusted so that a holder of Partnership Units shall be entitled to receive, upon exchange thereof, the number of REIT Shares which the holder would have owned at the opening of business on the day following the date fixed for such determination had such Partnership Units been exchanged immediately prior to such determination; (ii) in case the Partnership shall subdivide or reclassify the outstanding Partnership Units into a greater number of Partnership Units, the Conversion Factor in effect at the opening of business on the day following the date fixed for the determination of Partnership Unit holders subject to such subdivision or reclassification shall be proportionately adjusted so that a holder of Partnership Units shall be entitled to receive, upon exchange thereof, the number of REIT Shares which the holder would have owned at the opening of business on the day following the date fixed for such

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determination had such Partnership Units been exchanged immediately prior to such determination; (iii) in case the Company (A) shall issue rights or warrants to all holders of REIT Shares entitling them to subscribe for or purchase REIT Shares at a price per share less than the daily market price per REIT Share on the date fixed for the determination of shareholders entitled to receive such rights or warrants, (B) shall not issue similar rights or warrants to all holders of Partnership Units entitling them to subscribe for or purchase REIT Shares or Partnership Units at a comparable price (determined, in the case of Partnership Units, by reference to the Conversion Factor), and (C) cannot issue such rights or warrants to a Redeeming Partner as otherwise required by the definition of “REIT Shares Amount” set forth in this Article 1, then the Conversion Factor in effect at the opening of business on the day following the date fixed for such determination shall be increased by multiplying such Conversion Factor by a fraction of which the numerator shall be the number of REIT Shares outstanding at the close of business on the date fixed for such determination plus the number of REIT Shares so offered for subscription or purchase, and of which the denominator shall be the number of REIT Shares outstanding at the close of business on the date fixed for such determination plus the number of REIT Shares which the aggregate offering price of the total number of REIT Shares so offered for subscription would purchase at such daily market price per share, such increase of the Conversion Factor to become effective immediately after the opening of business on the day following the date fixed for such determination; and (iv) in case the Company shall, by distribution or otherwise, distribute to all holders of its REIT Shares, (A) capital shares of any class other than its REIT Shares, (B) evidence of its indebtedness or (C) assets (excluding any rights or warrants referred to in clause (iii) above, any cash distribution lawfully paid under the laws of the state of organization of the Company, and any distribution referred to in clause (i) above) and shall not cause a corresponding distribution to be made to all holders of Partnership Units, the Conversion Factor shall be adjusted so that the same shall equal the ratio determined by multiplying the Conversion Factor in effect immediately prior to the close of business on the date fixed for the determination of shareholders entitled to receive such distribution by a fraction of which the numerator shall be the daily market price per REIT Share on the date fixed for such determination, and of which the denominator shall be such daily market price per REIT Share less the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board resolution certified by the Secretary of the Company and delivered to the holders of the Partnership Units) of the portion of the capital shares or evidences of indebtedness or assets so distributed applicable to one REIT Share, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of shareholders entitled to receive such distribution.

“Covered Person” has the meaning set forth in Section 7.8.A.

“Debt” means, as to any Person, as of any date of determination, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, (ii) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds and other similar instruments guaranteeing payment or other performance of obligations by such

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Person, (iii) all indebtedness for borrowed money or for the deferred purchase price of property or services secured by any lien on any property owned by such Person, to the extent attributable to such Person’s interest in such property, even though such Person has not assumed or become liable for the payment thereof, and (iv) obligations of such Person incurred in connection with entering into a lease which, in accordance with GAAP, should be capitalized.

“Depreciation” means, for each taxable year, an amount equal to the federal income tax depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such year, except that if the Carrying Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Carrying Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such year bears to such beginning adjusted tax basis; provided, however, that if the federal income tax depreciation, amortization, or other cost recovery deduction for such year is zero, Depreciation shall be determined with reference to such beginning Carrying Value using any reasonable method selected by the General Partner.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder.  Any reference herein to a specific section or Title of ERISA shall be deemed to include a reference to any corresponding provision of future law.

“Event of Bankruptcy” has the meaning set forth in Section 13.1.G.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“final adjustment” has the meaning set forth in Section 10.3.B.

“Funding Debt” means any Debt incurred by or on behalf of the General Partner for the purpose of providing funds to the Partnership.

“GAAP” means U.S. generally accepted accounting principles.

“General Partner” means NexPoint Residential Trust Operating Partnership GP, LLC, a wholly owned subsidiary of the Company, or any Person who becomes an additional or a successor general partner of the Partnership.

“General Partner Interest” means a Partnership Interest held by the General Partner, in its capacity as general partner of the Partnership.  A General Partner Interest may be (but is not required to be) expressed as a number of Partnership Units.

“IRS” means the Internal Revenue Service, which administers the internal revenue laws of the United States.

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“Incapacity” or “Incapacitated” means, (i) as to any individual Partner, death, total physical disability or entry by a court of competent jurisdiction adjudicating him incompetent to manage his Person or his estate; (ii) as to any corporation which is a Partner, the filing of a certificate of dissolution, or its equivalent, for the corporation or the revocation of its charter; (iii) as to any partnership or limited liability company which is a Partner, the dissolution and commencement of winding up of the partnership or limited liability company; (iv) as to any estate which is a Partner, the distribution by the fiduciary of the estate’s entire interest in the Partnership; (v) as to any trustee of a trust which is a Partner, the termination of the trust (but not the substitution of a new trustee); or (vi) as to any Partner, the bankruptcy of such Partner.  For purposes of this definition, bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner commences a voluntary proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect; (b) the Partner is adjudged as bankrupt or insolvent, or a final and non-appealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in effect has been entered against the Partner; (c) the Partner executes and delivers a general assignment for the benefit of the Partner’s creditors; (d) the Partner files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Partner in any proceeding of the nature described in clause (b) above; (e) the Partner seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator for the Partner or for all or any substantial part of the Partner’s properties; (f) any proceeding seeking liquidation, reorganization or other relief of or against such Partner under any bankruptcy, insolvency or other similar law now or hereafter in effect has not been dismissed within 120 days after the commencement thereof; (g) the appointment without the Partner’s consent or acquiescence of a trustee, receiver or liquidator has not been vacated or stayed within 90 days of such appointment; or (h) an appointment referred to in clause (g) which has been stayed is not vacated within 90 days after the expiration of any such stay.

“Indemnitee” means (i) any Person made a party to a proceeding by reason of (A) his or its status as the General Partner, or as a trustee, director, officer, shareholder, partner, member, employee, representative or agent of the General Partner or as an officer, employee, representative or agent of the Partnership, or (B) his or its liabilities, pursuant to a loan guarantee or otherwise, for any indebtedness of the Partnership or any Subsidiary of the Partnership (including, without limitation, any indebtedness which the Partnership or any Subsidiary of the Partnership has assumed or taken assets subject to); and (ii) such other Persons (including Affiliates of the General Partner or the Partnership) as the General Partner may designate from time to time (whether before or after the event giving rise to potential liability), in its sole and absolute discretion.

“Limited Partner” means the Company and any other Person named as a limited partner of the Partnership in Exhibit A attached hereto, as such Exhibit may be amended from time to time, or any Substituted Limited Partner or Additional Limited Partner, in such Person’s capacity as a limited partner of the Partnership.  For purposes of this Agreement and the Act, the Limited Partners shall constitute a single class or group of limited partners.

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“Limited Partner Interest” means a Partnership Interest of a Limited Partner in the Partnership representing a fractional part of the Partnership Interests of all Partners and includes any and all benefits to which the holder of such a Partnership Interest may be entitled, as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement.  A Limited Partner Interest may be (but is not required to be) expressed as a number of Partnership Units.

“Liquidating Event” has the meaning set forth in Section 13.1.

“Liquidator” has the meaning set forth in Section 13.2.

“Net Income” means, for any taxable period, the excess, if any, of the Partnership’s items of income and gain for such taxable period over the Partnership’s items of loss and deduction for such taxable period.  The items included in the calculation of Net Income shall be determined in accordance with federal income tax accounting principles, subject to the specific adjustments provided for in Section 1.B of Exhibit B.

“Net Loss” means, for any taxable period, the excess, if any, of the Partnership’s items of loss and deduction for such taxable period over the Partnership’s items of income and gain for such taxable period.  The items included in the calculation of Net Loss shall be determined in accordance with federal income tax accounting principles, subject to the specific adjustments provided for in Section 1.B of Exhibit B.

“Nonrecourse Deductions” has the meaning set forth in Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Partnership taxable year shall be determined in accordance with the rules of Regulations Section 1.704-2(c).

“Nonrecourse Liability” has the meaning set forth in Regulations Section 1.752-1(a)(2).

“Notice of Redemption” means the Notice of Redemption substantially in the form of Exhibit D to this Agreement.

“Partner” means a General Partner or a Limited Partner, and “Partners” means the General Partner and the Limited Partners collectively.

“Partner Minimum Gain” means an amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i)(3).

“Partner Nonrecourse Debt” has the meaning set forth in Regulations Section 1.704-2(b)(4).

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“Partner Nonrecourse Deductions” has the meaning set forth in Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a Partnership taxable year shall be determined in accordance with the rules of Regulations Section 1.704-2(i)(2).

“Partnership” means the limited partnership heretofore formed and continued under the Act and pursuant to this Agreement, and any successor thereto.

“Partnership Interest” means an ownership interest in the Partnership held by either a Limited Partner or the General Partner and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement.  A Partnership Interest may be (but is not required to be) expressed as a number of Partnership Units.

“Partnership Minimum Gain” has the meaning set forth in Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net increase or decrease in a Partnership Minimum Gain, for a Partnership taxable year shall be determined in accordance with the rules of Regulations Section 1.704-2(d).

“Partnership Record Date” means the record date established by the General Partner for the distribution of Available Cash pursuant to Section 5.1 hereof, which record date shall be the same as the record date established by the Company for a distribution to its shareholders of some or all of its portion of such distribution.

“Partnership Unit” means a fractional, undivided share of the Partnership Interests of all Partners issued pursuant to Sections 4.1 and 4.2.  The number of Partnership Units outstanding and the Percentage Interest in the Partnership represented by such Units are set forth in Exhibit A attached hereto, as such Exhibit may be amended from time to time.  The ownership of Partnership Units shall be evidenced by such form of certificate for units as the General Partner adopts from time to time unless the General Partner determines that the Partnership Units shall be uncertificated securities.

“Partnership Year” means the fiscal year of the Partnership, which shall be the calendar year.

“Percentage Interest” means, as to a Partner, its interest in the Partnership as determined by dividing the Partnership Units owned by such Partner by the total number of Partnership Units then outstanding and as specified in Exhibit A attached hereto, as such Exhibit may be amended from time to time.

“Person” means an individual or a real estate investment trust, corporation, partnership, limited liability company, trust, estate, unincorporated organization, association or other entity.

“Prior Agreement” has the meaning set forth in the recitals hereto.

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“Qualified REIT Subsidiary” means a qualified REIT subsidiary of the Company within the meaning of Code Section 856(i)(2).

“Recapture Income” means any gain recognized by the Partnership upon the disposition of any property or asset of the Partnership, which gain is characterized as ordinary income because it represents the recapture of deductions previously taken with respect to such property or asset.

“Redeeming Partner” has the meaning set forth in Section 8.6.A hereof.

“Redemption Right” shall have the meaning set forth in Section 8.6.A hereof.

“Regulations” means the Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

“REIT” means a real estate investment trust under Section 856 of the Code.

“REIT Share” means shares of common stock, $0.01 par value per share, of the Company.

“REIT Shares Amount” means a number of REIT Shares equal to the product of the number of Partnership Units offered for redemption by a Redeeming Partner, multiplied by the Conversion Factor; provided, that in the event the Company issues to all holders of REIT Shares rights, options, warrants or convertible or exchangeable securities entitling the shareholders to subscribe for or purchase REIT Shares, or any other securities or property (collectively, the “rights”), and the Company can issue such rights to the Redeeming Partner, then the REIT Shares Amount shall also include such rights that a holder of that number of REIT Shares would be entitled to receive.

“REIT Share Offering” means a primary offering by the Company of its REIT Shares.

“Residual Gain” or “Residual Loss” means any item of gain or loss, as the case may be, of the Partnership recognized for federal income tax purposes resulting from a sale, exchange or other disposition of Contributed Property or Adjusted Property, to the extent such item of gain or loss is not allocated pursuant to Section 2.B.(1)(a) or 2.B.(2)(a) of Exhibit C to eliminate Book-Tax Disparities.

“Securities Act” means the Securities Act of 1933, as amended.

“Specified Redemption Date” means the 10th Business Day after receipt by the Partnership of a Notice of Redemption; provided, that if the Company combines its outstanding REIT Shares, no Specified Redemption Date shall occur after the record date of such combination of REIT Shares and prior to the effective date of such combination.

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“Subsidiary” means, with respect to any Person, any real estate investment trust, corporation, partnership, limited liability company or other entity of which a majority of (i) the voting power of the voting equity securities; or (ii) the outstanding equity interests, is owned, directly or indirectly, by such Person.

“Substituted Limited Partner” means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 11.4.

“Tenant” means any tenant from which the Company derives rent either directly or indirectly through partnerships or limited liability companies, including the Partnership.

“Terminating Capital Transaction” means any sale or other disposition of all or substantially all of the assets of the Partnership or a related series of transactions that, taken together, result in the sale or other disposition of all or substantially all of the assets of the Partnership.

“Transaction” has the meaning set forth in Section 8.7.G.

“Trading Days” means days on which the primary trading market for REIT Shares, if any, is open for trading.

“Unrealized Gain” attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (i) the fair market value of such property (as determined under Exhibit B hereof) as of such date; over (ii) the Carrying Value of such property (prior to any adjustment to be made pursuant to Exhibit B hereof) as of such date.

“Unrealized Loss” attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (i) the Carrying Value of such property (prior to any adjustment to be made pursuant to Exhibit B hereof) as of such date; over (ii) the fair market value of such property (as determined under Exhibit B hereof) as of such date.

“Valuation Date” means the date of receipt by the General Partner of a Notice of Redemption or, if such date is not a Business Day, the first Business Day thereafter.

“Value” means, with respect to a REIT Share, the greater of (i) the most recently publicly disclosed midpoint of the range of the Company’s net asset value and (ii) if the REIT Shares are listed or admitted to trading on any national securities exchange, the volume weighted average price for the 10 consecutive Trading Days immediately preceding the Valuation Date.  If the REIT Shares are not listed or admitted to trading on any national securities exchange, the volume weighted average price with respect to a REIT Share will be the volume weighted average price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the General Partner or if no such closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the

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General Partner, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than 10 days prior to the date in question) for which prices have been so reported; provided, that if there are no bid and asked prices reported during the 10 days prior to the date in question, the Value of the REIT Shares shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.  In the event the REIT Shares Amount includes rights that a holder of REIT Shares would be entitled to receive, then the Value of such rights shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.

ARTICLE 2.

ORGANIZATIONAL MATTERS

Section 2.1.  Continuation

The Partners hereby continue the Partnership as a limited partnership under and pursuant to the Act.  Except as expressly provided herein to the contrary, the rights and obligations of the Partners and the administration and termination of the Partnership shall be governed by the Act.  The Partnership Interest of each Partner shall be personal property for all purposes.

Section 2.2.  Name

The name of the Partnership heretofore formed and continued hereby shall be NexPoint Residential Trust Operating Partnership, L.P.  The Partnership’s business may be conducted under any other name or names deemed advisable by the General Partner, including the name of the General Partner or any Affiliate thereof.  The words “Limited Partnership,” “L.P.,” “Ltd.” or similar words or letters shall be included in the Partnership’s name where necessary for the purposes of complying with the laws of any jurisdiction that so requires.  The General Partner in its sole and absolute discretion may change the name of the Partnership at any time and from time to time and shall notify the Limited Partners of such change in the next regular communication to the Limited Partners.

Section 2.3.  Registered Office and Agent; Principal Office

The address of the registered office of the Partnership in the State of Delaware is 1209 Orange Street, Wilmington, New Castle County, Delaware, 19801 and the registered agent for service of process on the Partnership in the State of Delaware shall be The Corporation Trust Company.  The principal office of the Partnership shall be 300 Crescent Court, Suite 700, Dallas, Texas 75201 or such other place as the General Partner may from time to time designate by notice to the Limited Partners.  The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner deems advisable.

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Section 2.4.Power of Attorney

A.Each Limited Partner and each Assignee hereby constitutes and appoints the General Partner, any Liquidator, and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to:

(1)execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (a) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate and all amendments or restatements thereof) that the General Partner or the Liquidator deems appropriate or necessary to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the Limited Partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may or plans to conduct business or own property; (b) all instruments that the General Partner deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms; (c) all conveyances and other instruments or documents that the General Partner or the Liquidator deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement, including, without limitation, a certificate of cancellation; (d) all instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other events described in, Article 11, 12 or 13 hereof or the Capital Contribution of any Partner; and (e) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of Partnership Interest; and

(2)execute, swear to, seal, acknowledge and file all ballots, consents, approvals, waivers, certificates and other instruments appropriate or necessary, in the sole and absolute discretion of the General Partner or any Liquidator, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action which is made or given by the Partners hereunder or is consistent with the terms of this Agreement or appropriate or necessary, in the sole discretion of the General Partner or any Liquidator, to effectuate the terms or intent of this Agreement.

Nothing contained herein shall be construed as authorizing the General Partner or any Liquidator to amend this Agreement except in accordance with Article 14 hereof or as may be otherwise expressly provided for in this Agreement.

B.The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, in recognition of the fact that each of the Partners will be relying upon the power of the General Partner and any Liquidator to act as contemplated by this Agreement in any filing or other action by it on behalf of the Partnership, and it shall survive and not be affected by the subsequent Incapacity of any

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Limited Partner or Assignee and the transfer of all or any portion of such Limited Partner’s or Assignee’s Partnership Units and shall extend to such Limited Partner’s or Assignee’s heirs, successors, assigns and personal representatives.  Each such Limited Partner or Assignee hereby agrees to be bound by any representation made by the General Partner or any Liquidator, acting in good faith pursuant to such power of attorney, and each such Limited Partner or Assignee hereby waives any and all defenses which may be available to contest, negate or disaffirm the action of the General Partner or any Liquidator, taken in good faith under such power of attorney.  Each Limited Partner or Assignee shall execute and deliver to the General Partner or the Liquidator, within 15 days after receipt of the General Partner’s or Liquidator’s request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator, as the case may be, deems necessary to effectuate this Agreement and the purposes of the Partnership.

Section 2.5.  Term

The term of the Partnership commenced on the date that the Certificate was filed with the Secretary of State of the State of Delaware and shall continue until December 31, 2117, unless the Partnership is dissolved sooner pursuant to the provisions of Article 13 or as otherwise provided by law.

Section 2.6.  Admission of Limited Partners

On the date hereof, and upon the execution of this Agreement or a counterpart of this Agreement, each of the Persons identified as a limited partner of the Partnership on Exhibit A to this Agreement (other than the Company which has already been admitted as a limited partner of the Partnership) is hereby admitted to the Partnership as a limited partner of the Partnership.

ARTICLE 3.

PURPOSE

Section 3.1.  Purpose and Business

The purpose and nature of the business to be conducted by the Partnership is to conduct any business that may be lawfully conducted by a limited partnership formed pursuant to the Act.

Section 3.2.  Powers

The Partnership is empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Partnership, and shall have, without limitation, any and all of the powers that may be exercised on behalf of the Partnership by the General Partner pursuant to this Agreement.

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Section 3.3.Representations and Warranties by the Parties

A.Each Partner that is an individual represents and warrants to each other Partner that (i) such Partner has the legal capacity to enter into this Agreement and perform such Partner’s obligations hereunder, (ii) the consummation of the transactions contemplated by this Agreement to be performed by such Partner will not result in a breach or violation of, or a default under, any agreement by which such Partner or any of such Partner’s property is or are bound, or any statute, regulation, order or other law to which such Partner is subject, (iii) such Partner is a “United States person” within the meaning of Section 7701(a)(30) of the Code, and (iv) this Agreement is binding upon, and enforceable against, such Partner in accordance with its terms.

B.Each Partner that is not an individual represents and warrants to each other Partner that (i) its execution and delivery of this Agreement and all transactions contemplated by this Agreement to be performed by it have been duly authorized by all necessary action, including without limitation, that of its general partner(s), committee(s), trustee(s), beneficiaries, director(s) and/or shareholder(s), as the case may be, as required, (ii) the consummation of such transactions shall not result in a breach or violation of, or a default under, its certificate of limited partnership, partnership agreement, trust agreement, limited liability company operating agreement, declaration of trust, charter or bylaws, as the case may be, any agreement by which such Partner or any of such Partner’s properties or any of its partners, beneficiaries, trustees or shareholders, as the case may be, is or are bound, or any statute, regulation, order or other law to which such Partner or any of its partners, trustees, beneficiaries or shareholders, as the case may be, is or are subject, (iii) such Partner is a “United States person” within the meaning of Section 7701(a)(30) of the Code and (iv) this Agreement is binding upon, and enforceable against, such Partner in accordance with its terms.

C.Each Partner represents, warrants and agrees that it has acquired and continues to hold its interest in the Partnership for its own account for investment only and not for the purpose of, or with a view toward, the resale or distribution of all or any part thereof, nor with a view toward selling or otherwise distributing such interest or any part thereof at any particular time or under any predetermined circumstances.  Each Partner further represents and warrants that it is a sophisticated investor, able and accustomed to handling sophisticated financial matters for itself, particularly real estate investments, and that it has a sufficiently high net worth that it does not anticipate a need for the funds it has invested in the Partnership in what it understands to be a highly speculative and illiquid investment.

D.Each Partner further represents, warrants, covenants and agrees as follows:

(1)Except as provided in Exhibit F hereto, at any time such Partner actually or Constructively Owns a 25% or greater capital interest or profits interest in the Partnership, it does not and will not, without the prior written consent of the General Partner, actually own or Constructively Own (a) with respect to any Tenant that is a corporation, any stock of such Tenant, and (b) with respect to any Tenant that is not a corporation, any interest in either the assets or net profits of such Tenant.

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(2)Upon request of the General Partner, it will promptly disclose to the General Partner the amount of REIT Shares or other capital shares of the Company that it actually owns or Constructively Owns.

Each Partner understands that if, for any reason, (a) the representations, warranties or agreements set forth above are violated, or (b) the Partnership’s actual or Constructive Ownership of REIT Shares or other capital shares of the Company violates the limitations set forth in the Charter, then (x) some or all of the Redemption Rights of the Partners may become non-exercisable, and (y) some or all of the REIT Shares owned by the Partners may be automatically transferred to a trust for the benefit of a charitable beneficiary, as provided in the Charter.

(3)Without the consent of the General Partner, which may be given or withheld in its sole discretion, no Partner shall take any action that would cause the Partnership at any time to have more than 100 partners (including as partners those Persons indirectly owning an interest in the Partnership through a partnership, limited liability company, S corporation or grantor trust (such entity, a “flow through entity”), but only if substantially all of the value of such person’s interest in the flow through entity is attributable to the flow through entity’s interest (direct or indirect) in the Partnership).

E.The representations and warranties contained in this Section 3.3 shall survive the execution and delivery of this Agreement by each Partner and the dissolution and winding up of the Partnership.

F.Each Partner hereby acknowledges that no representations as to potential profit, cash flows, funds from operations or yield, if any, in respect of the Partnership or the Company have been made by any Partner or any employee or representative or Affiliate of any Partner, and that projections and any other information, including, without limitation, financial and descriptive information and documentation, which may have been in any manner submitted to such Partner shall not constitute any representation or warranty of any kind or nature, express or implied.

Section 3.4.  Not Publicly Traded

The General Partner, on behalf of the Partnership, shall use its best efforts not to take any action which would result in the Partnership being a publicly traded partnership within the meaning of either Code Section 469(k)(2) or 7704(b).  Subject to this Section 3.4, it is expressly acknowledged and agreed by the Partners that the General Partner may, in its sole and absolute discretion, waive or otherwise modify the application with respect to any Partner(s) or Assignee(s) of any provision herein restricting, prohibiting or otherwise relating to (i) the transfer of a Limited Partner Interest or the Partnership Units evidencing the same, (ii) the admission of any Limited Partners and (iii) the Redemption Rights of such Partners, and that such waivers or modifications may be made by the General Partner at any time or from time to time, including, without limitation, concurrently with the issuance of any Partnership Units pursuant to the terms of this Agreement.

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ARTICLE 4.
CAPITAL CONTRIBUTIONS

Section 4.1.  Capital Contributions of the Partners

At the time of their respective execution of this Agreement, the Partners shall make or shall have made Capital Contributions as set forth in Exhibit A to this Agreement.  The Partners shall own Partnership Units of the class or series and in the amounts set forth in Exhibit A and shall have a Percentage Interest in the Partnership as set forth in Exhibit A, which Percentage Interest shall be adjusted in Exhibit A from time to time by the General Partner to the extent necessary to reflect accurately exchanges, redemptions, additional Capital Contributions, the issuance of additional Partnership Units (pursuant to any merger or otherwise), or similar events having an effect on any Partner’s Percentage Interest.  Except as provided in Sections 4.2 and 10.4, the Partners shall have no obligation to make any additional Capital Contributions or loans to the Partnership.  Each Limited Partner that contributes any Contributed Property shall promptly provide the General Partner with any information regarding such Contributed Property that is requested by the General Partner, including for Partnership tax return reporting purposes.

Section 4.2.  Issuances of Additional Partnership Interests

The General Partner is hereby authorized, without the need for any vote or approval of any Partner or any other Person who may hold Partnership Units or Partnership Interests, to cause the Partnership from time to time to issue to any existing Partner (including the General Partner and the Company) or to any other Person, and to admit such Person as a limited partner in the Partnership, Partnership Units (including, without limitation, Common Units and preferred Partnership Units) or other Partnership Interests, in each case in exchange for the contribution by such Person of property or other assets, in one or more classes, or one or more series of any of such classes, or otherwise with such designations, preferences, redemption and conversion rights and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to Limited Partner Interests, all as shall be determined by the General Partner in its sole and absolute discretion subject to Delaware law, including, without limitation, (i) the allocations of items of Partnership income, gain, loss, deduction and credit to each such class or series of Partnership Interests; (ii) the right of each such class or series of Partnership Interests to share in Partnership distributions; and (iii) the rights of each such class or series of Partnership Interests upon dissolution and liquidation of the Partnership.

Section 4.3.  Additional Funds

A.The General Partner may, at any time and from time to time, determine that the Partnership requires additional funds (“Additional Funds”) for the acquisition of additional assets, for the redemption of Partnership Units or for such other purposes as the General Partner may determine in its sole and absolute discretion.  Additional Funds

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may be obtained by the Partnership, at the election of the General Partner, in any manner provided in, and in accordance with, the terms of this Section 4.3 without the approval of any Limited Partners.

B.The General Partner, on behalf of the Partnership, may obtain any Additional Funds by accepting Capital Contributions from any Partners or other Persons.  In connection with any such Capital Contribution, the General Partner is hereby authorized to cause the Partnership from time to time to issue additional Partnership Units (as set forth in Section 4.2 above) in consideration therefor, and the Percentage Interests of the Partners shall be adjusted to reflect the issuance of such additional Partnership Units.

C.The General Partner, on behalf of the Partnership, may obtain any Additional Funds by causing the Partnership to incur Debt to any Person upon such terms as the General Partner determines appropriate, including making such Debt convertible, redeemable or exchangeable for Partnership Units; provided, however, that the Partnership shall not incur any such Debt if (i) a breach, violation or default of such indebtedness would be deemed to occur by virtue of the transfer of any Partnership Interest, or (ii) such Debt is recourse to any Partner (unless the Partner otherwise agrees).

D.The General Partner, on behalf of the Partnership, may obtain any Additional Funds by causing the Partnership to incur Debt with the Company; provided, however, that the Partnership shall not incur any such Debt if (a) a breach, violation or default of such Debt would be deemed to occur by virtue of the transfer of any Partnership Interest, or (b) such Debt is recourse to any Partner (unless the Partner otherwise agrees).

Section 4.4.  Preemptive Rights

No Person shall have any preemptive, preferential or other similar right with respect to (i) additional Capital Contributions or loans to the Partnership; or (ii) the issuance or sale of any Partnership Units or other Partnership Interests.

ARTICLE 5.

DISTRIBUTIONS

Section 5.1.  Requirement and Characterization of Distributions

The General Partner shall distribute at least quarterly all or such portion as the General Partner may in its sole discretion determine of Available Cash generated by the Partnership during such quarter or shorter period to the Partners that are Partners on the Partnership Record Date with respect to such quarter or shorter period in the following priority:

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A.First, to the Partners in accordance with their Percentage Interests in arrears with respect to the immediately preceding calendar quarter in an amount equal to (1) the sum of (a) the General Partner’s reasonable estimate of the Net Income allocable to the Partners in accordance with their Percentage Interests under Section 6.1.A with respect to such immediately preceding calendar quarter and (b) the General Partner’s determination of the Net Income so allocated in prior calendar quarters in the same calendar year, reduced by (2) the sum of (a) all distributions previously made under this subsection or under subsection B with respect to all calendar quarters during the same calendar year and (b) any Net Loss allocable to the Partners in accordance with their Percentage Interests in such calendar quarter or any preceding calendar quarter of the same calendar year under Section 6.1.B.

B.Second, to the Partners in accordance with their Percentage Interests; provided, that in no event may a Partner receive a distribution of Available Cash with respect to a Partnership Unit if such Partner is entitled to receive a distribution out of such Available Cash with respect to a REIT Share for which such Partnership Unit has been exchanged, and any such distribution shall be made to the Company.

Section 5.2.  Amounts Withheld

All amounts withheld pursuant to the Code or any provisions of any state or local tax law and Section 10.4 hereof with respect to any allocation, payment or distribution to the Partners or Assignees shall be treated as amounts distributed to the Partners or Assignees pursuant to Section 5.1 for all purposes under this Agreement.

Section 5.3.  Distributions Upon Liquidation

Proceeds from a Terminating Capital Transaction and any other cash received or reductions in reserves made after commencement of the liquidation of the Partnership shall be distributed to the Partners in accordance with Section 13.2.

Section 5.4.  Restricted Distributions

Notwithstanding any provision to the contrary contained in this Agreement, the Partnership, and the General Partner on behalf of the Partnership, shall not make a distribution to any Partner on account of its interest in the Partnership if such distribution would violate Section 17-607 of the Act or other applicable law.

Section 5.5.  Deemed Limited Partner

Notwithstanding any provision to the contrary in this Agreement, BH Equities, L.L.C will be deemed to be a Limited Partner of the Partnership as of June 30, 2017 for purposes of this Article 5.

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ARTICLE 6.
ALLOCATIONS

Section 6.1.  Allocations For Capital Account Purposes

For purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Partnership’s items of income, gain, loss and deduction (computed in accordance with Exhibit B hereof) shall be allocated among the Partners in each taxable year (or portion thereof) as provided herein below.

A.After giving effect to the special allocations set forth in Section 1 of Exhibit C attached hereto, Net Income shall be allocated to the Partners in accordance with their respective Percentage Interests.

B.After giving effect to the special allocations set forth in Section 1 of Exhibit C attached hereto, Net Losses shall be allocated to the Partners in accordance with their respective Percentage Interests.  In no event shall Net Losses be allocated to a Limited Partner to the extent such allocation would result in such partner having an Adjusted Capital Account Deficit (per Unit) at the end of any taxable year in excess of the Adjusted Capital Account Deficit (per Unit) of any other Limited Partner.  All such Net Losses shall be allocated to the other Partners; provided, however, that appropriate adjustments shall be made to the allocation of future Net Income in order to offset such specially allocated Net Losses hereunder.

C.Notwithstanding any provision to the contrary in this Agreement, BH Equities, L.L.C will be deemed to be a Limited Partner of the Partnership as of June 30, 2017 for purposes of this Article 6.

ARTICLE 7.

MANAGEMENT AND OPERATIONS OF BUSINESS

Section 7.1.  Management

A.Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership are and shall be exclusively vested in the General Partner, and no Limited Partner shall have any right to participate in or exercise control or management power over the business and affairs of the Partnership.  The General Partner may not be removed by the Limited Partners with or without cause.  In addition to the powers now or hereafter granted to a general partner of a limited partnership under applicable law or which are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to Section 7.3 hereof, shall have full power and authority to do all things deemed necessary, desirable or convenient by it to conduct the business of the Partnership, to exercise all powers set forth in Section 3.2 hereof and to effectuate the purposes set forth in Section 3.1 hereof, including, without limitation:

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(1)the making of any expenditures, the lending or borrowing of money (including, without limitation, making prepayments on loans and borrowing money to permit the Partnership to make distributions to its Partners in such amounts as will permit the Company (so long as the Company desires to maintain its qualification as a REIT) to avoid the payment of any federal income tax (including, for this purpose, any excise tax pursuant to Section 4981 of the Code) and to make distributions to its shareholders in amounts sufficient to permit the Company to maintain its REIT status), the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidence of indebtedness (including the securing of the same by deed, mortgage, deed of trust or other lien or encumbrance on the Partnership’s assets) and the incurring of any obligations it deems necessary for the conduct of the activities of the Partnership;

(2)the making of tax, regulatory and other filings or elections, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership;

(3)the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any assets of the Partnership (including the exercise or grant of any conversion, option, privilege, or subscription right or other right available in connection with any assets at any time held by the Partnership) or the merger or other combination of the Partnership with or into another entity (all of the foregoing subject to any prior approval only to the extent required by Section 7.3 hereof);

(4)the mortgage, pledge, encumbrance or hypothecation of any assets of the Partnership, the use of the assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with the terms of this Agreement and on any terms that it sees fit, including, without limitation, the financing of the conduct of the operations of the Partnership, the Company or any of the Partnership’s or the Company’s Subsidiaries, the lending of funds to other Persons (including, without limitation, the Subsidiaries of the Partnership and/or the Company) and the repayment of obligations of the Partnership and its Subsidiaries and any other Person in which it has an equity investment, and the making of capital contributions to its Subsidiaries;

(5)the management, operation, leasing, landscaping, repair, alteration, demolition, disposition or improvement of any real property or improvements owned by the Partnership or any Subsidiary of the Partnership;

(6)the negotiation, execution, delivery and performance of any contracts, conveyances or other instruments that the General Partner considers useful or necessary or convenient to the conduct of the Partnership’s operations or the implementation of the General Partner’s powers under this Agreement, including, without limitation, contracting with consultants, accountants, legal counsel, other professional advisors and other agents and the payment of their expenses and compensation out of the Partnership’s assets;

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(7)the distribution of Partnership cash or other Partnership assets in accordance with this Agreement;

(8)holding, managing, investing and reinvesting cash and other assets of the Partnership;

(9)the collection and receipt of revenues and income of the Partnership;

(10)the establishment of one or more divisions of the Partnership, the selection and dismissal of employees of the Partnership (including, without limitation, employees who may be designated as officers with titles such as “president,” “vice president,” “secretary” and “treasurer” of the Partnership), and agents, outside attorneys, accountants, consultants and contractors of the Partnership, and the determination of their compensation and other terms of employment or hiring;

(11)the maintenance of such insurance for the benefit of the Partnership and the Partners as it deems necessary or appropriate;

(12)the formation of, or acquisition of an interest in, and the contribution of property to, any further limited or general partnerships, limited liability companies, real estate investment trusts, corporations, entities that are treated as REITs, “taxable REIT subsidiaries” or as foreign corporations for federal income tax purposes, joint ventures or other relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the contributions of property or the making of loans to, its or the Company’s Subsidiaries and any other Person in which it has an equity investment from time to time or the incurrence of indebtedness on behalf of such Persons or the guarantee of obligations of such Persons and the making of any tax, regulatory or other filing or election with respect to any of the foregoing Persons); provided, that as long as the Company has determined to continue to qualify as a REIT, the Partnership may not engage in any such formation, acquisition or contribution that would cause the Company to fail to qualify as a REIT;

(13)the control of any matters affecting the rights and obligations of the Partnership, including the settlement, compromise, submission to arbitration or any other form of dispute resolution, or abandonment of, any claim, cause of action, liability, debt or damages, due or owing to or from the Partnership, the commencement or defense of suits, legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, and the representation of the Partnership in all suits or legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, the incurrence of legal expense, and the indemnification of any Person against liabilities and contingencies to the extent permitted by law;

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(14)the undertaking of any action in connection with the Partnership’s direct or indirect investment in any Subsidiary or any other Person (including, without limitation, the contribution or loan of funds by the Partnership to such Persons);

(15)the determination of the fair market value of any Partnership property distributed in kind using such reasonable method of valuation as the General Partner may adopt;

(16)the enforcement of any rights against any Partner pursuant to representations, warranties, covenants and indemnities relating to such Partner’s contribution of property or assets to the Partnership;

(17)the exercise, directly or indirectly, through any attorney-in-fact acting under a general or limited power of attorney, of any right, including the right to vote, appurtenant to any asset or investment held by the Partnership;

(18)the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of or in connection with any Subsidiary of the Partnership or any other Person in which the Partnership has a direct or indirect interest, or jointly with any such Subsidiary or other Person;

(19)the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of any Person in which the Partnership does not have an interest pursuant to contractual or other arrangements with such Person;

(20)the making, execution, delivery and performance of any and all deeds, leases, notes, mortgages, deeds of trust, security agreements, conveyances, contracts, guarantees, warranties, indemnities, waivers, releases or legal instruments or agreements in writing necessary, appropriate or convenient, in the judgment of the General Partner, for the accomplishment of any of the powers of the General Partner enumerated in this Agreement;

(21)the issuance of additional Partnership Units and other partnership interests, as appropriate, in connection with Capital Contributions by Additional Limited Partners and additional Capital Contributions by Partners pursuant to Article 4 hereof; and

(22)the taking of any action necessary or appropriate to enable the Company to qualify as a REIT.

B.Each of the Limited Partners agrees that the General Partner is authorized to execute, deliver and perform the above-mentioned agreements and transactions on behalf of the Partnership without any further act, approval or vote of the Partners, notwithstanding any other provision of this Agreement (except as provided in Section 7.3), the Act or any applicable law, rule or regulation, to the fullest extent permitted under the Act or other applicable law, rule or regulation.  The execution, delivery or

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performance by the General Partner or the Partnership of any agreement authorized or permitted under this Agreement shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement or of any duty stated or implied by law or equity.

C.At all times from and after the date hereof, the General Partner may cause the Partnership to establish and maintain at any and all times working capital accounts and other cash or similar balances in such amounts as the General Partner, in its sole and absolute discretion, deems appropriate and reasonable from time to time.

D.In exercising its authority under this Agreement, the General Partner may, but shall be under no obligation to, take into account the tax consequences to any Partner of any action taken by it.  The General Partner and the Partnership shall not be liable to a Limited Partner under any circumstances as a result of an income tax or other tax liability incurred by such Limited Partner as a result of an action (or inaction) by the General Partner taken pursuant to its authority under this Agreement and in accordance with the terms of Section 7.3.

Section 7.2.  Certificate of Limited Partnership

The General Partner has filed the Certificate with the Secretary of State of the State of Delaware as required by the Act.  The General Partner shall use all reasonable efforts to cause to be filed such other certificates or documents as may be reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and any other state, or the District of Columbia, in which the Partnership may elect to do business or own property.  To the extent that such action is determined by the General Partner to be reasonable and necessary or appropriate or convenient, the General Partner shall file amendments to and restatements of the Certificate and do all of the things to maintain the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) under the laws of the State of Delaware and each other state, or the District of Columbia, in which the Partnership may elect to do business or own property.  Subject to the terms of Section 8.5.A(4) hereof, the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate or any amendment thereto or restatement thereof to any Limited Partner.

Section 7.3.  Restrictions on General Partner Authority

The General Partner may not take any action in contravention of an express prohibition or limitation of this Agreement without the written Consent of Limited Partners holding a majority of the Percentage Interests of the Limited Partners, or such other percentage of the Limited Partners as may be specifically provided for under a provision of this Agreement.

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Section 7.4.Reimbursement of the General Partner and the Company

A.Except as provided in this Section 7.4 and elsewhere in this Agreement (including the provisions of Articles 5 and 6 regarding distributions, payments, and allocations to which it may be entitled), the General Partner shall not be compensated for its services as general partner of the Partnership.

B.The General Partner and its Affiliates shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its sole and absolute discretion, for all expenditures that each incurs relating to the ownership and operation of, or for the benefit of, the Partnership; provided, that the amount of any such reimbursement shall be reduced by any interest earned by the General Partner with respect to bank accounts or other instruments or accounts held by it on behalf of the Partnership; and provided, further, that the General Partner and its Affiliates shall not be reimbursed for any (i) trustees’/directors’ fees, (ii) income tax liabilities or (iii) filing or similar fees in connection with maintaining the General Partner’s or any such Affiliate’s continued existence that are incurred by the General Partner or an Affiliate, but the Partners acknowledge that all other expenses of the General Partner and its Affiliates are deemed to be for the benefit of the Partnership.  Such reimbursement shall be in addition to any reimbursement made as a result of indemnification pursuant to Section 7.7 hereof.  Included among the expenditures for which the General Partner shall be entitled to reimbursement hereunder shall be any payments of debt service made by the General Partner, in its capacity as General Partner, as guarantor or otherwise, with respect to indebtedness encumbering any property held by the Partnership.

C.In the event that the Company shall elect to purchase from its shareholders REIT Shares for the purpose of delivering such REIT Shares to satisfy an obligation under any distribution reinvestment program adopted by the Company, any employee share purchase plan adopted by the Company, or any similar obligation or arrangement undertaken by the Company in the future, the purchase price paid by the Company for such REIT Shares and any other expenses incurred by the Company in connection with such purchase shall be considered expenses of the Partnership and shall be reimbursed to the Company, subject to the condition that:  (i) if such REIT Shares subsequently are sold by the Company, the Company shall pay to the Partnership any proceeds received by the Company for such REIT Shares (which sales proceeds shall include the amount of distributions reinvested under any distribution reinvestment or similar program; provided, that a transfer of REIT Shares for Partnership Units pursuant to Section 8.6 would not be considered a sale for such purposes); and (ii) if such REIT Shares are not retransferred by the Company within 30 days after the purchase thereof, the General Partner shall cause the Partnership to cancel a number of Partnership Units held by the Company equal to the product obtained by multiplying the Conversion Factor by the number of such REIT Shares (in which case such reimbursement shall be treated as a distribution in redemption of Partnership Units held by the Company).

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Section 7.5.Outside Activities of the General Partner

The General Partner shall not directly or indirectly enter into or conduct any business other than in connection with the ownership, acquisition and disposition of Partnership Interests and the management of the business of the Partnership, and such activities as are incidental thereto.  The General Partner and any Affiliates of the General Partner may acquire Limited Partner Interests and shall be entitled to exercise all rights of a Limited Partner relating to such Limited Partner Interests.

Section 7.6.  Contracts with Affiliates

A.The Partnership may lend or contribute funds or other assets to its or the Company’s Subsidiaries or other Persons in which it or the Company has an equity investment and such Persons may borrow funds from the Partnership, on terms and conditions established in the sole and absolute discretion of the General Partner.  The foregoing authority shall not create any right or benefit in favor of any Subsidiary or any other Person.

B.Except as provided in Section 7.5, the Partnership may transfer assets to joint ventures, other partnerships, limited liability companies, real estate investment trusts, corporations or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions consistent with this Agreement and applicable law as the General Partner, in its sole and absolute discretion, believes are advisable.

C.Except as expressly permitted by this Agreement, neither the General Partner nor any of its Affiliates shall sell, transfer or convey any property to, or purchase any property from, the Partnership, directly or indirectly, except pursuant to transactions that are determined by the General Partner in good faith to be fair and reasonable.

D.The General Partner, in its sole and absolute discretion and without the approval of the Limited Partners, may propose and adopt, on behalf of the Partnership, employee benefit plans, share option plans, and similar plans funded by the Partnership for the benefit of employees of the General Partner, the Company, the Partnership, Subsidiaries of the Partnership or any Affiliate of any of them in respect of services performed, directly or indirectly, for the benefit of the Partnership, the Company, the General Partner or any Subsidiaries of the Partnership.

E.The General Partner is expressly authorized to enter into, in the name and on behalf of the Partnership, and without the approval of the Limited Partners, a right of first opportunity arrangement and other conflict avoidance agreements with various Affiliates of the Partnership, the Company and the General Partner, on such terms as the General Partner, in its sole and absolute discretion, believes are advisable.

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Section 7.7.Indemnification

A.To the fullest extent permitted by Delaware law, the Partnership shall indemnify each Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation, attorneys’ fees and other legal fees and expenses), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Partnership or the Company as set forth in this Agreement, in which such Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, except to the extent such Indemnitee acted in bad faith, or with gross negligence or willful misconduct.  Without limitation, the foregoing indemnity shall extend to any liability of any Indemnitee, pursuant to a loan guaranty or otherwise for any indebtedness of the Partnership or any Subsidiary of the Partnership (including without limitation, any indebtedness which the Partnership or any Subsidiary of the Partnership has assumed or taken subject to), and the General Partner is hereby authorized and empowered, on behalf of the Partnership, to enter into one or more indemnity agreements consistent with the provisions of this Section 7.7 in favor of any Indemnitee having or potentially having liability for any such indebtedness.  Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Partnership, and neither the General Partner nor any Limited Partner shall have any obligation to contribute to the capital of the Partnership, or otherwise provide funds, to enable the Partnership to fund its obligations under this Section 7.7.

B.Reasonable expenses incurred by an Indemnitee who is a party to a proceeding shall be paid or reimbursed by the Partnership in advance of the final disposition of the proceeding, upon receipt by the Partnership of an undertaking by or on behalf of the Indemnitee to repay such amount if it shall be determined that the Indemnitee is not entitled to be indemnified as authorized in Section 7.7.A.

C.The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity unless otherwise provided in a written agreement pursuant to which such Indemnities are indemnified.

D.The Partnership may, but shall not be obligated to, purchase and maintain insurance, on behalf of the Indemnities and such other Persons as the General Partner shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Partnership’s activities, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement.

E.For purposes of this Section 7.7, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or

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otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute fines within the meaning of this Section 7.7; and actions taken or omitted by the Indemnitee with respect to an employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the Partnership.

F.In no event may an Indemnitee subject any of the Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.

G.An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

H.The provisions of this Section 7.7 are for the benefit of the Indemnities, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons.  Any amendment, modification or repeal of this Section 7.7 or any provision hereof shall be prospective only and shall not in any way affect the Partnership’s liability to any Indemnitee under this Section 7.7, as in effect immediately prior to such amendment, modification, or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

Section 7.8.  Liability of the General Partner

A.Notwithstanding anything to the contrary set forth in this Agreement, none of the General Partner, its Affiliates, or any of their respective officers, trustees, directors, shareholders, partners, members, employees, representatives or agents or any officer, employee, representative or agent of the Partnership and its Affiliates (individually, a “Covered Person” and collectively, the “Covered Persons”) shall be liable for monetary damages to the Partnership, any Partners or any Assignees for losses sustained or liabilities incurred as a result of errors in judgment or of any act or omission if the Covered Person’s conduct did not constitute bad faith, gross negligence or willful misconduct.

B.The Limited Partners expressly acknowledge that the General Partner is acting on behalf of the Partnership, the Limited Partners and the shareholders of the Company collectively, that the General Partner is under no obligation to consider the separate interests of the Limited Partners (except as otherwise provided herein) in deciding whether to cause the Partnership to take (or decline to take) any actions.  In the event of a conflict between the interests of the shareholders of the Company on the one hand and the Limited Partners on the other, the General Partner shall endeavor in good faith to resolve the conflict in a manner not adverse to either the shareholders of the Company or the Limited Partners; provided, however, that any such conflict that the General Partner, in its sole and absolute discretion, determines cannot be resolved in a

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manner not adverse to either the shareholders of the Company or the Limited Partners shall be resolved in favor of the shareholders of the Company.  The General Partner shall not be liable for monetary damages for losses sustained, liabilities incurred, or benefits not derived by Limited Partners in connection with such decisions; provided, that the General Partner has acted in good faith.

C.Subject to its obligations and duties as General Partner set forth in Section 7.1.A hereof, the General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its employees and agents.  The General Partner shall not be responsible for any misconduct or negligence on the part of any such employee or agent appointed by the General Partner in good faith.

D.Any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the Covered Person’s liability to the Partnership and the Limited Partners under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

E.To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the Partnership or to the Partners, any Covered Person acting under this Agreement or otherwise shall not be liable to the Partnership or to any Partner for its good faith reliance on the provisions of this Agreement.  The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the Partners to replace such other duties and liabilities of such Covered Person.

F.Whenever in this Agreement the General Partner is permitted or required to make a decision (i) in its “sole discretion” or “discretion,” or under a similar grant of authority or latitude, the General Partner shall be entitled to consider such interests and factors as it desires and may consider its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Partnership or the Limited Partners, or (ii) in its “good faith” or under another express standard, the General Partner shall act under such express standard and shall not be subject to any other or different standards imposed by this Agreement or by law or any other agreement contemplated herein.

Section 7.9.  Other Matters Concerning the General Partner

A.The General Partner may rely and shall be protected in acting, or refraining from acting, upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties.

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B.The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers, architects, engineers, environmental consultants and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion of such Persons as to matters which the General Partner reasonably believes to be within such Person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion.

C.The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and duly appointed attorneys-in-fact.  Each such attorney shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform each and every act and duty which is permitted or required to be done by the General Partner hereunder.

D.Notwithstanding any other provisions of this Agreement or the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such action or omission is necessary or advisable in order (i) to protect the ability of the Company to continue to qualify as a REIT; or (ii) to avoid the Company incurring any taxes under Section 337(d), 857, 1374 or 4981 of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners.

Section 7.10.  Title to Partnership Assets

Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof.  Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine in its sole and absolute discretion, including Affiliates of the General Partner.  The General Partner hereby declares and warrants that any Partnership assets for which legal title is held in the name of the General Partner or any nominee or Affiliate of the General Partner shall be held by the General Partner for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use its best efforts to cause beneficial and record title to such assets to be vested in the Partnership as soon as reasonably practicable.  All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which legal title to such Partnership assets is held.

Section 7.11.  Reliance by Third Parties

Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority, without consent or approval of any other Partner or Person, to encumber,

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sell or otherwise use in any manner any and all assets of the Partnership and to enter into any contracts on behalf of the Partnership, and take any and all actions on behalf of the Partnership and such Person shall be entitled to deal with the General Partner as if the General Partner were the Partnership’s sole party in interest, both legally and beneficially.  Each Limited Partner hereby waives any and all defenses or other remedies which may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing.  In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or its representatives.  Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (i) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect; (ii) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership; and (iii) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership.

ARTICLE 8.

RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

Section 8.1.  Limitation of Liability

The Limited Partners shall have no liability under this Agreement except as expressly provided in this Agreement, including Section 10.4 hereof, or under the Act.

Section 8.2.  Management of Business

No Limited Partner or Assignee (other than the General Partner, any of its Affiliates or any officer, trustee, director, member, employee or agent of the General Partner, the Partnership or any of their Affiliates, in their capacity as such) shall take part in the operation, management or control (within the meaning of the Act) of the Partnership’s business, transact any business in the Partnership’s name or have the power to sign documents for or otherwise bind the Partnership. The transaction of any such business by the General Partner, any of its Affiliates or any officer, trustee, director, member, employee or agent of the General Partner, the Partnership or any of their Affiliates, in their capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Limited Partners or Assignees under this Agreement.

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Section 8.3.Outside Activities of Limited Partners

Subject to any agreements entered into pursuant to Section 7.6.E hereof and any other agreements entered into by a Limited Partner or its Affiliates with the Partnership or any of its Subsidiaries, any Limited Partner (other than the Company) and any officer, trustee, director, member, employee, agent, trustee, Affiliate or shareholder of any Limited Partner (other than the Company) shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities that are in direct competition with the Partnership or that are enhanced by the activities of the Partnership.  Neither the Partnership nor any Partners shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner or Assignee.  None of the Limited Partners (other than the Company) nor any other Person shall have any rights by virtue of this Agreement or the Partnership relationship established hereby in any business ventures of any other Person and such Person shall have no obligation pursuant to this Agreement to offer any interest in any such business ventures to the Partnership, any Limited Partner or any such other Person, even if such opportunity is of a character which, if presented to the Partnership, any Limited Partner or such other Person, could be taken by such Person.

Section 8.4.  Return of Capital

Except pursuant to the right of redemption set forth in Section 8.6, no Limited Partner shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent of distributions made pursuant to this Agreement or upon termination of the Partnership as provided herein.  Except to the extent provided by Exhibit C hereof or as otherwise expressly provided in this Agreement, no Limited Partner or Assignee shall have priority over any other Limited Partner or Assignee, either as to the return of Capital Contributions or as to profits, losses or distributions.

Section 8.5.  Rights of Limited Partners Relating to the Partnership

A.In addition to the other rights provided by this Agreement or by the Act, and except as limited by Section 8.5.C hereof, each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner’s interest as a limited partner in the Partnership, upon written demand with a statement of the purpose of such demand and at such Limited Partner’s own expense (including such copying and administrative charges as the General Partner may establish from time to time):

(1)to obtain a copy of the most recent annual and quarterly reports prepared by the Company and distributed to its shareholders, including, annual and quarterly reports filed with the Securities and Exchange Commission by the Company pursuant to the Exchange Act;

(2)to obtain a copy of the Partnership’s federal, state and local income tax returns for each Partnership Year;

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(3)to obtain a current list of the name and last known business, residence or mailing address of each Partner;

(4)to obtain a copy of this Agreement and the Certificate and all amendments thereto, together with executed copies of all powers of attorney pursuant to which this Agreement, the Certificate and all amendments thereto have been executed; and

(5)to obtain true and full information regarding the amount of cash and a description and statement of any other property or services contributed by each Partner and which each Partner has agreed to contribute in the future, and the date on which each became a Partner.

B.The Partnership shall notify each Limited Partner, upon request, of the then current Conversion Factor.

C.Notwithstanding any other provision of this Section 8.5, the General Partner may keep confidential from the Limited Partners, for such period of time as the General Partner determines in its sole and absolute discretion to be reasonable, any information that (i) the General Partner reasonably believes to be in the nature of trade secrets or other information, the disclosure of which the General Partner in good faith believes is not in the best interests of the Partnership or could damage the Partnership or its business; or (ii) the Partnership is required by law or by agreements with an unaffiliated third party to keep confidential.

Section 8.6.  Redemption Right

A.Subject to Sections 8.6.B and 8.6.C hereof and on or after such date, if any, as expressly provided for in any agreement entered into between the Partnership and any Limited Partner, each Limited Partner (other than the Company) shall have the right (the “Redemption Right”) to require the Partnership to redeem on a Specified Redemption Date all or a portion of the Partnership Units (provided that such Partnership Units constitute Common Units) held by such Limited Partner at a redemption price per Unit equal to and in the form of the Cash Amount to be paid by the Partnership; provided that the Partnership Units shall have been outstanding for at least one year.  The Redemption Right shall be exercised pursuant to a Notice of Redemption delivered to the Partnership (with a copy to the Company) by the Limited Partner who is exercising the redemption right (the “Redeeming Partner”); provided, however, that the Partnership shall not be obligated to satisfy such Redemption Right if the Company elects to purchase the Partnership Units subject to the Notice of Redemption pursuant to Section 8.6.B.  A Limited Partner may not exercise the Redemption Right for less than 1,000 Partnership Units at any one time or, if such Limited Partner holds less than 1,000 Partnership Units, all of the Partnership Units held by such Partner.  The Redeeming Partner shall have no right, with respect to any Partnership Units so redeemed, to receive any distributions paid on or after the Specified Redemption Date.  The Assignee of any Limited Partner may exercise the rights of such Limited Partner pursuant to this Section 8.6, and such Limited Partner shall be deemed to have assigned such rights to such Assignee and shall be bound by

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the exercise of such rights by such Assignee.  In connection with any exercise of such rights by an Assignee on behalf of a Limited Partner, the Cash Amount shall be paid by the Partnership directly to such Assignee and not to such Limited Partner.  Any Partnership Units redeemed by the Partnership pursuant to this Section 8.6.A shall be cancelled upon such redemption.

B.Notwithstanding the provisions of Section 8.6.A, a Limited Partner that exercises the Redemption Right shall be deemed to have offered to sell the Partnership Units described in the Notice of Redemption to the Company, and the Company may, in its sole and absolute discretion, elect to purchase directly and acquire such Partnership Units by paying to the Redeeming Partner either the Cash Amount or the REIT Shares Amount, as elected by the Company (in its sole and absolute discretion), on the Specified Redemption Date, whereupon the Company shall acquire the Partnership Units offered for redemption by the Redeeming Partner and shall be treated for all purposes of this Agreement as the owner of such Partnership Units.  If the Company shall elect to exercise its right to purchase Partnership Units under this Section 8.6.B with respect to a Notice of Redemption, it shall so notify the Redeeming Partner within five Business Days after the receipt by it of such Notice of Redemption.  Unless the Company (in its sole and absolute discretion) shall exercise its right to purchase Partnership Units from the Redeeming Partner pursuant to this Section 8.6.B, the Company shall not have any obligation to the Redeeming Partner or the Partnership with respect to the Redeeming Partner’s exercise of the Redemption Right.  In the event the Company shall exercise its right to purchase Partnership Units with respect to the exercise of a Redemption Right in the manner described in the first sentence of this Section 8.6.B, the Partnership shall have no obligation to pay any amount to the Redeeming Partner with respect to such Redeeming Partner’s exercise of such Redemption Right, and each of the Redeeming Partner, the Partnership and the Company shall treat the transaction between the Company and the Redeeming Partner, for federal income tax purposes, as a sale of the Redeeming Partner’s Partnership Units to the Company.  Each Redeeming Partner agrees to execute such documents as the Company may reasonably require in connection with the issuance of REIT Shares upon exercise of the Redemption Right.  In case of any reclassification of the REIT Shares (including, but not limited to, any reclassification upon a consolidation or merger in which the Company is the continuing corporation) into securities other than REIT Shares, for purposes of this Section 8.6.B, the Company (or its Successor) may thereafter exercise its right to purchase Partnership Units for the kind and amount of shares of such securities receivable upon such reclassification by a holder of the number of REIT Shares for which such Units could be purchased pursuant to this Section immediately prior to such reclassification.

C.Notwithstanding the provisions of Section 8.6.A and Section 8.6.B, a Partner shall not be entitled to exercise the Redemption Right pursuant to Section 8.6.A to the extent that the delivery of REIT Shares to such Partner on the Specified Redemption Date by the Company pursuant to Section 8.6.B (regardless of whether or not the Company would in fact exercise its rights under Section 8.6.B) would (i) be prohibited, as determined in the sole discretion of the Company, under the Charter or (ii) cause the acquisition of REIT Shares by such Partner to be “integrated” with any other distribution of REIT Shares for purposes of complying with the Securities Act.

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ARTICLE 9.
BOOKS, RECORDS, ACCOUNTING AND REPORTS

Section 9.1.  Records and Accounting

The General Partner shall keep or cause to be kept at the principal office of the Partnership those records and documents required to be maintained by the Act and other books and records deemed by the General Partner to be appropriate with respect to the Partnership’s business, including, without limitation, all books and records necessary to provide to the Limited Partners any information, lists and copies of documents required to be provided pursuant to Section 9.3 hereof.  The books of the Partnership shall be maintained, for financial and tax reporting purposes, on an accrual basis in accordance with GAAP, or such other basis as the General Partner determines to be necessary or appropriate.

Section 9.2.  Fiscal Year

The fiscal year of the Partnership shall be the calendar year.

Section 9.3.  Reports

A.As soon as practicable, but in no event later than 105 days after the close of each Partnership Year, the General Partner shall cause to be mailed to each Limited Partner as of the close of the Partnership Year, an annual report containing financial statements of the Partnership, or of the Company if such statements are prepared solely on a consolidated basis with the Company, for such Partnership Year, presented in accordance with GAAP, such statements to be audited by a nationally recognized firm of independent public accountants selected by the General Partner; provided that if such financial statements of the Company are available on the Securities and Exchange Commission’s website, then this obligation shall be satisfied.

B.As soon as practicable, but in no event later than 105 days after the close of each calendar quarter (except the last calendar quarter of each year), the General Partner shall cause to be mailed to each Limited Partner as of the last day of the calendar quarter, a report containing unaudited financial statements of the Partnership, or of the Company, if such statements are prepared solely on a consolidated basis with the Company, and such other information as may be required by applicable law or regulation, or as the General Partner determines to be appropriate; provided that if such financial statements of the Company are available on the Securities and Exchange Commission’s website, then this obligation shall be satisfied.

C.The Partnership shall also cause to be prepared such reports and/or information as are necessary for the Company to determine its qualification as a REIT and its compliance with the requirements for REITs pursuant to the Code and Regulations.

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ARTICLE 10.
TAX MATTERS

Section 10.1.  Preparation of Tax Returns

The General Partner shall arrange for the preparation and timely filing of all returns of Partnership income, gains, deductions, losses and other items required of the Partnership for federal and state income tax purposes and shall furnish by July 31 of the year immediately following each taxable year, or as soon as reasonably practicable thereafter,  the tax information reasonably required by Limited Partners for federal and state income tax reporting purposes.

Section 10.2.  Tax Elections

Except as otherwise provided herein, the General Partner shall, in its sole and absolute discretion, determine whether to make any available election pursuant to the Code.  Notwithstanding the above, in making any such tax election the General Partner may, but shall be under no obligation to, take into account the tax consequences to the Limited Partners resulting from any such election.

The General Partner can elect to use any method permitted by Code Section 704(c) and the Regulations thereunder to take into account any variation between the adjusted basis of any property contributed to the Partnership by any Partner after the date hereof and such property’s initial Carrying Value.  The General Partner shall have the right to seek to revoke any tax election it makes (including, without limitation, an election under Section 754 of the Code) upon the General Partner’s determination, in its sole and absolute discretion, that such revocation is in the best interests of the Partners.

Section 10.3.  Tax Matters Partner

A.The General Partner shall be the “tax matters partner” of the Partnership for federal income tax purposes and, for taxable years beginning after December 31, 2017, the “partnership representative” (in each case, the “tax matters partner”).  Pursuant to Section 6230(e) of the Code, upon receipt of notice from the IRS of the beginning of an administrative proceeding with respect to the Partnership, the tax matters partner shall furnish the IRS with the name, address, taxpayer identification number, and profit interest of each of the Limited Partners and the Assignees; provided, however, that such information is provided to the Partnership by the Limited Partners and the Assignees.

B.The tax matters partner is authorized, but not required:

(1)to enter into any settlement with the IRS with respect to any administrative or judicial proceedings for the adjustment of Partnership items required to be taken into account by a Partner for income tax purposes (such administrative proceedings being referred to as a “tax audit” and such judicial proceedings being referred to as “judicial review”), and in the settlement

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agreement the tax matters partner may expressly state that such agreement shall bind all Partners, except that such settlement agreement shall not bind any Partner (i) who (within the time prescribed pursuant to the Code and Regulations) files a statement with the IRS providing that the tax matters partner shall not have the authority to enter into a settlement agreement on behalf of such Partner; or (ii) who is a “notice partner” (as defined in Section 6231(a)(8) of the Code) or a member of a “notice group” (as defined in Section 6223(b)(2) of the Code);

(2)in the event that a notice of a final administrative adjustment at the Partnership level of any item required to be taken into account by a Partner for tax purposes (a “final adjustment”) is mailed to the tax matters partner, to seek judicial review of such final adjustment, including the filing of a petition for readjustment with the Tax Court or the filing of a complaint for refund with the United States Claims Court or the District Court of the United States for the district in which the Partnership’s principal place of business is located;

(3)to intervene in any action brought by any other Partner for judicial review of a final adjustment;

(4)to file a request for an administrative adjustment with the IRS and, if any part of such request is not allowed by the IRS, to file an appropriate pleading (petition or complaint) for judicial review with respect to such request;

(5)to enter into an agreement with the IRS to extend the period for assessing any tax which is attributable to any item required to be taken account of by a Partner for tax purposes, or an item affected by such item; and

(6)to make any election with respect to an “imputed underpayment,” including an election under Section 6226 of the Code; and

(7)to take any other action on behalf of the Partners or the Partnership in connection with any tax audit or judicial review proceeding to the extent permitted by applicable law or regulations.

The taking of any action and the incurring of any expense by the tax matters partner in connection with any such proceeding, except to the extent required by law, is a matter in the sole and absolute discretion of the tax matters partner, and the provisions relating to indemnification of the General Partner set forth in Section 7.7 of this Agreement shall be fully applicable to the tax matters partner in its capacity as such.

C.The tax matters partner shall receive no compensation for its services.  All third party costs and expenses incurred by the tax matters partner in performing its duties as such (including legal and accounting fees and expenses) shall be borne by the Partnership.  Nothing herein shall be construed to restrict the Partnership from engaging an accounting and/or law firm to assist the tax matters partner in discharging its duties hereunder, so long as the compensation paid by the Partnership for such services is reasonable.

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Section 10.4.Withholding

Each Limited Partner hereby authorizes the Partnership to withhold from, or pay on behalf of or with respect to, such Limited Partner any amount of federal, state, local, or foreign taxes that the General Partner determines that the Partnership is required to withhold or pay with respect to any amount distributable or allocable to such Limited Partner pursuant to this Agreement, including, without limitation, any taxes required to be withheld or paid by the Partnership pursuant to Section 1441, 1442, 1445, or 1446 of the Code, and any taxes paid by the Partnership with respect to an imputed underpayment.  Any amount paid on behalf of or with respect to a Limited Partner shall constitute a loan by the Partnership to such Limited Partner, which loan shall be repaid by such Limited Partner within 15 days after notice from the General Partner that such payment must be made unless (i) the Partnership withholds such payment from a distribution which would otherwise be made to the Limited Partner, or (ii) the General Partner determines, in its sole and absolute discretion, that such payment may be satisfied out of the available funds of the Partnership which would, but for such payment, be distributed to the Limited Partner.  Any amounts withheld pursuant to the foregoing clause (i) or (ii) shall be treated as having been distributed to such Limited Partner.  In the event that a Limited Partner fails to pay any amounts owed to the Partnership pursuant to this Section 10.4 when due, the General Partner may, in its sole and absolute discretion, elect to make the payment to the Partnership on behalf of such defaulting Limited Partner, and in such event shall be deemed to have loaned such amount to such defaulting Limited Partner and shall succeed to all rights and remedies of the Partnership as against such defaulting Limited Partner.  Without limitation, in such event the General Partner shall have the right to receive distributions that would otherwise be distributable to such defaulting Limited Partner until such time as such loan, together with all interest thereon, has been paid in full, and any such distributions so received by the General Partner shall be treated as having been distributed to the defaulting Limited Partner and immediately paid by the defaulting Limited Partner to the General Partner in repayment of such loan.  Any amounts payable by a Limited Partner hereunder shall bear interest at the lesser of (A) the base rate on corporate loans at large United States money center commercial banks, as published from time to time in The Wall Street Journal, plus four percentage points, or (B) the maximum lawful rate of interest on such obligation, such interest to accrue from the date such amount is due (i.e., 15 days after demand) until such amount is paid in full.  Each Limited Partner shall take such actions as the Partnership or the General Partner shall request in order to perfect or enforce the security interest created hereunder.  Upon a Limited Partner’s complete withdrawal from the Partnership, such Limited Partner shall be required to restore funds to the Partnership to the extent that the cumulative amount of taxes withheld from or paid on behalf of, or with respect to, such Limited Partner exceeds the sum of such amounts (i) repaid to the Partnership by such Limited Partner, (ii) withheld from distributions to such Limited Partner and (iii) paid by the General Partner on behalf of such Limited Partner.

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ARTICLE 11.
TRANSFERS AND WITHDRAWALS

Section 11.1.  Transfer

A.The term “transfer,” when used in this Article 11 with respect to a Partnership Unit, shall be deemed to refer to a transaction by which the General Partner purports to assign all or any part of its General Partner Interest to another Person or by which a Limited Partner purports to assign all or any part of its Limited Partner Interest to another Person, and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or otherwise.  The term “transfer” when used in this Article 11 does not include (i) any redemption of Partnership Interests by the Partnership from a Limited Partner, (ii) any acquisition of Partnership Units from a Limited Partner by the Company pursuant to Section 8.6, or (iii) any distribution of Partnership Units by a Limited Partner to its beneficial owners.

B.No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article 11.  Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article 11 shall be null and void.

C.Notwithstanding the other provisions of this Article 11, the Partnership Interests of the General Partner or the Company may be transferred, in whole or in part, at any time or from time to time, to any Person that is, at the time of such transfer, a Qualified REIT Subsidiary.  Any transferee of the entire General Partner Interest pursuant to this Section 11.1.C shall automatically become, without further action or Consent of any Limited Partners, the sole general partner of the Partnership, subject to all the rights, privileges, duties and obligations under this Agreement and the Act relating to a general partner.  Upon any transfer permitted by this Section 11.1.C, the transferor Partner shall be relieved of all its obligations under this Agreement.  The provisions of Sections 11.2.B, 11.3, 11.4.A and 11.5 hereof shall not apply to any transfer permitted by this Section 11.1.C.

Section 11.2.  Transfer of General Partner Interest and Limited Partner Interest

A.The General Partner may not transfer any of its General Partner Interest or withdraw as General Partner, or transfer any of its Limited Partner Interest, except as provided in Sections 11.1.C, 11.2.B and 11.2.C hereof.

B.Except as set forth in Section 11.1.C or 11.2.C, the General Partner shall not withdraw from the Partnership and shall not transfer all or any portion of its Limited Partner Interest in the Partnership (whether by sale, disposition, statutory merger or consolidation, liquidation or otherwise) unless Limited Partners holding a majority of the Percentage Interests of the Limited Partners Consent to such transfer or withdrawal.  Upon any transfer of the General Partner’s Partnership Interest pursuant to the Consent of the Limited Partners and otherwise in accordance with the provisions of this Section

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11.2.B, the transferee shall become a successor General Partner for all purposes herein, and shall be vested with the powers and rights of the transferor General Partner, and shall be liable for all obligations and responsible for all duties of the General Partner, once such transferee has executed such instruments as may be necessary to effectuate such admission and to confirm the agreement of such transferee to be bound by all the terms and provisions of this Agreement with respect to the Partnership Interest so acquired.  It is a condition to any transfer by the General Partner otherwise permitted hereunder that the transferee assumes, by operation of law or express agreement, all of the obligations of the transferor General Partner under this Agreement with respect to such transferred Partnership Interest, and such transfer shall relieve the transferor General Partner of its obligations under this Agreement without the Consent of the Limited Partners.  In the event that the General Partner withdraws from the Partnership, in violation of this Agreement or otherwise, or otherwise dissolves or terminates, or upon an Event of Bankruptcy of the General Partner, as described in Section 13.2 hereof, the remaining Partners may agree in writing to continue the business of the Partnership by selecting a successor General Partner in accordance with the Act.

C.The General Partner may merge with another entity if immediately after such merger substantially all of the assets of the surviving entity, other than the General Partner Interest held by the General Partner, are contributed to the Partnership as a Capital Contribution in exchange for Partnership Units.

Section 11.3.  Limited Partners’ Rights to Transfer

A.Except as provided in Section 11.3.B, no Limited Partner shall transfer all or any portion of its Partnership Interest to any transferee without the written consent of the General Partner, which consent may be withheld in its sole and absolute discretion; provided, however, that the Company may not transfer any portion of its Limited Partnership Interest without the Consent of Partners holding a majority of the Percentage Interests of the Limited Partners; and provided, further, that if a Limited Partner is subject to Incapacity, such Incapacitated Limited Partner may transfer all or any portion of its Partnership Interest.

B.Notwithstanding any other provision of this Article 11, a Limited Partner may Transfer all or any portion of its Partnership Interest to any of its Affiliates and such transferee shall be admitted as a Substituted Limited Partner, all without obtaining the consent of the General Partner.

C.If a Limited Partner is subject to Incapacity, the executor, administrator, trustee, committee, guardian, conservator or receiver of such Limited Partner’s estate shall have all of the rights of a Limited Partner, but not more rights than those enjoyed by other Limited Partners, for the purpose of settling or managing the estate and such power as the Incapacitated Limited Partner possessed to transfer all or any part of his or its interest in the Partnership.  The Incapacity of a Limited Partner, in and of itself, shall not dissolve or terminate the Partnership.

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D.Without limiting the generality of Section 11.3.A hereof, the General Partner may prohibit any transfer by a Limited Partner of its Partnership Interest if, in the opinion of legal counsel to the Partnership, such transfer would require filing of a registration statement under the Securities Act or would otherwise violate any federal or state securities laws or regulations applicable to the Partnership or the Partnership Units.

E.No transfer by a Limited Partner of its Partnership Units may be made to any Person if (i) in the opinion of legal counsel for the Partnership, it could result in the Partnership being treated as an association taxable as a corporation or a publicly traded partnership within the meaning of either Code Section 469(k)(2) or 7704(b); (ii) such transfer could be treated as effectuated through an “established securities market” or a “secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code; (iii) such transfer could cause the Partnership to become, with respect to any employee benefit plan subject to Title I of ERISA or to Section 4975 of the Code, a “party-in-interest” (as defined in Section 3(14) of ERISA) or a “disqualified person” (as defined in Section 4975(c) of the Code); (iv) such transfer could, in the opinion of legal counsel for the Partnership, cause any portion of the assets of the Partnership to constitute assets of any employee benefit plan pursuant to Department of Labor Regulations Section 2510.3-101; (v) such transfer could subject the Partnership to be regulated under the Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940, as amended, or the fiduciary responsibility provisions of ERISA; or (vi) such transfer could cause the Partnership to be terminated for federal income tax purposes pursuant to Code Section 708.

F.No transfer of any Partnership Units may be made to a lender to the Partnership or any Person who is related (within the meaning of Section 1.752-4(b) of the Regulations) to any lender to the Partnership whose loan constitutes a Nonrecourse Liability, without the consent of the General Partner, in its sole and absolute discretion.

G.The General Partner shall keep a register for the Partnership on which the transfer, pledge or release of Partnership Units shall be shown and pursuant to which entries shall be made to effect all transfers, pledges or releases as required by the applicable sections of Article 8 of the Uniform Commercial Code, as amended, in effect in the State of Delaware.  The General Partner shall (i) place proper entries in such register clearly showing each transfer and each pledge and grant of security interest and the transfer and assignment pursuant thereto, such entries to be endorsed by the General Partner, and (ii) maintain the register and make the register available for inspection by all of the Partners and their pledgees at all times during the term of this Agreement.  Nothing herein shall be deemed a consent to any pledge or transfer otherwise prohibited under this Agreement.

Section 11.4.  Substituted Limited Partners

A.No Limited Partner shall have the right to substitute a transferee as a Limited Partner in his or its place.  The General Partner shall, however, have the right to consent to the admission of a transferee of the interest of a Limited Partner pursuant to

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this Section 11.4 as a Substituted Limited Partner, which consent may be given or withheld by the General Partner in its sole and absolute discretion.  The General Partner’s failure or refusal to permit a transferee of any such interests to become a Substituted Limited Partner shall not give rise to any cause of action against the Partnership or any Partner.  A Person shall be admitted to the Partnership as a Substituted Limited Partner only upon the aforementioned consent of the General Partner and the furnishing to the General Partner of (i) evidence of acceptance in form satisfactory to the General Partner of all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 2.4 hereof and (ii) such other documents of the General Partner in order to effect such Person’s admission as a Substituted Limited Partner.  The admission of any Person as a Substituted Limited Partner shall become effective on the date upon which the name of such Person is recorded on the books and records of the Partnership, following the consent of the General Partner to such admission.

B.A transferee who has been admitted as a Substituted Limited Partner in accordance with this Article 11 shall have all the rights and powers and be subject to all the restrictions and liabilities of a Limited Partner under this Agreement.

C.Upon the admission of a Substituted Limited Partner, the General Partner shall amend Exhibit A to reflect the name, address, number of Partnership Units and Percentage Interest (as applicable) of such Substituted Limited Partner and to eliminate or adjust, if necessary, the name, address and interest of the predecessor of such Substituted Limited Partner.

Section 11.5.  Assignees

If the General Partner, in its sole and absolute discretion, does not consent to the admission of any permitted transferee as a Substituted Limited Partner, as described in Section 11.4, such transferee shall be considered an Assignee for purposes of this Agreement.  An Assignee shall be deemed to have had assigned to it, and shall be entitled to receive distributions from the Partnership and the share of Net Income, Net Losses, Recapture Income, and any other items, gain, loss, deduction and credit of the Partnership attributable to the Partnership Interest assigned to such transferee, but shall not be deemed to be a holder of a Partnership Interest for any other purpose under this Agreement, and shall not be entitled to vote such Partnership Interest in any matter presented to the Limited Partners for a vote (such Partnership Interest being deemed to have been voted on such matter in the same proportion as all other Partnership Interest held by Limited Partners are voted).  In the event any such transferee desires to make a further assignment of any such Partnership Interest, such transferee shall be subject to all of the provisions of this Article 11 to the same extent and in the same manner as any Limited Partner desiring to make an assignment of his or its Partnership Interest.

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Section 11.6.General Provisions

A.No Limited Partner may withdraw from the Partnership other than as a result of a permitted transfer of all of such Limited Partner’s Partnership Interest in accordance with this Article 11 or pursuant to redemption of all of its Partnership Units, or the acquisition thereof by the Company, under Section 8.6.

B.Any Limited Partner who shall transfer all of its Partnership Interest in a transfer permitted pursuant to this Article 11 shall cease to be a Limited Partner upon the admission of all Assignees of such Partnership Interest as Substituted Limited Partners.  Similarly, any Limited Partner who shall transfer all of its Partnership Units pursuant to a redemption of all of its Partnership Units, or the acquisition thereof by the Company, under Section 8.6 shall cease to be a Limited Partner.

C.Transfers pursuant to this Article 11 may only be made on the first day of a fiscal quarter of the Partnership, unless the General Partner otherwise agrees.

D.If any Partnership Interest is transferred or assigned during any quarterly segment of the Partnership’s fiscal year in compliance with the provisions of this Article 11 or redeemed or transferred pursuant to Section 8.6 on any day other than the first day of a Partnership Year, then Net Income, Net Losses, each item thereof and all other items attributable to such interest for such Partnership Year shall be divided and allocated between the transferor Partner and the transferee Partner by taking into account their varying interests during the Partnership Year in accordance with Section 706(d) of the Code, using the interim closing of the books method.  All distributions of Available Cash attributable to such Partnership Interest with respect to which the Partnership Record Date is before the date of such transfer, assignment, or redemption shall be made to the transferor Partner or the Redeeming Partner, as the case may be, and in the case of a transfer or assignment other than a redemption, all distributions of Available Cash thereafter attributable to such Partnership Interest shall be made to the transferee Partner.

ARTICLE 12.

ADMISSION OF PARTNERS

Section 12.1.  Admission of Successor General Partner

A successor to all of the General Partner Interest pursuant to Section 11.1.C or 11.2 hereof who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective immediately prior to such transfer.  Any such transferee shall carry on the business of the Partnership without dissolution.  In each case, the admission shall be subject to the successor General Partner executing and delivering to the Partnership an acceptance of all of the terms and conditions of this Agreement and such other documents or instruments as may be required to effect the admission.  In the case of such admission on any day other than the first day of a Partnership Year, all items attributable to the General Partner Interest for such Partnership Year shall be allocated between the transferring General Partner and such successor as provided in Section 11.6.D hereof.

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Section 12.2.Admission of Additional Limited Partners

A.A Person who makes a Capital Contribution to the Partnership in accordance with this Agreement shall be admitted to the Partnership as an Additional Limited Partner only upon furnishing to the General Partner (i) evidence of acceptance in form satisfactory to the General Partner of all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 2.4 hereof and (ii) such other documents or instruments as may be required in the discretion of the General Partner in order to effect such Person’s admission as an Additional Limited Partner.

B.Notwithstanding anything to the contrary in this Section 12.2, no Person shall be admitted as an Additional Limited Partner without the consent of the General Partner, which consent may be given or withheld in the General Partner’s sole and absolute discretion.  The admission of any Person as an Additional Limited Partner shall become effective on the date upon which the name of such Person is recorded on the books and records of the Partnership, following the consent of the General Partner to such admission.

C.If any Additional Limited Partner is admitted to the Partnership on any day other than the first day of a Partnership Year, then Net Income, Net Losses, each item thereof and all other items allocable among Partners and Assignees for such Partnership Year shall be allocated among such Additional Limited Partner and all other Partners and Assignees by taking into account their varying interests during the Partnership Year in accordance with Section 706(d) of the Code, using the interim closing of the books method.  All distributions of Available Cash with respect to which the Partnership Record Date is before the date of such admission shall be made solely to Partners and Assignees, other than such Additional Limited Partner, and all distributions of Available Cash thereafter shall be made to all of the Partners and Assignees, including such Additional Limited Partner.

Section 12.3.  Amendment of Agreement and Certificate of Limited Partnership

For the admission to the Partnership of any Partner, the General Partner shall take all steps necessary and appropriate under the Act to amend the records of the Partnership and, if necessary, to prepare as soon as practical an amendment of this Agreement (including an amendment of Exhibit A) and, if required by law, shall prepare and file an amendment to the Certificate and may for this purpose exercise the power of attorney granted pursuant to Section 2.4 hereof.

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ARTICLE 13.
DISSOLUTION, LIQUIDATION AND TERMINATION

Section 13.1.  Dissolution

The Partnership shall not be dissolved by the admission of Substituted Limited Partners or Additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement.  Upon the withdrawal of the General Partner, any successor General Partner shall continue the business of the Partnership without dissolution.  The Partnership shall dissolve, and its affairs shall be wound up, only upon the first to occur of any of the following (“Liquidating Events”):

A.the expiration of its term as provided in Section 2.5 hereof;

B.an event of withdrawal of the General Partner, as defined in the Act, other than an event of bankruptcy as defined in the Act, unless, (i) at the time of the occurrence of such event there is at least one remaining general partner of the Partnership who is hereby authorized to and does carry on the business of the Partnership, or (ii) within 90 days after such event of withdrawal not less than a majority of the Percentage Interests of the remaining Partners (or such greater Percentage Interest as may be required by the Act and determined in accordance with the Act), determined, in case the withdrawing General Partner continues as a Limited Partner, by both excluding and including Limited Partner Interests continuing to be held by the withdrawing General Partner, agrees in writing to continue the business of the Partnership and to the appointment, effective as of the date of withdrawal, of a successor General Partner;

C.from and after the date of this Agreement through December 31, 2072, an election to dissolve the Partnership made by the General Partner with the Consent of Partners holding a majority of the Percentage Interests of the Limited Partners;

D.on or after January 1, 2073, an election to dissolve the Partnership made by the General Partner, in its sole and absolute discretion;

E.entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Act;

F.the sale of all or substantially all of the assets and properties of the Partnership; or

G.a final and non-appealable judgment is entered by a court of competent jurisdiction ruling that the General Partner is bankrupt or insolvent, or a final and non-appealable order for relief is entered by a court with appropriate jurisdiction against the General Partner, in each case under any federal or state bankruptcy or insolvency laws as now or hereafter in effect (hereinafter referred to as an “Event of Bankruptcy,” and such term as used herein is intended and shall be deemed to supersede and replace the events of withdrawal described in Section 17‑402(a)(4) and (5) of the Act), unless

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prior to the entry of such order or judgment all of the remaining Partners agree in writing to continue the business of the Partnership and to the appointment, effective as of a date prior to the date of such order or judgment, of a substitute General Partner.

Section 13.2.  Winding Up

A.Upon the occurrence of a Liquidating Event, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Partners.  No Partner shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Partnership’s business and affairs.  The General Partner, or, in the event there is no remaining General Partner, any Person elected by a majority of the Percentage Interests of the Limited Partners (the General Partner or such other Person being referred to herein as the “Liquidator”), shall be responsible for overseeing the winding up and dissolution of the Partnership and shall take full account of the Partnership’s liabilities and property and the Partnership property shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom (which may, to the extent determined by the General Partner, include REIT Shares of the Company) shall be applied and distributed in the following order:

(1)First, in satisfaction of all of the Partnership’s debts and liabilities to creditors other than the Partners (whether by payment or the making of reasonable provision for payment thereof);

(2)Second, to the payment and discharge of all of the Partnership’s debts and liabilities to the General Partner;

(3)Third, to the payment and discharge of all of the Partnership’s debts and liabilities to the other Partners; and

(4)The balance, if any, to the General Partner and Limited Partners in accordance with their Capital Accounts, after giving effect to all contributions, distributions, and allocations for all periods.

The General Partner shall not receive any additional compensation for any services performed pursuant to this Article 13.

B.Notwithstanding the provisions of Section 13.2.A hereof which require liquidation of the assets of the Partnership, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Partnership the Liquidator determines that an immediate sale of part or all of the Partnership’s assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its sole and absolute discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Partnership (including to those Partners as creditors) and/or distribute to the Partners, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.2.A hereof, undivided interests in such Partnership assets as the Liquidator deems not suitable for liquidation.  Any such distributions in kind shall be made only if, in the good faith judgment of the Liquidator,

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such distributions in kind are in the best interest of the Partners, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operation of such properties at such time.  The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt.

C.In the discretion of the Liquidator, a pro rata portion of the distributions that would otherwise be made to the General Partner and Limited Partners pursuant to this Article 13 may be:

(1)distributed to a trust established for the benefit of the General Partner and Limited Partners for the purposes of liquidating Partnership assets, collecting amounts owed to the Partnership, and paying any contingent or unforeseen liabilities or obligations of the Partnership or the General Partner arising out of or in connection with the Partnership.  The assets of any such trust shall be distributed to the General Partner and Limited Partners from time to time, in the reasonable discretion of the Liquidator, in the same proportions as the amount distributed to such trust by the Partnership would otherwise have been distributed to the General Partner and Limited Partners pursuant to this Agreement; or

(2)withheld or escrowed to provide a reasonable reserve for Partnership liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Partnership; provided, that such withheld or escrowed amounts shall be distributed to the General Partner and Limited Partners in the manner and order of priority set forth in Section 13.2.A as soon as practicable.

Section 13.3.  Compliance with Timing Requirements of Regulations

In the event the Partnership is “liquidated” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to this Article 13 to the General Partner and Limited Partners who have positive Capital Accounts in compliance with Regulations Section 1.704-l(b)(2)(ii)(b)(2).  If any Partner has a deficit balance in his or its Capital Account (after giving effect to all contributions, distributions and allocations for all taxable years, including the year during which such liquidation occurs), such Partner shall have no obligation to make any contribution to the capital of the Partnership with respect to such deficit, and such deficit shall not be considered a debt owed to the Partnership or to any other Person for any purpose whatsoever.

Section 13.4.  Deemed Contribution and Distribution

Notwithstanding any other provision of this Article 13, in the event the Partnership is “liquidated” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), but no Liquidating Event has occurred, the Partnership’s property shall not be liquidated, the Partnership’s liabilities shall not be paid or discharged, and the

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Partnership’s affairs shall not be wound up.  Instead, for federal income tax purposes and for purposes of maintaining Capital Accounts pursuant to Exhibit B hereto, the Partnership shall be deemed to have contributed all Partnership property and liabilities to a new limited partnership in exchange for an interest in such new limited partnership and, immediately thereafter, the Partnership will be deemed to liquidate by distributing interests in the new limited partnership to the Partners.

Section 13.5.  Rights of Limited Partners

Except as otherwise provided in this Agreement, each Limited Partner shall look solely to the assets of the Partnership for the return of its Capital Contributions and shall have no right or power to demand or receive property other than cash from the Partnership.  Except as otherwise provided in this Agreement, no Limited Partner shall have priority over any other Partner as to the return of its Capital Contributions, distributions, or allocations.

Section 13.6.  Notice of Dissolution

In the event a Liquidating Event occurs or an event occurs that would, but for the provisions of an election or objection by one or more Partners pursuant to Section 13.1, result in a dissolution of the Partnership, the General Partner shall, within 30 days thereafter, provide written notice thereof to each of the Partners.

Section 13.7.  Termination of Partnership and Cancellation of Certificate of Limited Partnership

Upon the completion of the winding up of the Partnership and liquidation of its assets, as provided in Section 13.2 hereof, the Partnership shall be terminated by filing a certificate of cancellation with the Secretary of State of the State of Delaware, canceling all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Delaware and taking such other actions as may be necessary to terminate the Partnership.

Section 13.8.  Reasonable Time for Winding Up

A reasonable time shall be allowed for the orderly winding-up of the business and affairs of the Partnership and the liquidation of its assets pursuant to Section 13.2 hereof, in order to minimize any losses otherwise attendant upon such winding up, and the provisions of this Agreement shall remain in effect among the Partners during the period of liquidation.

Section 13.9.  Waiver of Partition

Each Partner hereby waives any right to partition of the Partnership property.

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ARTICLE 14.
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS

Section 14.1.  Amendment of Partnership Agreement

A.A proposed amendment shall be adopted and be effective as an amendment hereto if it is approved by the General Partner.

B.Notwithstanding Section 14.1.A hereof, this Agreement shall not be amended without the Consent of each Partner materially adversely affected if such amendment would (i) convert a Limited Partner’s interest in the Partnership into a General Partner Interest; (ii) modify the limited liability of a Limited Partner in a manner materially adverse to such Limited Partner; (iii) alter rights of such Partner to receive distributions pursuant to Article 5 or Article 13, or the allocations specified in Article 6 (except as permitted pursuant to Section 4.2 hereof) in a manner materially adverse to such Partner; (iv) alter or modify the Redemption Right and REIT Shares Amount as set forth in Section 8.6, and the related definitions, in a manner materially adverse to such Partner; (v) cause the termination of the Partnership prior to the time set forth in Section 2.5 or 13.1; or (vi) amend this Section 14.1.B; provided, however, that the Consent of each Partner materially adversely affected shall not be required for any amendment or action that affects all Partners holding the same class or series of Partnership Units on a uniform or pro rata basis.  Any amendment consented to by any Partner shall be effective as to that Partner, notwithstanding the absence of such Consent by any other Partner.

Section 14.2.  Meetings of the Partners

A.Meetings of the Partners may be called by the General Partner and shall be called upon the receipt by the General Partner of a written request by Limited Partners (other than the Company) holding 20% or more of the Partnership Interests.  The request shall state the nature of the business to be transacted.  Notice of any such meeting shall be given to all Partners not less than seven days nor more than 30 days prior to the date of such meeting.  Partners may vote in person or by proxy at such meeting.  Except as otherwise expressly provided in this Agreement, the Consent of holders of a majority of the Percentage Interests held by Limited Partners shall control.

B.Any action required or permitted to be taken at a meeting of the Partners may be taken without a meeting if a written consent setting forth the action so taken is signed by a majority of the Percentage Interests of the Partners (or such other percentage as is expressly required by this Agreement).  Such consent may be in one instrument or in several instruments, and shall have the same force and effect as a vote of a majority of the Percentage Interests of the Partners (or such other percentage as is expressly required by this Agreement).  Such consent shall be filed with the General Partner.  An action so taken shall be deemed to have been taken at a meeting held on the effective date so certified.

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C.Each Limited Partner may authorize any Person or Persons to act for him by proxy on all matters in which a Limited Partner is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting.  Every proxy must be signed by the Limited Partner or his or its attorney-in-fact.  No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy.  Every proxy shall be revocable at the pleasure of the Limited Partner executing it, such revocation to be effective upon the Partnership’s receipt of written notice of such revocation from the Limited Partner executing such proxy.

D.Each meeting of the Partners shall be conducted by the General Partner or such other Person as the General Partner may appoint pursuant to such rules for the conduct of the meeting as the General Partner or such other Person deems appropriate.  Without limitation, meetings of Partners may be conducted in the same manner as meetings of the shareholders of the Company and may be held at the same time, and as part of, meetings of the shareholders of the Company.

ARTICLE 15.

GENERAL PROVISIONS

Section 15.1.  Addresses and Notice

Any notice, demand, request or report required or permitted to be given or made to a Partner or Assignee under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written communication to such Partner or Assignee at the address set forth in Exhibit A or such other address of which such Partner shall notify the General Partner in writing.

Section 15.2.  Titles and Captions

All article or section titles or captions in this Agreement are for convenience only.  They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof.  Except as specifically provided otherwise, references to “Articles” and “Sections” are to Articles and Sections of this Agreement.

Section 15.3.  Pronouns and Plurals

Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neutral forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

Section 15.4.  Further Action

The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.

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Section 15.5.Binding Effect

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.

Section 15.6.  Creditors

Other than as expressly set forth herein with respect to the Indemnitees, none of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership.

Section 15.7.  Waiver

No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute a waiver of any such breach or any other covenant, duty, agreement or condition.

Section 15.8.  Counterparts

This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all of the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart.  Each party shall become bound by this Agreement immediately upon affixing his or its signature hereto.

Section 15.9.  Applicable Law

This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflict of laws.

Section 15.10.  Invalidity of Provisions

If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.

Section 15.11.  Entire Agreement

This Agreement contains the entire understanding and agreement among the Partners with respect to the subject matter hereof and supersedes the Prior Agreement and any other prior written or oral understandings or agreements among them with respect thereto.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

GENERAL PARTNER:

NexPoint Residential Trust Operating Partnership GP, LLC

By: NexPoint Residential Trust, Inc., its sole member

By:	/s/ Brian Mitts
	Name:	Brian Mitts
	Title:	Chief Financial Officer, Executive
		VP-Finance and Treasurer

LIMITED PARTNER:

NexPoint Residential Trust, Inc.

By:	/s/ Brian Mitts
	Name:	Brian Mitts
	Title:	Chief Financial Officer, Executive
		VP-Finance and Treasurer

LIMITED PARTNER:

BH EQUITIES, L.L.C.

By:	/s/ Harry Bookey
	Name:	Harry Bookey
	Title:	Manager

EXHIBIT A
PARTNERS’ CONTRIBUTIONS AND PARTNERSHIP INTERESTS⁺

(As of August 1, 2017)

Name and Address of Partner	Cash Contribution	Agreed Value of Contributed Property	Total Contribution	Partnership Units	Percentage Interest
General Partner
NexPoint Residential Trust Operating Partnership GP, LLC 300 Crescent Court Suite 700 Dallas, Texas  75201					0.1% general partner
Limited Partners
NexPoint Residential Trust, Inc. 300 Crescent Court Suite 700 Dallas, Texas  75201	N/A	N/A	N/A	21,043,669	99.6% limited partner
BH Equities, L.L.C.	N/A	$2,000,000	$2,000,000	73,233	0.3% limited partner

+ Subject to change as a result of subsequent contributions by the Company

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EXHIBIT B
CAPITAL ACCOUNT MAINTENANCE

1. Capital Accounts of the Partners

A.The Partnership shall maintain for each Partner a separate Capital Account in accordance with the rules of Regulations Section 1.704-l(b)(2)(iv).  Such Capital Account shall be increased by (i) the amount of all Capital Contributions and any other deemed contributions made by such Partner to the Partnership pursuant to the Agreement; and (ii) all items of Partnership income and gain (including income and gain exempt from tax) computed in accordance with Section 1.B hereof and allocated to such Partner pursuant to Section 6.1.A of the Agreement and Exhibit C hereof, and decreased by (x) the amount of cash or Agreed Value of all actual and deemed distributions of cash or property made to such Partner pursuant to the Agreement, and (y) all items of Partnership deduction and loss computed in accordance with Section 1.B hereof and allocated to such Partner pursuant to Section 6.1.B of the Agreement and Exhibit C hereof.

B.For purposes of computing the amount of any item of income, gain, deduction or loss (“Net Income” or “Net Loss”) to be reflected in the Partners’ Capital Accounts, unless otherwise specified in the Agreement, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes determined in accordance with Section 703(a) of the Code (for this purpose all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments:

(1)Except as otherwise provided in Regulations Section 1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any election under Section 754 of the Code which may be made by the Partnership; provided, that the amounts of any adjustments to the adjusted bases of the assets of the Partnership made pursuant to Section 734 of the Code as a result of the distribution of property by the Partnership to a Partner (to the extent that such adjustments have not previously been reflected in the Partners’ Capital Accounts) shall be reflected in the Capital Accounts of the Partners in the manner and subject to the limitations prescribed in Regulations Section 1.704-1(b)(2)(iv)(m)(4).

(2)The computation of all items of income, gain, and deduction shall be made without regard to the fact that items described in Sections 705(a)(1)(B) or 705(a)(2)(B) of the Code are not includable in gross income or are neither currently deductible nor capitalized for federal income tax purposes.

(3)Any income, gain or loss attributable to the taxable disposition of any Partnership property shall be determined as if the adjusted basis of such

B-1

property as of such date of disposition were equal in amount to the Partnership’s Carrying Value with respect to such property as of such date.

(4)In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such fiscal year.

(5)In the event the Carrying Value of any Partnership asset is adjusted pursuant to Section 1.D hereof, the amount of any such adjustment shall be taken into account as gain or loss from the disposition of such asset.

(6)Notwithstanding any other provision of this Section 1.B, any items that are specially allocated pursuant to Exhibit C of the Agreement shall not be taken into account for purposes of computing Net Income or Net Loss.

The amounts of the items of Partnership income, gain, loss or deduction available to be specially allocated pursuant to Exhibit C of the Agreement shall be determined by applying rules analogous to those set forth in Sections 1.B(1) through 1.B(5) above.

C.Generally, a transferee (including an Assignee) of a Partnership Unit shall succeed to a pro rata portion of the Capital Account of the transferor.

D.(1) Consistent with the provisions of Regulations Section 1.704-1(b)(2)(iv)(f), and as provided in Section 1.D(2), the Carrying Value of all Partnership assets shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as of the times of the adjustments provided in Section 1.D(2) hereof, as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property and allocated pursuant to Section 6.1 of the Agreement.

(2)Such adjustments shall be made as of the following times: (a) immediately prior to the acquisition of an additional interest in the Partnership by any new or existing Partner in exchange for more than a de minimis Capital Contribution; (b) immediately prior to the distribution by the Partnership to a Partner of more than a de minimis amount of property as consideration for an interest in the Partnership; (c) in connection with the grant of an interest in the Partnership (other than a de minimis interest), as consideration for the provision of services to or for the benefit of the Partnership by an existing Partner acting in a partner capacity or by a new partner acting in a partner capacity or in anticipation of being a partner; and (d) immediately prior to the liquidation of the Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses (a), (b) and (c) above shall be made only if the General Partner determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership.

B-2

(3)In accordance with Regulations Section 1.704-1(b)(2)(iv)(e), the Carrying Value of Partnership assets distributed in kind shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as of the time any such asset is distributed.

(4)The Carrying Value of Partnership assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and Section 1.B(1) hereof or Section 1.F of Exhibit C; provided, however, that Carrying Values shall not be adjusted pursuant to this Section 1.D(4) to the extent that an adjustment pursuant to Section 1.D(2) is required in connection with a transaction that would otherwise result in an adjustment pursuant to this Section 1.D(4).

(5)In determining Unrealized Gain or Unrealized Loss for purposes of this Exhibit B, the aggregate cash amount and fair market value of all Partnership assets (including cash or cash equivalents) shall be determined by the General Partner using such reasonable method of valuation as it may adopt, or in the case of a liquidating distribution pursuant to Article 13 of the Agreement, shall be determined and allocated by the Liquidator using such reasonable method of valuation as it may adopt.  The General Partner, or the Liquidator, as the case may be, shall allocate such aggregate value among the assets of the Partnership (in such manner as it determines in its sole and absolute discretion to arrive at a fair market value for individual properties).

If the Carrying Value of an asset has been determined or adjusted pursuant to Section 1.B(2) or Section 1.B(4), such Carrying Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset, for purposes of computing Net Income and Net Loss.

E.The provisions of the Agreement (including this Exhibit B and other Exhibits to the Agreement) relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-l(b), and shall be interpreted and applied in a manner consistent with such Regulations.  In the event the General Partner shall determine that it is prudent to modify (i) the manner in which the Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed property or which are assumed by the Partnership, the General Partner, or the Limited Partners) are computed; or (ii) the manner in which items are allocated among the Partners for federal income tax purposes, in order to comply with such Regulations or to comply with Section 704(c) of the Code, the General Partner may make such modification without regard to Article 14 of the Agreement; provided, that it is not likely to have a material effect on the amounts distributable to any Person pursuant to Article 13 of the Agreement upon the dissolution of the Partnership.  The General Partner also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Partners and the amount of Partnership capital reflected on the Partnership’s balance

B-3

sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q); and (ii) make any appropriate modifications in the event unanticipated events might otherwise cause the Agreement not to comply with Regulations Section 1.704-1(b).  In addition, the General Partner may adopt and employ such methods and procedures for (i) the maintenance of book and tax capital accounts; (ii) the determination and allocation of adjustments under Sections 704(c), 734 and 743 of the Code; (iii) the determination of Net Income, Net Loss, taxable income, taxable loss and items thereof under the Agreement and pursuant to the Code; (iv) the adoption of reasonable conventions and methods for the valuation of assets and the determination of tax basis; (v) the allocation of asset value and tax basis; and (vi) conventions for the determination of cost recovery, depreciation and amortization deductions, as it determines in its sole discretion are necessary or appropriate to execute the provisions of the Agreement, to comply with federal and state tax laws, and are in the best interest of the Partners.

2. No Interest

No interest shall be paid by the Partnership on Capital Contributions or on balances in Partners’ Capital Accounts.

3. No Withdrawal

No Partner shall be entitled to withdraw any part of his or its Capital Contribution or his or its Capital Account or to receive any distribution from the Partnership, except as provided in Articles 4, 5, 7 and 13 of the Agreement.

B-4

EXHIBIT C
SPECIAL ALLOCATION RULES

1. Special Allocation Rules

Notwithstanding any other provision of the Agreement or this Exhibit C, the following special allocations shall be made in the following order:

A.Minimum Gain Chargeback.  Notwithstanding the provisions of Section 6.1 of the Agreement or any other provisions of this Exhibit C, if there is a net decrease in Partnership Minimum Gain during any Partnership taxable year, then, subject to the exceptions set forth in Regulations Sections 1.704-2(f)(2)-(5), each Partner shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Partner’s share of the net decrease in Partnership Minimum Gain, as determined under Regulations Section 1.704-2(g).  Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto.  The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(f)(6).  This Section 1.A is intended to comply with the minimum gain chargeback requirements in Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.  Solely for purposes of this Section 1.A, each Partner’s Adjusted Capital Account Deficit shall be determined prior to any other allocations pursuant to Section 6.1 of the Agreement with respect to such Partnership taxable year and without regard to any decrease of Partner Minimum Gain during such Partnership taxable year.

B.Partner Minimum Gain Chargeback.  Notwithstanding any other provision of Section 6.1 of the Agreement or any other provisions of this Exhibit C (except Section 1.A hereof), if there is a net decrease in Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership taxable year, then, subject to the exceptions referred to in Regulations Section 1.704-2(i)(4), each Partner who has a share of the Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Partner’s share of the net decrease in Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5).  Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto.  The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(i)(4).  This Section 1.B is intended to comply with the minimum gain chargeback requirement in such Section of the Regulations and shall be interpreted consistently therewith.  Solely for purposes of this Section 1.B, each Partner’s Adjusted Capital Account Deficit shall be determined prior to any other allocations pursuant to Section 6.1 of the Agreement or this Exhibit with respect to such Partnership taxable year, other than allocations pursuant to Section 1.A hereof.

C-1

C.Qualified Income Offset.  In the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), and after giving effect to the allocations required under Sections 1.A and 1.B hereof such Partner has an Adjusted Capital Account Deficit, items of Partnership income and gain (consisting of a pro rata portion of each item of Partnership income, including gross income and gain for the Partnership taxable year) shall be specially allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Regulations, its Adjusted Capital Account Deficit created by such adjustments, allocations or distributions as quickly as possible.  This Section 1.C is intended to constitute a qualified income offset under Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

D.Nonrecourse Deductions.  Nonrecourse Deductions for any Partnership taxable year shall be allocated to the Partners in accordance with their respective Percentage Interests.  If the General Partner determines in its good faith discretion that the Partnership’s Nonrecourse Deductions must be allocated in a different ratio to satisfy the safe harbor requirements of the Regulations promulgated under Section 704(b) of the Code, the General Partner is authorized, upon notice to the Limited Partners, to revise the prescribed ratio to the numerically closest ratio for such Partnership taxable year which would satisfy such requirements.

E.Partner Nonrecourse Deductions.  Any Partner Nonrecourse Deductions for any Partnership taxable year shall be specially allocated to the Partner who bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Regulations Section 1.704-2(i).

F.Code Section 754 Adjustments.  To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such item of gain or loss shall be specially allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Regulations.

G.Curative Allocations.  The allocations set forth in Section 1.A through 1.F of this Exhibit C (the “Regulatory Allocations”) are intended to comply with certain requirements of the Regulations under Section 704(b) of the Code.  The Regulatory Allocations may not be consistent with the manner in which the Partners intend to divide Partnership distributions.  Accordingly, the General Partner is hereby authorized to divide other allocations of income, gain, deduction and loss among the Partners so as to prevent the Regulatory Allocations from distorting the manner in which Partnership distributions will be divided among the Partners.  In general, the Partners anticipate that, if necessary, this will be accomplished by specially allocating other items of income,

C-2

gain, loss and deduction among the Partners so that the net amount of the Regulatory Allocations and such special allocations to each person is zero.  However, the General Partner will have discretion to accomplish this result in any reasonable manner; provided, however, that no allocation pursuant to this Section 1.G shall cause the Partnership to fail to comply with the requirements of Regulations Sections 1.704-1(b)(2)(ii)(d), -2(e) or -2(i).

2. Allocations for Tax Purposes

A.Except as otherwise provided in this Section 2, for federal income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Partners in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C.

B.In an attempt to eliminate Book-Tax Disparities attributable to a Contributed Property or Adjusted Property, items of income, gain, loss, and deduction shall be allocated for federal income tax purposes among the Partners as follows:

(1)       (a)       In the case of a Contributed Property, such items attributable thereto shall be allocated among the Partners, consistent with the principles of Section 704(c) of the Code and the Regulations thereunder, and with the procedures and methods described in Section 10.2 of the Agreement, to take into account the variation between the 704(c) Value of such property and its adjusted basis at the time of contribution; and

            (b)       any item of Residual Gain or Residual Loss attributable to a Contributed Property shall be allocated among the Partners in the same manner as its correlative item of “book” gain or loss is allocated pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C.

(2)       (a)       In the case of an Adjusted Property, such items shall

(1)    first, be allocated among the Partners in a manner consistent with the principles of Section 704(c) of the Code and the Regulations thereunder to take into account the Unrealized Gain or Unrealized Loss attributable to such property and the allocations thereof pursuant to Exhibit B; and

(2)    second, in the event such property was originally a Contributed Property, be allocated among the Partners in a manner consistent with Section 2.B(1) of this Exhibit C; and

C-3

            (b)       any item of Residual Gain or Residual Loss attributable to an Adjusted Property shall be allocated among the Partners in the same manner as its correlative item of “book” gain or loss is allocated pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C.

C.To the extent that the Treasury Regulations promulgated pursuant to Section 704(c) of the Code permit the Partnership to utilize alternative methods to eliminate the disparities between the Carrying Value of property and its adjusted basis, the General Partner shall have the authority to elect the method to be used by the Partnership and such election shall be binding on all Partners.

3. No Withdrawal

No Partner shall be entitled to withdraw any part of its Capital Contribution or its Capital Account or to receive any distribution from the Partnership, except as provided in Articles 4, 5, 8 and 13 of the Agreement.

C-4

EXHIBIT D
NOTICE OF REDEMPTION

The undersigned Limited Partner hereby irrevocably requests NexPoint Residential Trust Operating Partnership, L.P., a Delaware limited partnership (the “Partnership”), to redeem Partnership Units in the Partnership in accordance with the terms of the Amended and Restated Limited Partnership Agreement of the Partnership and the Redemption Right referred to therein; and the undersigned Limited Partner irrevocably (i) surrenders such Partnership Units and all right, title and interest therein; and (ii) directs that the Cash Amount or REIT Shares Amount (as determined by the Company) deliverable upon exercise of the Redemption Right be delivered to the address specified below, and if REIT Shares are to be delivered, such REIT Shares be registered or placed in the name(s) and at the address(es) specified below.  The undersigned hereby represents, warrants, and certifies that the undersigned (a) has marketable and unencumbered title to such Limited Partnership Units, free and clear of the rights or interests of any other person or entity; (b) has the full right, power, and authority to request such redemption and surrender such Partnership Units as provided herein; and (c) has obtained the consent or approval of all persons or entities, if any, having the right to consent or approve such redemption and surrender of Units.  The undersigned Limited Partner further agrees that, in the event that any state or local property tax is payable as a result of the transfer of its Partnership Units to the Partnership or the Company, the undersigned Limited Partner shall assume and pay such transfer tax.

Dated:

Name of Limited Partner:
	Please Print
	(Signature of Limited Partner)
	(Street Address)
	(City) (State) (Zip Code)
	Signature Guaranteed by:

D-1

If REIT Shares are to be issued, issue to:

Name:

Please insert social security or identifying number:

D-2

EXHIBIT E
CONSTRUCTIVE OWNERSHIP DEFINITION

The term “Constructively Owns” means ownership determined through the application of the constructive ownership rules of Section 318 of the Code, as modified by Section 856(d)(5) of the Code.  Generally, as of the date first set forth above, these rules provide the following:

a.  an individual is considered as owning the Ownership Interest that is owned, actually or constructively, by or for his spouse, his children, his grandchildren, and his parents;

b.  an Ownership Interest that is owned, actually or constructively, by or for a partnership, limited liability company or estate is considered as owned proportionately by its partners or beneficiaries;

c.  an Ownership Interest that is owned, actually or constructively, by or for a trust is considered as owned by its beneficiaries in proportion to the actuarial interest of such beneficiaries (provided, however, that in the case of a “grantor trust” the Ownership Interest will be considered as owned by the grantors);

d.  if ten (10) percent or more in value of the stock in a corporation is owned, actually or constructively, by or for any person, such person shall be considered as owning the Ownership Interest that is owned, actually or constructively, by or for such corporation in that proportion which the value of the stock which such person so owns bears to the value of all the stock in such corporation;

e.  an Ownership Interest that is owned, actually or constructively, by or for a partner or member which actually or constructively owns a 25% or greater capital interest or profits interest in a partnership or limited liability company, or by or to or for a beneficiary of an estate or trust shall be considered as owned by the partnership, limited liability company, estate, or trust (or, in the case of a grantor trust, the grantors);

f.  if ten (10) percent or more in value of the stock in a corporation is owned, actually or constructively, by or for any person, such corporation shall be considered as owning the Ownership Interest that is owned, actually or constructively, by or for such person;

g.  if any person has an option to acquire an Ownership Interest (including an option to acquire an option or any one of a series of such options), such Ownership Interest shall be considered as owned by such person;

h.  an Ownership Interest that is constructively owned by a person by reason of the application of the rules described in paragraphs (a) through (g) above shall, for purposes of applying paragraphs (a) through (g), be considered as actually owned by such person; provided, however, that (i) an Ownership Interest constructively owned by an individual by reason of paragraph (a) shall not be considered as owned by him for

E-1

purposes of again applying paragraph (a) in order to make another person the constructive owner of such Ownership Interest, (ii) an Ownership Interest constructively owned by a partnership, estate, trust, or corporation by reason of the application of paragraphs (e) or (f) shall not be considered as owned by it for purposes of applying paragraphs (b), (c), or (d) in order to make another person the constructive owner of such Ownership Interest, (iii) if an Ownership Interest may be considered as owned by an individual under paragraph (a) or (g), it shall be considered as owned by him under paragraph (g), and (iv) for purposes of the above described rules, an S corporation shall be treated as a partnership and any shareholder of the S corporation shall be treated as a partner of such partnership except that this rule shall not apply for purposes of determining whether stock in the S corporation is constructively owned by any person.

i.  For purposes of the above summary of the constructive ownership rules, the term “Ownership Interest” means the ownership of stock with respect to a corporation and, with respect to any other type of entity, the ownership of an interest in either its assets or net profits.

E-2

EXHIBIT F
SCHEDULE OF PARTNERS’ OWNERSHIP
WITH RESPECT TO TENANTS

NONE

F-1

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFIVER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jim Dondero, certify that:

1. I have reviewed this quarterly report on Form 10-Q of NexPoint Residential Trust, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 31, 2017

/s/  Jim Dondero

Jim Dondero

President

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brian Mitts, certify that:

1. I have reviewed this quarterly report on Form 10-Q of NexPoint Residential Trust, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 31, 2017

/s/ Brian Mitts

Brian Mitts

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of NexPoint Residential Trust, Inc. (the “Company”) for the period ending September 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Jim Dondero, President of the Company, and Brian Mitts, Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and  

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.  

Dated: October 31, 2017	/s/ Jim Dondero
	Jim Dondero President (Principal Executive Officer)
Dated: October 31, 2017	/s/ Brian Mitts
	Brian Mitts Chief Financial Officer (Principal Financial Officer)

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Oct. 31, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Trading Symbol	NXRT
Entity Registrant Name	NexPoint Residential Trust, Inc.
Entity Central Index Key	0001620393
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		21,059,269

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Operating Real Estate Investments
Land	$ 167,245	$ 165,863
Buildings and improvements	768,499	733,374
Intangible lease assets	3,021	5,140
Construction in progress	1,850	2,828
Furniture, fixtures, and equipment	41,190	36,616
Total Gross Operating Real Estate Investments	981,805	943,821
Accumulated depreciation and amortization	(78,387)	(60,214)
Total Net Operating Real Estate Investments	903,418	883,607
Real estate held for sale, net of accumulated depreciation of $3,397 and $6,099, respectively	32,915	79,430
Total Net Real Estate Investments	936,333	963,037
Cash and cash equivalents	92,695	22,705
Restricted cash	29,417	32,556
Accounts receivable	3,298	3,008
Prepaid and other assets	3,923	1,678
Fair market value of interest rate swaps	11,759	12,413
TOTAL ASSETS	1,077,425	1,035,397
Liabilities:
Mortgages payable, net	694,968	367,453
Mortgages payable held for sale, net	30,327	55,685
Credit facilities, net	29,803	310,492
Bridge facility, net	54,531	29,874
Accounts payable and other accrued liabilities	5,229	5,551
Accrued real estate taxes payable	11,443	6,534
Accrued interest payable	1,820	1,067
Security deposit liability	1,451	1,364
Prepaid rents	1,627	1,275
Total Liabilities	831,199	779,295
Redeemable noncontrolling interests in the Operating Partnership (see Note 10)	2,110
Equity:
Preferred stock, $0.01 par value: 100,000,000 shares authorized; 0 shares issued
Common stock, $0.01 par value: 500,000,000 shares authorized; 21,095,769 and 21,043,669 shares issued and outstanding, respectively	211	213
Additional paid-in capital	206,613	241,450
Accumulated earnings less dividends	28,960	(14,584)
Accumulated other comprehensive income	8,332	9,052
Common stock held in treasury at cost; 0 and 250,156 shares, respectively		(4,587)
Total Stockholders' Equity	244,116	231,544
Noncontrolling interests		24,558
Total Equity	244,116	256,102
TOTAL LIABILITIES AND EQUITY	$ 1,077,425	$ 1,035,397

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Statement Of Financial Position [Abstract]
Net of accumulated depreciation	$ 3,397	$ 6,099
Preferred stock, shares authorized	100,000,000	100,000,000
Preferred stock, shares issued	0	0
Preferred stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares, issued	21,095,769	21,043,669
Common stock, shares, outstanding	21,095,769	21,043,669
Common stock, par value	$ 0.01	$ 0.01
Treasury stock, shares	0	250,156

XML

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited) - USD ($) shares in Thousands, $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Revenues
Rental income		$ 32,148	$ 28,632	$ 94,564	$ 87,406
Other income		4,949	4,447	14,758	12,841
Total revenues		37,097	33,079	109,322	100,247
Expenses
Property operating expenses		10,075	9,874	29,611	28,947
Acquisition costs			386		386
Real estate taxes and insurance		4,853	3,973	14,911	12,326
Property management fees	[1]	1,110	989	3,280	3,007
Advisory and administrative fees	[2]	1,870	1,698	5,544	4,944
Corporate general and administrative expenses		1,623	1,023	4,842	2,649
Property general and administrative expenses		1,594	1,527	4,756	4,473
Depreciation and amortization		11,215	8,667	35,866	26,363
Total expenses		32,340	28,137	98,810	83,095
Operating income		4,757	4,942	10,512	17,152
Interest expense		(8,257)	(4,791)	(22,479)	(15,650)
Loss on extinguishment of debt and modification costs		(914)	(888)	(5,717)	(1,722)
Gain on sales of real estate		58,490	9,562	78,386	25,932
Net income		54,076	8,825	60,702	25,712
Net income attributable to noncontrolling interests			1,735	2,836	4,047
Net income attributable to redeemable noncontrolling interests in the Operating Partnership		162		162
Net income attributable to common stockholders		53,914	7,090	57,704	21,665
Other comprehensive income (loss)
Unrealized gains (losses) on interest rate derivatives		214	(1,084)	(835)	(1,128)
Total comprehensive income		54,290	7,741	59,867	24,584
Comprehensive income attributable to noncontrolling interests			1,627	2,720	3,935
Comprehensive income attributable to redeemable noncontrolling interests in the Operating Partnership		163		163
Comprehensive income attributable to common stockholders		$ 54,127	$ 6,114	$ 56,984	$ 20,649
Weighted average common shares outstanding - basic		21,085	21,260	21,057	21,282
Weighted average common shares outstanding - diluted		21,453	21,376	21,407	21,322
Earnings per share - basic		$ 2.56	$ 0.33	$ 2.74	$ 1.02
Earnings per share - diluted		2.51	0.33	2.70	1.02
Dividends declared per common share		$ 0.220	$ 0.206	$ 0.660	$ 0.618

[1] Fees incurred to an unaffiliated third party that is an affiliate of the noncontrolling limited partner of the Company’s operating partnership (see Notes 10 and 11).

[2] Fees incurred to the Company’s adviser (see Note 11).

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CONSOLIDATED STATEMENT OF EQUITY (Unaudited) - 9 months ended Sep. 30, 2017 - USD ($)	Total	Common Stock	Additional Paid-in Capital	Accumulated Earnings Less Dividends	Accumulated Other Comprehensive Income (Loss)	Common Stock Held in Treasury at Cost	Noncontrolling Interests
Beginning Balance, Values at Dec. 31, 2016	$ 256,102,000	$ 213,000	$ 241,450,000	$ (14,584,000)	$ 9,052,000	$ (4,587,000)	$ 24,558,000
Beginning Balance, Shares at Dec. 31, 2016	21,043,669	21,293,825
Net income attributable to common stockholders	$ 57,704,000			57,704,000
Net income attributable to noncontrolling interests	2,836,000						2,836,000
Contributions by noncontrolling interests	38,000						38,000
Distributions to noncontrolling interests	(4,789,000)						(4,789,000)
Purchase of noncontrolling interests	(53,840,000)		(31,313,000)				(22,527,000)
Repurchase of common stock	$ (1,354,000)					(1,354,000)
Retirement of common stock held in treasury		$ (3,000)	(5,938,000)			$ 5,941,000
Retirement of common stock held in treasury, shares	(308,313)	(308,313)
Vesting of stock-based compensation	$ 2,415,000	$ 1,000	2,414,000
Vesting of stock-based compensation, shares		110,257
Common stock dividends declared	(14,160,000)			(14,160,000)
Other comprehensive loss	(836,000)				(720,000)		$ (116,000)
Ending Balance, Values at Sep. 30, 2017	$ 244,116,000	$ 211,000	$ 206,613,000	$ 28,960,000	$ 8,332,000
Ending Balance, Shares at Sep. 30, 2017	21,095,769	21,095,769

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Cash flows from operating activities
Net income	$ 60,702	$ 25,712
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sales of real estate	(78,386)	(25,932)
Depreciation and amortization	35,866	26,363
Amortization/write-off of deferred financing costs	2,551	1,782
Change in fair value on derivative instruments included in interest expense	1,235	331
Net cash paid for derivative settlements	(777)	(430)
Amortization of fair market value adjustment of assumed debt	(155)	(98)
Vesting of stock-based compensation	2,415	296
Changes in operating assets and liabilities, net of effects of acquisitions:
Operating assets	(413)	(2,273)
Operating liabilities	4,461	530
Net cash provided by operating activities	27,499	26,281
Cash flows from investing activities
Net proceeds from sales of real estate	224,416	131,786
Prepaid acquisition deposits	(1,500)	(1,425)
Additions to real estate investments	(17,192)	(18,022)
Acquisitions of real estate investments	(138,106)	(6,474)
Net cash provided by investing activities	67,618	105,865
Cash flows from financing activities
Mortgage proceeds received	583,713
Mortgage payments	(275,840)	(271,274)
Credit facilities proceeds received	25,000	200,000
Credit facilities payments	(310,000)
Bridge facility proceeds received	65,875
Bridge facility payments	(41,278)	(29,000)
Deferred financing costs paid	(3,742)	(2,538)
Repurchase of common stock	(1,354)	(1,524)
Dividends paid to common stockholders	(13,996)	(13,154)
Distributions to redeemable noncontrolling interests in the Operating Partnership	(53)
Contributions from noncontrolling interests	38	710
Distributions to noncontrolling interests	(4,789)	(8,884)
Purchase of noncontrolling interests	(51,840)	(1,381)
Net cash used in financing activities	(28,266)	(127,045)
Net increase in cash and restricted cash	66,851	5,101
Cash and restricted cash, beginning of period	55,261	63,095
Cash and restricted cash, end of period	122,112	68,196
Supplemental Disclosure of Cash Flow Information
Interest paid	19,098	15,255
Prepayment penalties paid	2,701	827
Supplemental Disclosure of Noncash Activities
Issuance of operating partnership units for purchase of noncontrolling interests	2,000
Capitalized construction costs included in accounts payable and other accrued liabilities	1,245	935
Change in fair value on derivative instruments designated as hedges	835	1,128
Liabilities assumed from acquisitions	690	232
Other assets acquired from acquisitions	84	63
Assumed debt on acquisition of real estate investment		15,812
Increase in dividends payable on restricted stock units	$ 164	$ 43

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Organization and Description of Business

9 Months Ended

Sep. 30, 2017

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization and Description of Business

1. Organization and Description of Business

NexPoint Residential Trust, Inc. (the “Company”, “we”, “our”) was incorporated in Maryland on September 19, 2014, and has elected to be taxed as a real estate investment trust (“REIT”). The Company is focused on “value-add” multifamily investments primarily located in the Southeastern and Southwestern United States. Substantially all of the Company’s business is conducted through NexPoint Residential Trust Operating Partnership, L.P. (the “OP”), the Company’s operating partnership. The Company owns its properties (the “Portfolio”) through the OP and its wholly owned taxable REIT subsidiary (“TRS”). The OP owns approximately 99.9% of the Portfolio; the TRS owns approximately 0.1% of the Portfolio. The Company’s wholly owned subsidiary, NexPoint Residential Trust Operating Partnership GP, LLC (the “OP GP”), is the sole general partner of the OP. As of September 30, 2017, there were 21,116,902 common units in the OP (“OP Units”) outstanding, of which 21,043,669, or 99.7%, were owned by the Company and 73,233, or 0.3%, were owned by an unaffiliated limited partner (see Note 10).

The Company began operations on March 31, 2015 as a result of the transfer and contribution by NexPoint Credit Strategies Fund (“NHF”) of all but one of the multifamily properties owned by NHF through its wholly owned subsidiary NexPoint Real Estate Opportunities, LLC (fka Freedom REIT, LLC) (“NREO”). We use the term “predecessor” to mean the carve-out business of NREO. On March 31, 2015, NHF distributed all of the outstanding shares of the Company's common stock held by NHF to holders of NHF common shares. We refer to the distribution of our common stock by NHF as the “Spin-Off.”

The Company is externally managed by NexPoint Real Estate Advisors, L.P. (the “Adviser”) through an agreement dated March 16, 2015, as amended, and renewed on March 13, 2017 for a one-year term set to expire on March 16, 2018 (the “Advisory Agreement”), by and among the Company, the OP and the Adviser. The Adviser conducts substantially all of the Company’s operations and provides asset management services for its real estate investments. The Company expects it will only have accounting employees while the Advisory Agreement is in effect. All of the Company’s investment decisions are made by the Adviser, subject to general oversight by the Adviser’s investment committee and the Company’s board of directors (the “Board”). The Adviser is wholly owned by NexPoint Advisors, L.P., which is an affiliate of Highland Capital Management, L.P. (the “Sponsor” or “Highland”).

The Company’s investment objectives are to maximize the cash flow and value of properties owned, acquire properties with cash flow growth potential, provide quarterly cash distributions and achieve long-term capital appreciation for its stockholders through targeted management and a value-add program. Consistent with the Company’s policy to acquire assets for both income and capital gain, the Company intends to hold at least majority interests in its properties for long-term appreciation and to engage in the business of directly or indirectly acquiring, owning, and operating well-located multifamily properties with a value-add component in large cities and suburban submarkets of large cities primarily in the Southeastern and Southwestern United States consistent with its investment objectives. Economic and market conditions may influence the Company to hold properties for different periods of time. From time to time, the Company may sell a property if, among other deciding factors, the sale would be in the best interest of its stockholders.

The Company may also participate with third parties in property ownership through limited liability companies (“LLCs”), funds or other types of co-ownership or acquire real estate or interests in real estate in exchange for the issuance of common stock, OP Units, preferred stock or options to purchase stock. These types of investments may permit the Company to own interests in larger assets without unduly restricting diversification, which provides flexibility in structuring the Company’s portfolio.

The Company may allocate up to thirty percent of the portfolio to investments in real estate-related debt and securities with the potential for high current income or total returns. These allocations may include first and second mortgages and subordinated, bridge, mezzanine, construction and other loans, as well as debt securities related to or secured by multifamily real estate and common and preferred equity securities, which may include securities of other REITs or real estate companies.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Predecessor

With the exception of a nominal amount of initial cash funded at inception, the Company did not own any assets prior to March 31, 2015. The business and operations of the Company prior to March 31, 2015 occurred under the predecessor. The predecessor included all of the properties in the Portfolio that were held directly or indirectly by NREO prior to the Spin-Off that occurred on March 31, 2015. However, the Company’s consolidated financial statements reflect operations of the predecessor through March 31, 2015 as if they were incurred by the Company. The predecessor was determined in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). References throughout these consolidated financial statements to the “Company”, “we”, or “our”, include the activity of the predecessor defined above.

Basis of Accounting

The accompanying unaudited consolidated financial statements have been prepared according to the rules and regulations of the SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted according to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading.

In the opinion of management, all adjustments and eliminations necessary for the fair presentation of the Company’s financial position as of September 30, 2017, and results of operations for the three and nine months ended September 30, 2017 and 2016 have been included. Such adjustments are normal and recurring in nature. The interim results presented are not necessarily indicative of future financial results. The unaudited information included in this quarterly report on Form 10-Q should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2016 and notes thereto included in its annual report on Form 10-K filed with the SEC on March 15, 2017.

The accompanying unaudited consolidated financial statements are presented in accordance with GAAP. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the unaudited consolidated financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates. All significant intercompany accounts and transactions have been eliminated in consolidation. There have been no significant changes to the Company’s significant accounting policies during the nine months ended September 30, 2017.

Principles of Consolidation

The Company accounts for subsidiary partnerships, joint ventures and other similar entities in which it holds an ownership interest in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation. The Company first evaluates whether each entity is a variable interest entity ("VIE"). Under the VIE model, the Company consolidates an entity when it has control to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Under the voting model, the Company consolidates an entity when it controls the entity through ownership of a majority voting interest. The consolidated financial statements include the accounts of the Company and its subsidiaries, including the OP.

Revenue Recognition

The Company’s primary operations consist of rental income earned from its residents under lease agreements typically with terms of one year or less. Rental income is recognized when earned. This policy effectively results in income recognition on the straight-line method over the related terms of the leases. Resident reimbursements and other income consist of charges billed to residents for utilities, carport and garage rental, and pets, administrative, application and other fees and are recognized when earned. 

Real Estate Investments

Upon acquisition of a property, the purchase price and related acquisition costs (“total consideration”) are allocated to land, buildings, improvements, furniture, fixtures, and equipment, and intangible lease assets in accordance with FASB ASC 805, Business Combinations, and Accounting Standards Update (“ASU”) 2017-01, Clarifying the Definition of a Business (Topic 805) (“ASU 2017-01”), which the Company early adopted on October 1, 2016 (see “Recent Accounting Pronouncements” below). The Company believes most future acquisition costs will be capitalized in accordance with ASU 2017-01. Prior to the Company’s adoption of ASU 2017-01, acquisition costs were expensed as incurred.

The allocation of total consideration, which is determined using inputs that are classified within Level 3 of the fair value hierarchy established by FASB ASC 820, Fair Value Measurement and Disclosures (see Note 7), is based on management’s estimate of the property’s “as-if” vacant fair value and is calculated by using all available information such as the replacement cost of such asset, appraisals, property condition reports, market data and other related information. The allocation of the total consideration to intangible lease assets represents the value associated with the in-place leases, which may include lost rent, leasing commissions, legal and other related costs, which the Company, as buyer of the property, did not have to incur to obtain the residents. If any debt is assumed in an acquisition, the difference between the fair value, which is estimated using inputs that are classified within Level 2 of the fair value hierarchy, and the face value of debt is recorded as a premium or discount and amortized as interest expense over the life of the debt assumed.

Real estate assets, including land, buildings, improvements, furniture, fixtures and equipment, and intangible lease assets are stated at historical cost less accumulated depreciation and amortization. Costs incurred in making repairs and maintaining real estate assets are expensed as incurred. Expenditures for improvements, renovations, and replacements are capitalized at cost. Real estate-related depreciation and amortization are computed on a straight-line basis over the estimated useful lives as described in the following table:

Land	Not depreciated
Buildings	30 years
Improvements	15 years
Furniture, fixtures, and equipment	3 years
Intangible lease assets	6 months

Construction in progress includes the cost of renovation projects being performed at the various properties. Once a project is complete, the historical cost of the renovation is placed into service in one of the categories above depending on the type of renovation project and is depreciated over the estimated useful lives as described in the table above.

Real estate assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In such cases, the Company will evaluate the recoverability of such real estate assets based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provide for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate asset. If impaired, the real estate asset will be written down to its estimated fair value.

The Company periodically classifies real estate assets as held for sale when certain criteria are met, in accordance with GAAP. At that time, the Company presents the net real estate assets and the net debt associated with the real estate held for sale separately in its consolidated balance sheet, and the Company ceases recording depreciation and amortization expense related to that property. Real estate held for sale is reported at the lower of its carrying amount or its estimated fair value less estimated costs to sell.

Reclassifications

Certain reclassifications have been made to amounts in the prior year consolidated statements of operations and comprehensive income to conform to current year presentations as a result of an accounting policy election to classify certain expenses incurred in connection with the extinguishment or modification of debt separately from interest expense. These expenses are recorded in loss on extinguishment of debt and modification costs on the consolidated statements of operations and comprehensive income. As a result, for the three and nine months ended September 30, 2016, interest expense decreased by approximately $0.9 million and $1.7 million, respectively. See Note 6 for additional information.

Reportable Segment

Substantially all of the Company’s net income (loss) is from investments in real estate properties within the multifamily sector that the Company owns through LLCs. The Company evaluates operating performance on an individual property level and views its real estate assets as one industry segment and, accordingly, its properties are aggregated into one reportable segment.

Income Taxes

The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Code and expects to continue to qualify as a REIT. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to distribute annually at least 90% of its “REIT taxable income,” as defined by the Code, to its stockholders. As a REIT, the Company will be subject to federal income tax on its undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions it pays with respect to any calendar year are less than the sum of (1) 85% of its ordinary income, (2) 95% of its capital gain net income and (3) 100% of its undistributed income from prior years. The Company intends to operate in such a manner so as to qualify as a REIT, but no assurance can be given that the Company will operate in a manner so as to qualify as a REIT. Taxable income from certain non-REIT activities is managed through a TRS and is subject to applicable federal, state, and local income and margin taxes. The Company has no significant taxes associated with its TRS for the nine months ended September 30, 2017 and 2016.

If the Company fails to meet these requirements, it could be subject to federal income tax on all of the Company’s taxable income at regular corporate rates for that year. The Company would not be able to deduct distributions paid to stockholders in any year in which it fails to qualify as a REIT. Additionally, the Company will also be disqualified from electing to be taxed as a REIT for the four taxable years following the year during which qualification was lost unless the Company is entitled to relief under specific statutory provisions. As of September 30, 2017, the Company believes it is in compliance with all applicable REIT requirements.

The Company evaluates the accounting and disclosure of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” (greater than 50 percent probability) of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. The Company’s management is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which include federal and certain states. The Company has no examinations in progress and none are expected at this time.

The Company recognizes its tax positions and evaluates them using a two-step process. First, the Company determines whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Second, the Company will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement.

The Company had no material unrecognized tax benefit or expense, accrued interest or penalties as of September 30, 2017. The Company and its subsidiaries are subject to federal income tax as well as income tax of various state and local jurisdictions. The 2016 and 2015 tax years remain open to examination by tax jurisdictions to which the Company and its subsidiaries are subject. When applicable, the Company recognizes interest and/or penalties related to uncertain tax positions on its consolidated statements of operations and comprehensive income.

Recent Accounting Pronouncements

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 13(a) of the Exchange Act, for complying with new or revised accounting standards applicable to public companies. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to take advantage of this extended transition period. As a result of this election, the Company’s financial statements may not be comparable to companies that comply with public company effective dates for such new or revised standards. The Company may elect to comply with public company effective dates at any time, and such election would be irrevocable pursuant to Section 107(b) of the JOBS Act. The following recent accounting pronouncements reflect effective dates that delay the adoption until those standards would otherwise apply to private companies.

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business (Topic 805), which clarifies the definition of a business and provides further guidance for evaluating whether a transaction will be accounted for as an acquisition of an asset or a business. The ASU provides a test to determine whether a set of assets and activities acquired is a business. When substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. Under the updated guidance, an acquisition of a single property will likely be treated as an asset acquisition as opposed to a business combination and associated transaction costs will be capitalized rather than expensed as incurred. Additionally, assets acquired, liabilities assumed, and any noncontrolling interest will be measured at their relative fair values. The Company early adopted ASU 2017-01 on October 1, 2016, on a prospective basis, and there was no material impact on its consolidated financial statements or disclosures. The Company believes most of its future acquisitions of properties will qualify as asset acquisitions and most future transaction costs associated with these acquisitions will be capitalized.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which clarifies the presentation of restricted cash and restricted cash equivalents in the statements of cash flows. Under ASU 2016-18, restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statements of cash flows. The Company adopted ASU 2016-18 during the three months ended December 31, 2016 on a retrospective basis. As a result, net cash provided by operating activities decreased by $2.2 million in the nine months ended September 30, 2016. Net cash provided by investing activities increased by $10.6 million in the nine months ended September 30, 2016. Beginning-of-period cash and restricted cash total increased by $46.9 million in 2016. The following is a summary of the Company’s cash and restricted cash total as presented in the consolidated statements of cash flows for the nine months ended September 30, 2017 and 2016 (in thousands):

	September 30, 2017		September 30, 2016
Cash and cash equivalents	$	92,695	$	34,086
Restricted cash		29,417		34,110
Total cash and restricted cash	$	122,112	$	68,196

In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis, which changes the way reporting enterprises evaluate whether (1) they should consolidate limited partnerships and similar entities, (2) fees paid to a decision maker or service provider are variable interests in a VIE, and (3) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. The ASU also significantly changes how to evaluate voting rights for entities that are not similar to limited partnerships when determining whether the entity is a VIE, which may affect entities for which the decision making rights are conveyed through a contractual arrangement. The Company implemented the provisions of ASU 2015-02 as of January 1, 2017 and there was no material impact on its consolidated financial statements. Upon issuing OP Units to an unaffiliated limited partner on August 1, 2017, the OP became a VIE as such limited partner of the OP lacks substantive kick-out rights and substantive participating rights. The Company is the primary beneficiary of, and continues to consolidate, the OP.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends several aspects of the accounting for share-based payment transactions, including the income tax consequences, accrual of compensation cost, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this standard must be applied prospectively, retrospectively, or as of the beginning of the earliest comparative period presented in the year of adoption, depending on the type of amendment. The Company implemented the provisions of ASU 2016-09 as of January 1, 2017 and there was no material impact on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should also disclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date, which amends ASU 2014-09 to defer the effective date by one year. The new standard is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Entities are allowed to use either the full or modified retrospective approach when transitioning to the ASU. The Company expects to implement the provisions of ASU 2014-09 as of January 1, 2019 and has not yet selected a transition method. The Company is continuing to evaluate ASU 2014-09 (and related clarifying guidance issued by the FASB); however, the Company does not expect its adoption to have a material impact on its consolidated financial statements, as a substantial portion of its revenue consists of rental income from leasing arrangements, which is specifically excluded from ASU 2014-09.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which changes certain recognition, measurement, presentation, and disclosure requirements for financial instruments. The ASU requires all equity investments, except those accounted for under the equity method of accounting or resulting in consolidation, to be measured at fair value with changes in fair value recognized in net income. The ASU also simplifies the impairment assessment for equity investments without readily determinable fair values, amends the presentation requirements for changes in the fair value of financial liabilities, requires presentation of financial instruments by measurement category and form of financial asset, and eliminates the requirement to disclose the methods and significant assumptions used in estimating the fair value of financial instruments. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. The Company expects to implement the provisions of ASU 2016-01 as of January 1, 2019, and does not expect the new standard to have a material impact on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which supersedes the current accounting for leases and while retaining two distinct types of leases, finance and operating, (1) requires lessees to record a right of use asset and a related liability for the rights and obligations associated with a lease, regardless of lease classification, and recognize lease expense in a manner similar to current accounting, (2) eliminates most real estate specific lease provisions, and, (3) aligns many of the underlying lessor model principles with those in the new revenue standard. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Entities are required to use a modified retrospective approach when transitioning to the ASU for leases that exist as of or are entered into after the beginning of the earliest comparative period presented in the financial statements. The Company expects to implement the provisions of ASU 2016-02 as of January 1, 2019 in conjunction with the adoption of ASU 2014-09 discussed above. As lessors, substantially all of the Company’s agreements have a term of 12 months or less. Based on a preliminary assessment, the Company expects most of its operating leases will be subject to the new guidance and recognized as operating lease liabilities and right-of-use assets upon adoption, resulting in an immaterial increase in the assets and liabilities on its consolidated balance sheets. The Company is continuing its evaluation, which may identify additional impacts this standard will have on its consolidated financial statements and related disclosures.

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Investments in Subsidiaries

9 Months Ended

Sep. 30, 2017

Schedule Of Investments [Abstract]

Investments in Subsidiaries

3. Investments in Subsidiaries

The Company has in the past and may in the future invest in joint ventures. The Company consolidates the entities that it controls as well as any VIEs where it is the primary beneficiary. In connection with its indirect equity investments in the properties acquired, the Company, through the OP and the TRS, directly or indirectly holds 100% of the membership interests in single-asset LLCs that directly own the properties. All of the properties the Company has acquired are consolidated in the Company’s financial statements. The assets of each entity can only be used to settle obligations of that particular entity, and the creditors of each entity have no recourse to the assets of other entities or the Company.

Additionally, the Company has in the past and may in the future enter into purchase and sale transactions structured as reverse like-kind exchanges (“1031 Exchanges”) under Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”). For a reverse 1031 Exchange in which the Company purchases a new property prior to selling the property to be matched in the like-kind exchange (the Company refers to a new property being acquired in the 1031 Exchange prior to the sale of the related property as a “Parked Asset”), legal title to the Parked Asset is held by an Exchange Accommodation Titleholder (“EAT”) engaged to execute the 1031 Exchange until the sale transaction and the 1031 Exchange are completed. The Company, through a wholly owned subsidiary, enters into a master lease agreement with the EAT whereby the EAT leases the acquired property and all other rights acquired in connection with the acquisition to the Company. The term of the master lease agreement is until the earlier of the completion of the reverse 1031 Exchange or 180 days from the date that the property was acquired. The EAT is classified as a VIE as it does not have sufficient equity investment at risk to finance its activities without additional subordinated financial support. The Company consolidates the EAT as its primary beneficiary because it has the ability to control the activities that most significantly impact the EAT's economic performance and the Company retains all of the legal and economic benefits and obligations related to the Parked Assets prior to completion of the 1031 Exchange. As such, the Parked Assets are included in the Company’s consolidated financial statements as VIEs until legal title is transferred to the Company upon either completion of the 1031 Exchange or termination of the master lease agreements, at which time they will be consolidated as wholly owned subsidiaries.

As of September 30, 2017, the Company was invested in 32 properties. The following table represents the Company’s investments as of September 30, 2017 and December 31, 2016:

Property Name		Location	YearAcquired	Effective Ownership Percentage at September 30, 2017				Effective Ownership Percentage at December 31, 2016
The Miramar Apartments		Dallas, Texas	2013		—		(1)		100	%
Arbors on Forest Ridge		Bedford, Texas	2014		100	%	(2)		90	%
Cutter’s Point		Richardson, Texas	2014		100	%	(2)		90	%
Eagle Crest		Irving, Texas	2014		100	%	(2)		90	%
Silverbrook		Grand Prairie, Texas	2014		100	%	(2)		90	%
Timberglen	(3)	Dallas, Texas	2014		100	%	(2)		90	%
Toscana		Dallas, Texas	2014		—		(1)		90	%
The Grove at Alban		Frederick, Maryland	2014		—		(1)		76	%	(4)
Edgewater at Sandy Springs		Atlanta, Georgia	2014		100	%	(2)		90	%
Beechwood Terrace		Nashville, Tennessee	2014		100	%	(2)		90	%
Willow Grove		Nashville, Tennessee	2014		100	%	(2)		90	%
Woodbridge		Nashville, Tennessee	2014		100	%	(2)		90	%
Abbington Heights		Antioch, Tennessee	2014		100	%	(2)		90	%	(4)
The Summit at Sabal Park		Tampa, Florida	2014		100	%	(2)		90	%	(4)
Courtney Cove		Tampa, Florida	2014		100	%	(2)		90	%	(4)
Radbourne Lake		Charlotte, North Carolina	2014		100	%	(2)		90	%	(4)
Timber Creek		Charlotte, North Carolina	2014		100	%	(2)		90	%	(4)
Belmont at Duck Creek		Garland, Texas	2014		100	%	(2)		90	%	(4)
The Arbors		Tucker, Georgia	2014		—		(1)		90	%	(4)
The Crossings		Marietta, Georgia	2014		—		(1)		90	%	(4)
The Crossings at Holcomb Bridge		Roswell, Georgia	2014		—		(1)		90	%	(4)
The Knolls		Marietta, Georgia	2014		—		(1)		90	%	(4)
Regatta Bay		Seabrook, Texas	2014		—		(1)		90	%	(4)
Sabal Palm at Lake Buena Vista		Orlando, Florida	2014		100	%	(2)		90	%	(4)
Southpoint Reserve at Stoney Creek	(3)	Fredericksburg, Virginia	2014		100	%	(2)		85	%	(4)
Cornerstone		Orlando, Florida	2015		100	%	(2)		90	%	(4)
Twelve 6 Ten at the Park		Dallas, Texas	2015		—		(1)		90	%	(4)
The Preserve at Terrell Mill		Marietta, Georgia	2015		100	%	(2)		90	%	(4)
The Ashlar		Dallas, Texas	2015		100	%	(2)		90	%	(4)
Heatherstone		Dallas, Texas	2015		100	%	(2)		90	%	(4)
Versailles		Dallas, Texas	2015		100	%	(2)		90	%	(4)
Seasons 704 Apartments		West Palm Beach, Florida	2015		100	%	(2)		90	%	(4)
Madera Point		Mesa, Arizona	2015		100	%	(2)		95	%
The Pointe at the Foothills		Mesa, Arizona	2015		100	%	(2)		95	%
Venue at 8651		Fort Worth, Texas	2015		100	%	(2)		95	%
Parc500		West Palm Beach, Florida	2016		100	%	(2)		91	%
The Colonnade		Phoenix, Arizona	2016		100	%	(2)		97	%
Old Farm		Houston, Texas	2016		100	%	(2)		100	%	(5)
Stone Creek at Old Farm		Houston, Texas	2016		100	%	(2)		100	%	(5)
Hollister Place		Houston, Texas	2017		100	%			—		(6)
Rockledge Apartments		Marietta, Georgia	2017		100	%			—		(6)

(1) Properties were sold during the nine months ended September 30, 2017.

(2) The Company purchased 100% of the ownership interest in the property held by the noncontrolling interest holders on June 30, 2017 (see Note 10).

(3) Properties were classified as held for sale as of September 30, 2017.

(4) Properties were considered VIEs at December 31, 2016.

(5) Properties were Parked Assets and considered VIEs at December 31, 2016. The Company completed the reverse 1031 Exchanges of these properties during the nine months ended September 30, 2017 with the sales of the replacement properties, at which time legal title to the properties transferred to the Company. Upon the transfer of title, the properties were no longer considered Parked Assets or VIEs (see Note 5).

(6) Properties were acquired in 2017; therefore, no ownership as of December 31, 2016.

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Real Estate Investments Statistics

9 Months Ended

Sep. 30, 2017

Business Combinations [Abstract]

Real Estate Investments Statistics

4. Real Estate Investments Statistics

As of September 30, 2017, the Company is invested in a total of 32 multifamily properties, as listed below:

Property Name		Rentable Square Footage (in thousands)		Number of Units		Date Acquired	Average Effective Monthly Rent Per Unit (1)		% Occupied as of September 30, 2017 (2)			% Occupied as of December 31, 2016 (2)
Arbors on Forest Ridge			155	210		1/31/2014		859		95.2	%		92.9	%
Cutter’s Point			198	196		1/31/2014		1,052		94.4	%		93.9	%
Eagle Crest			396	447		1/31/2014		876		95.3	%		94.4	%
Silverbrook			526	642		1/31/2014		781		95.6	%		93.5	%
Timberglen	(3)		221	304		1/31/2014		846		95.1	%		92.8	%
Edgewater at Sandy Springs			727	760		7/18/2014		929		94.5	%		94.5	%
Beechwood Terrace			272	300		7/21/2014		921		96.0	%		95.3	%
Willow Grove			229	244		7/21/2014		912		93.4	%		96.7	%
Woodbridge			247	220		7/21/2014		945		95.5	%		87.7	%
Abbington Heights			239	274		8/1/2014		879		93.8	%		95.3	%
The Summit at Sabal Park			205	252		8/20/2014		907		95.2	%		90.9	%
Courtney Cove			225	324		8/20/2014		817		93.8	%		94.4	%
Radbourne Lake			247	225		9/30/2014		1,059		93.3	%		96.9	%
Timber Creek			248	352		9/30/2014		819		95.2	%		95.5	%
Belmont at Duck Creek			198	240		9/30/2014		990		95.4	%		95.0	%
Sabal Palm at Lake Buena Vista			371	400		11/5/2014		1,158		93.5	%		95.0	%
Southpoint Reserve at Stoney Creek	(3)		116	156		12/18/2014		1,069		96.8	%		92.9	%
Cornerstone			318	430		1/15/2015		910		94.9	%		95.8	%
The Preserve at Terrell Mill			692	752		2/6/2015		850		93.1	%		92.0	%
The Ashlar			206	264		2/26/2015		819		92.4	%		91.3	%
Heatherstone			116	152		2/26/2015		838		94.1	%		92.8	%
Versailles			301	388		2/26/2015		860		95.1	%		93.0	%
Seasons 704 Apartments			217	222		4/15/2015		1,056		95.9	%		95.0	%
Madera Point			193	256		8/5/2015		797		93.8	%		93.8	%
The Pointe at the Foothills			473	528		8/5/2015		817		92.2	%		92.2	%
Venue at 8651			289	333		10/30/2015		800		94.3	%		90.4	%
Parc500			266	217		7/27/2016		1,167		93.5	%		93.5	%
The Colonnade			256	415		10/11/2016		695		92.0	%		88.0	%
Old Farm			697	734		12/29/2016		1,177		92.8	%		93.6	%
Stone Creek at Old Farm			186	190		12/29/2016		1,186		93.7	%		93.2	%
Hollister Place			246	260		2/1/2017		969		93.5	%		—		(4)
Rockledge Apartments			802	708		6/30/2017		1,153		91.9	%		—		(4)
			10,078		11,395

(1) Average effective monthly rent per unit is equal to the average of the contractual rent for commenced leases as of September 30, 2017 minus any tenant concessions over the term of the lease, divided by the number of units under commenced leases as of September 30, 2017.

(2) Percent occupied is calculated as the number of units occupied as of September 30, 2017 and December 31, 2016, divided by the total number of units, expressed as a percentage.

(3) Properties were classified as held for sale as of September 30, 2017.

(4) Properties were acquired in 2017.

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Real Estate Investments

9 Months Ended

Sep. 30, 2017

Real Estate [Abstract]

Real Estate Investments

5. Real Estate Investments

As of September 30, 2017, the major components of the Company’s investments in multifamily properties were as follows (in thousands):

Operating Properties	Land		Buildingsand Improvements			IntangibleLease Assets			Construction in Progress		Furniture, Fixtures and Equipment			Totals
Arbors on Forest Ridge	$	2,330	$	11,073		$	—		$	—	$	794		$	14,197
Cutter’s Point		3,330		12,995			—			—		946			17,271
Eagle Crest		5,450		22,227			—			—		1,231			28,908
Silverbrook		4,860		25,643			—			—		2,363			32,866
Edgewater at Sandy Springs		14,290		43,959			—			9		4,057			62,315
Beechwood Terrace		1,390		20,662			—			78		1,229			23,359
Willow Grove		3,940		10,739			—			—		882			15,561
Woodbridge		3,651		12,995			—			1		1,029			17,676
Abbington Heights		1,770		16,602			—			112		1,101			19,585
The Summit at Sabal Park		5,770		13,355			—			—		1,107			20,232
Courtney Cove		5,880		12,913			—			—		1,055			19,848
Radbourne Lake		2,440		21,801			—			5		1,255			25,501
Timber Creek		11,260		13,429			—			—		1,086			25,775
Belmont at Duck Creek		1,910		17,157			—			—		1,170			20,237
Sabal Palm at Lake Buena Vista		7,580		41,173			—			—		1,024			49,777
Cornerstone		1,500		30,357			—			—		1,395			33,252
The Preserve at Terrell Mill		10,170		48,609			—			—		3,895			62,674
The Ashlar		4,090		12,631			—			—		1,459			18,180
Heatherstone		2,320		7,862			—			—		909			11,091
Versailles		6,720		19,735			—			6		2,155			28,616
Seasons 704 Apartments		7,480		14,071			—			2		867			22,420
Madera Point		4,920		17,369			—			43		1,130			23,462
The Pointe at the Foothills		4,840		46,402			—			108		1,669			53,019
Venue at 8651		2,350		16,910			—			813		1,744			21,817
Parc500		3,860		19,297			—			589		1,217			24,963
The Colonnade		8,340		36,677			—			55		805			45,877
Old Farm		11,078		69,718			—			29		1,304			82,129
Stone Creek at Old Farm		3,493		19,123			—			—		350			22,966
Hollister Place		2,782		20,719			—			—		593			24,094
Rockledge Apartments		17,451		92,296			3,021			—		1,369			114,137
		167,245		768,499			3,021			1,850		41,190			981,805
Accumulated depreciation and amortization		—		(57,876	)		(1,007	)		—		(19,504	)		(78,387	)
Total Operating Properties	$	167,245	$	710,623		$	2,014		$	1,850	$	21,686		$	903,418
Held For Sale Properties
Timberglen		2,510		14,718			—			—		1,049			18,277
Southpoint Reserve at Stoney Creek		6,120		11,252			—			—		663			18,035
		8,630		25,970			—			—		1,712			36,312
Accumulated depreciation and amortization		—		(2,630	)		—			—		(767	)		(3,397	)
Total Held For Sale Properties	$	8,630	$	23,340		$	—		$	—	$	945		$	32,915
Total	$	175,875	$	733,963		$	2,014		$	1,850	$	22,631		$	936,333

As of December 31, 2016, the major components of the Company’s investments in multifamily properties were as follows (in thousands):

Operating Properties	Land		Buildings and Improvements			Intangible Lease Assets			Construction in Progress		Furniture, Fixtures and Equipment			Totals
Arbors on Forest Ridge	$	2,330	$	11,014		$	—		$	3	$	717		$	14,064
Cutter's Point		3,330		12,871			—			—		810			17,011
Eagle Crest		5,450		21,990			—			—		1,052			28,492
Silverbrook		4,860		25,335			—			—		1,996			32,191
Timberglen		2,510		14,527			—			—		894			17,931
Edgewater at Sandy Springs		14,290		43,709			—			123		3,295			61,417
Beechwood Terrace		1,390		20,561			—			—		940			22,891
Willow Grove		3,940		10,672			—			—		668			15,280
Woodbridge		3,650		12,708			—			215		759			17,332
Abbington Heights		1,770		16,426			—			75		916			19,187
The Summit at Sabal Park		5,770		13,342			—			9		956			20,077
Courtney Cove		5,880		12,886			—			42		910			19,718
Radbourne Lake		2,440		21,445			—			257		1,025			25,167
Timber Creek		11,260		13,252			—			69		864			25,445
Belmont at Duck Creek		1,910		17,034			—			—		941			19,885
The Arbors		1,730		6,587			—			5		413			8,735
The Crossings		3,982		17,662			—			155		1,429			23,228
The Crossings at Holcomb Bridge		5,560		10,925			—			—		1,178			17,663
The Knolls		3,410		17,707			—			8		1,615			22,740
Regatta Bay		1,660		16,155			—			89		891			18,795
Sabal Palm at Lake Buena Vista		7,580		41,147			—			3		874			49,604
Cornerstone		1,500		30,354			—			29		906			32,789
The Preserve at Terrell Mill		10,170		48,163			—			516		2,872			61,721
The Ashlar		4,090		12,348			—			124		1,129			17,691
Heatherstone		2,320		7,521			—			224		749			10,814
Versailles		6,720		20,267			—			286		1,597			28,870
Seasons 704 Apartments		7,480		14,043			—			—		696			22,219
Madera Point		4,920		17,079			—			15		865			22,879
The Pointe at the Foothills		4,840		45,975			—			157		1,289			52,261
Venue at 8651		2,350		16,815			—			311		1,162			20,638
Parc500		3,860		18,700			491			113		504			23,668
The Colonnade		8,340		35,473			723			—		376			44,912
Old Farm		11,078		69,580			3,354			—		1,052			85,064
Stone Creek at Old Farm		3,493		19,101			572			—		276			23,442
		165,863		733,374			5,140			2,828		36,616			943,821
Accumulated depreciation and amortization		—		(46,044	)		(650	)		—		(13,520	)		(60,214	)
Total Operating Properties	$	165,863	$	687,330		$	4,490		$	2,828	$	23,096		$	883,607
Held For Sale Properties
The Grove at Alban		3,640		19,033			—			—		1,318			23,991
The Miramar Apartments		1,580		8,870			—			—		711			11,161
Toscana		1,730		7,341			—			3		684			9,758
Southpoint Reserve at Stoney Creek		6,120		11,218			—			31		605			17,974
Twelve 6 Ten at the Park		3,610		18,088			—			21		925			22,644
		16,680		64,550			—			55		4,243			85,528
Accumulated depreciation and amortization		—		(4,896	)		—			—		(1,202	)		(6,098	)
Total Held For Sale Properties	$	16,680	$	59,654		$	—		$	55	$	3,041		$	79,430
Total	$	182,543	$	746,984		$	4,490		$	2,883	$	26,137		$	963,037

Depreciation expense was $10.0 million and $8.5 million for the three months ended September 30, 2017 and 2016, respectively. Depreciation expense was $29.5 million and $25.5 million for the nine months ended September 30, 2017 and 2016, respectively. 

Amortization expense related to the Company’s intangible lease assets was $1.2 million and $0.2 million for the three months ended September 30, 2017 and 2016, respectively. Amortization expense related to the Company’s intangible lease assets was $6.4 million and $0.9 million for the nine months ended September 30, 2017 and 2016, respectively. Amortization expense related to the Company’s intangible lease assets for all acquisitions completed through September 30, 2017 is expected to be $2.0 million for the remainder of the year ended December 31, 2017. Due to the six-month useful life attributable to intangible lease assets, the value of intangible lease assets on any acquisition prior to March 31, 2017 has been fully amortized and the assets and related accumulated amortization have been written off as of September 30, 2017.

Acquisitions

The following table presents the Company’s acquisitions of real estate during the nine months ended September 30, 2017 (dollars in thousands); the Company acquired one property for approximately $22.4 million during the nine months ended September 30, 2016 (see Notes 3, 4 and 6). 

Property Name	Location	Date of Acquisition	Purchase Price		Debt (1)		# Units		Effective Ownership
Hollister Place	Houston, Texas	February 1, 2017	$	24,500	$	24,500		260		100	%
Rockledge Apartments	Marietta, Georgia	June 30, 2017		113,500		113,500		708		100	%
			$	138,000	$	138,000		968

(1) For additional information regarding the Company’s debt, see Note 6.

Dispositions

The following table presents the Company’s sales of real estate during the nine months ended September 30, 2017 (in thousands). The Company sold seven properties for approximately $134.0 million during the nine months ended September 30, 2016.

Property Name		Location	Date of Sale	Sales Price		Net Cash Proceeds(1)			Gain on Sale of Real Estate
The Miramar Apartments	(2)	Dallas, Texas	April 3, 2017	$	16,550	$	16,326		$	6,368
Toscana	(3)	Dallas, Texas	April 3, 2017		13,250		13,040			4,283
The Grove at Alban		Frederick, Maryland	April 3, 2017		27,500		27,021			4,514
Twelve 6 Ten at the Park	(2)	Dallas, Texas	April 27, 2017		26,600		26,349			4,731
Regatta Bay	(4)	Seabrook, Texas	July 14, 2017		28,200		27,670			10,423
The Arbors, The Crossings, The Crossings at Holcomb Bridge and The Knolls	(5)	Atlanta, Georgia	September 29, 2017		116,000		114,010			48,067
				$	228,100	$	224,416	(6)	$	78,386

(1) Represents sales price, net of closing costs.

(2) The Company completed the reverse 1031 Exchange of Old Farm with the sales of The Miramar Apartments and Twelve 6 Ten at the Park.

(3) The Company completed the reverse 1031 Exchange of Stone Creek at Old Farm with the sale of Toscana.

(4) The Company completed the reverse 1031 Exchange of Hollister Place with the sale of Regatta Bay.

(5) Properties were sold as a portfolio. The Company completed the reverse 1031 Exchange of Rockledge Apartments with the sales of The Arbors, The Crossings, The Crossings at Holcomb Bridge and The Knolls (the “NAVA Portfolio”). Approximately $14.1 million of the proceeds from the sale of the NAVA Portfolio was placed with a qualified intermediary for use in a forward 1031 Exchange that was completed on October 25, 2017 (see Note 13).

(6) During the nine months ended September 30, 2017, the Company used cash on hand plus its share of the proceeds, net of mortgage repayments and distributions to noncontrolling interests, from the sales of these properties to repay the entire $30.0 million outstanding on its 2016 bridge facility, which retired the bridge facility, to pay down $10.0 million on its $30.0 million credit facility and to pay down approximately $11.3 million on its 2017 bridge facility (see Note 6).

Other Activity

In August and September 2017, parts of Texas and Florida were hit by two hurricanes, causing severe property damage in the affected areas. As of September 30, 2017, the Company owned three properties in the Houston area, two properties in the Miami area, two properties in the Tampa Bay area, and two properties in the Orlando area. The Company’s properties in these areas suffered minimal damage, which the Company estimates to be approximately $40,000.

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Debt

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Debt

6. Debt

Mortgage Debt

The following table contains summary information concerning the mortgage debt of the Company as of September 30, 2017 (dollars in thousands):

Operating Properties		Type	Term(months)		Outstanding Principal (1)				Interest Rate (2)		Maturity Date
Arbors on Forest Ridge	(3)	Floating		84	$	13,130				2.91%	7/1/2024
Cutter's Point	(3)	Floating		84		16,640				2.91%	7/1/2024
Eagle Crest	(3)	Floating		84		29,510				2.91%	7/1/2024
Silverbrook	(3)	Floating		84		30,590				2.91%	7/1/2024
Edgewater at Sandy Springs	(3)	Floating		84		52,000				2.91%	7/1/2024
Beechwood Terrace	(3)	Floating		84		20,150				2.91%	7/1/2024
Willow Grove	(3)	Floating		84		14,818				3.01%	7/1/2024
Woodbridge	(3)	Floating		84		13,677				3.01%	7/1/2024
The Summit at Sabal Park	(3)	Floating		84		13,560				2.85%	7/1/2024
Courtney Cove	(3)	Floating		84		13,680				2.85%	7/1/2024
The Preserve at Terrell Mill	(3)	Floating		84		42,480				2.85%	7/1/2024
The Ashlar	(3)	Floating		84		14,520				2.85%	7/1/2024
Heatherstone	(3)	Floating		84		8,880				2.85%	7/1/2024
Versailles	(3)	Floating		84		23,880				2.85%	7/1/2024
Seasons 704 Apartments	(3)	Floating		84		17,460				2.85%	7/1/2024
Madera Point	(3)	Floating		84		15,150				2.85%	7/1/2024
The Pointe at the Foothills	(3)	Floating		84		34,800				2.85%	7/1/2024
Venue at 8651	(3)	Floating		84		13,734				3.01%	7/1/2024
The Colonnade	(3)	Floating		84		28,093				2.91%	7/1/2024
Old Farm	(3)	Floating		84		52,886				2.91%	7/1/2024
Stone Creek at Old Farm	(3)	Floating		84		15,274				2.91%	7/1/2024
Timber Creek	(4)	Floating		120		19,482				3.05%	10/1/2024
Radbourne Lake	(4)	Floating		120		19,213				3.04%	10/1/2024
Sabal Palm at Lake Buena Vista	(4)	Floating		120		37,680				3.04%	12/1/2024
Abbington Heights	(5)	Fixed		120		10,053				3.79%	9/1/2022
Belmont at Duck Creek	(6)	Fixed		84		10,995				4.68%	9/1/2018
Cornerstone	(7)	Fixed		120		22,771				4.24%	3/1/2023
Parc500	(8)	Fixed		120		15,793				4.49%	8/1/2025
Hollister Place	(3)	Floating		84		13,475				3.47%	2/1/2024
Rockledge Apartments	(3)	Floating		84		68,100				2.80%	7/1/2024
					$	702,474
Fair market value adjustment						852		(9)
Deferred financing costs, net of accumulated amortization of $592						(8,358	)
					$	694,968
Held for Sale Properties
Timberglen	(3)	Floating		84		17,226				3.11%	7/1/2024
Southpoint Reserve at Stoney Creek	(3)	Floating		84		13,600				3.34%	1/1/2022
					$	30,826
Deferred financing costs, net of accumulated amortization of $80						(499	)
					$	30,327

(1) Mortgage debt that is non-recourse to the Company and encumbers the multifamily properties.

(2) Interest rate is based on one-month LIBOR plus an applicable margin, except for fixed rate mortgage debt. One-month LIBOR as of September 30, 2017 was 1.2322%.

(3) Loan can be pre-paid in the first 12 months of the term at par plus 5.00%. Starting in the 13^th month of the term through the 81^st month of the term, the loan can be pre-paid at par plus 1.00% of the unpaid principal balance and at par during the last three months of the term.

(4) Loan can be pre-paid in the first 12 months of the term at par plus 5.00%. Starting in the 13^th month of the term through the 116^th month of the term, the loan can be pre-paid at par plus 1.00% of the unpaid principal balance and at par during the last four months of the term.

(5) Debt was assumed upon acquisition of this property at approximated fair value. The loan is open to pre-payment in the last three months of the term.

(6) Debt was assumed upon acquisition of this property at approximated fair value. The loan is open to pre-payment in the last six months of the term.

(7) Debt in the amount of $18.0 million was assumed upon acquisition of this property at approximated fair value. The assumed debt carries a 4.09% fixed rate, was originally issued in March 2013, and had a term of 120 months with an initial 24 months of interest only. At the time of acquisition, the principal balance of the first mortgage remained unchanged and had a remaining term of 98 months with 2 months of interest only. The first mortgage is pre-payable and subject to yield maintenance from month 13 through August 31, 2022 and is pre-payable at par September 1, 2022 until maturity. Concurrently with the acquisition of the property, the Company placed a supplemental second mortgage on the property with a principal amount of approximately $5.8 million, a fixed rate of 4.70%, and with a maturity date that is the same time as the first mortgage. The supplemental second mortgage is pre-payable and subject to yield maintenance from the date of issuance through August 31, 2022 and is pre-payable at par September 1, 2022 until maturity. As of September 30, 2017, the total indebtedness secured by the property had a blended interest rate of 4.24%.

(8) Debt was assumed upon acquisition of this property at approximated fair value. The loan is open to pre-payment in the last four months of the term.

(9) The Company reflected valuation adjustments on its fixed rate debt for Belmont at Duck Creek and Parc500 to adjust it to fair market value on the date of acquisition for the difference between the fair value and the assumed principal amount of debt. The difference is amortized into interest expense over the remaining terms of the mortgages. 

On June 30, 2017, the Company entered into 22 first mortgages, with a combined principal amount of $502.1 million, on certain of its properties, replacing the $168.4 million of existing mortgage debt outstanding on nine properties and the $300.0 million outstanding under a credit facility (the “$300 Million Credit Facility”). The refinancing of the existing mortgage debt incurred approximately $1.7 million of prepayment penalties, which is included in loss on extinguishment of debt and modification costs on the consolidated statements of operations and comprehensive income. The Federal Home Loan Mortgage Corporation (“Freddie Mac”), who was the lender on the existing mortgage debt and the $300 Million Credit Facility, also originated the 22 new first mortgages (the “Freddie Refinance”). In accordance with FASB ASC 470-50, Debt – Modifications and Extinguishments, the Company accounted for the refinancing as a modification of a debt instrument. As such, the existing $4.9 million of net deferred financing costs related to the prior mortgage debt and credit facility debt is included with the approximately $2.9 million of deferred financing costs incurred in connection with the modification. Such costs are recorded as a reduction from mortgages payable on the accompanying consolidated balance sheet as of September 30, 2017 and are amortized over the terms of the new mortgage debt. Additionally, the Company incurred approximately $2.0 million of costs in connection with the Freddie Refinance that were not capitalized as deferred financing costs. Such costs are recorded in loss on extinguishment of debt and modification costs on the accompanying consolidated statements of operations and comprehensive income. The Company used approximately $16.3 million of proceeds from the Freddie Refinance to fund a portion of the purchase of joint venture interests in the Portfolio held by noncontrolling interests (the “BH Buyout”) (see Note 10).

The following nine properties had existing mortgage debt that was refinanced: The Summit at Sabal Park, Courtney Cove, The Preserve at Terrell Mill, The Ashlar, Heatherstone, Versailles, Seasons 704 Apartments, Madera Point and The Pointe at the Foothills. The following twelve properties, which were refinanced as described above, were previously cross-collateralized as security for the $300 Million Credit Facility: Arbors on Forest Ridge, Cutter’s Point, Eagle Crest, Silverbrook, Timberglen, Edgewater at Sandy Springs, Beechwood Terrace, Willow Grove, Woodbridge, Venue at 8651, Old Farm and Stone Creek at Old Farm. The Colonnade, which obtained a first mortgage as described above, was not previously encumbered by mortgage debt or credit facility debt.

During the nine months ended September 30, 2017, the Company sold nine properties and repaid the related mortgage loans that encumbered eight of the properties, as detailed in the table below (in thousands):

Property Name		Date of Sale	Type	Outstanding Principal (1)
The Miramar Apartments		April 3, 2017	Floating	$	8,400
The Grove at Alban		April 3, 2017	Floating		18,374
Twelve 6 Ten at the Park		April 27, 2017	Floating		15,711
Regatta Bay		July 14, 2017	Floating		14,000
The Arbors, The Crossings, The Crossings at Holcomb Bridge and The Knolls	(2)	September 29, 2017	Floating		50,177
				$	106,662

(1) Represents the outstanding principal balance when the loan was repaid.

(2) Properties were sold as a portfolio.

The ninth property the Company sold, Toscana, was released from the collateral pool of the $300 Million Credit Facility upon its sale on April 3, 2017. The Company incurred prepayment penalties of approximately $0.9 million in connection with the payoff of these mortgage loans and $0.1 million of fees in connection with the release of Toscana, both of which are included in loss on extinguishment of debt and modification costs on the consolidated statements of operations and comprehensive income.

The weighted average interest rate of the Company’s mortgage indebtedness was 3.04% as of September 30, 2017 and 2.95% as of December 31, 2016. The increase between the periods is primarily related to increases in LIBOR, partially offset by a weighted average reduction of 57 basis points in the borrowing spread related to the Freddie Refinance. As of September 30, 2017, the adjusted weighted average interest rate of the Company’s mortgage indebtedness was 3.14%. For purposes of calculating the adjusted weighted average interest rate of the outstanding mortgage indebtedness, the Company has included the weighted average fixed rate of 1.3388% on its combined $650.0 million notional amount of interest rate swap agreements, which effectively fix the interest rate on $650.0 million of the Company’s floating rate mortgage indebtedness (see Note 7). The interest rate cap agreements the Company has entered into effectively cap one-month LIBOR on $293.2 million of the Company’s floating rate mortgage indebtedness at a weighted average rate of 4.20% (see Note 7).

Each of the Company’s mortgages is a non-recourse obligation subject to customary provisions. The loan agreements contain customary events of default, including defaults in the payment of principal or interest, defaults in compliance with the covenants contained in the documents evidencing the loan, defaults in payments under any other security instrument covering any part of the property, whether junior or senior to the loan, and bankruptcy or other insolvency events. As of September 30, 2017, the Company believes it is in compliance with all provisions.

Freddie Mac Multifamily Green Advantage. In order to obtain more favorable pricing on the Company’s mortgage debt financing with Freddie Mac, the Company has decided to participate in Freddie Mac’s new Multifamily Green Advantage program. The Company has escrowed approximately $4.2 million to finance smarter, greener property improvements at 20 of its properties, which will be completed by the summer of 2019. The Company plans to reduce water/sewer costs at each property by at least 15% through the replacement of showerheads, plumbing fixtures and toilets with modern energy efficient upgrades. By participating in this program, the Company was able to lower the interest rate on the properties it refinanced in the Freddie Refinance by 10 basis points.

Credit and Bridge Facilities

The following table contains summary information concerning the Company’s credit and bridge facilities as of September 30, 2017 (dollars in thousands):

	Type	Term(months)		Amortization (months)		Outstanding Principal			Interest Rate (1)		Maturity Date
$30 Million Credit Facility	Floating		24		360	$	30,000			5.23%	12/29/2018
Deferred financing costs, net of accumulated amortization of $115							(197	)
						$	29,803
2017 Bridge Facility	Floating		4		360	$	54,597			4.98%	10/31/2017
Deferred financing costs, net of accumulated amortization of $198							(66	)
						$	54,531

(1) Interest rate is based on one-month LIBOR plus an applicable margin. One-month LIBOR as of September 30, 2017 was 1.2322%.

$30 Million Credit Facility. On December 29, 2016, the Company, through the OP, entered into a $30.0 million credit facility (the “$30 Million Credit Facility”) and immediately drew $15.0 million to fund a portion of the purchase price of Old Farm and Stone Creek at Old Farm. On February 1, 2017, the Company drew $14.0 million and used $12.0 million to fund a portion of the purchase price of Hollister Place and $2.0 million to fund value-add renovations at the Company’s properties. In April 2017, the Company used cash on hand plus its share of the proceeds, net of distributions to noncontrolling interests, from four properties it sold to pay down $10.0 million on the $30 Million Credit Facility. On June 30, 2017, the Company drew $11.0 million to fund a portion of the BH Buyout. The $30 Million Credit Facility is a full-term, interest-only facility, has one 12-month extension option and is guaranteed by the OP.

2017 Bridge Facility. On June 30, 2017, the Company, through the OP, entered into a $65.9 million bridge facility (the “2017 Bridge Facility”) with KeyBank. The Company drew $44.5 million to fund a portion of the purchase price of Rockledge Apartments and $21.4 million to fund a portion of the BH Buyout. In July 2017, the Company used proceeds from the sale of Regatta Bay to pay down $11.3 million on the 2017 Bridge Facility. The 2017 Bridge Facility is a full-term, interest-only facility with an initial four-month term (see below) and is guaranteed by the Company. Interest accrues on the 2017 Bridge Facility at an interest rate of one-month LIBOR plus 3.75%. In October 2017, the Company used proceeds from the sale of the NAVA Portfolio to pay down approximately $46.0 million on the 2017 Bridge Facility, bringing the outstanding balance to approximately $8.6 million, and also extended the maturity date to March 31, 2018 (see Note 13). The Company intends on paying the outstanding principal balance of the 2017 Bridge Facility with proceeds from the sales of properties classified as held for sale as of September 30, 2017 or cash on hand.

The credit and bridge facilities agreements contain customary provisions with respect to events of default, covenants and borrowing conditions. Certain prepayments may be required upon a breach of covenants or borrowing conditions. As of September 30, 2017, the Company believes it is in compliance with all provisions of the agreements.

$300 Million Credit Facility. On June 6, 2016, the Company, through certain of its subsidiaries, entered into a $200.0 million credit facility, which was expanded to $300.0 million (the “$300 Million Credit Facility”) during the fourth quarter of 2016 to acquire three properties. The $300 Million Credit Facility was cross-collateralized by the following 12 properties: Arbors on Forest Ridge, Cutter’s Point, Eagle Crest, Silverbrook, Timberglen, Edgewater at Sandy Springs, Beechwood Terrace, Willow Grove, Woodbridge, Venue at 8651, Old Farm and Stone Creek at Old Farm.

On June 30, 2017, in connection with the Freddie Refinance, the Company repaid and retired the $300 Million Credit Facility. The refinancing of this existing credit facility debt did not incur prepayment penalties.

2016 Bridge Facility. On December 29, 2016, the Company, through the OP, entered into a $30.0 million bridge facility (the “2016 Bridge Facility”) with KeyBank and drew $30.0 million to fund a portion of the purchase price of Old Farm and Stone Creek at Old Farm. In April 2017, the Company paid down the entire $30.0 million of principal on the 2016 Bridge Facility, which was funded with its share of the proceeds, net of distributions to noncontrolling interests, from properties the Company sold in April 2017. The 2016 Bridge Facility was retired on April 28, 2017.

Deferred Financing Costs

The Company defers costs incurred in obtaining financing and amortizes the costs over the terms of the related loans using the straight-line method, which approximates the effective interest method. Deferred financing costs, net of amortization, are recorded as a reduction from the related debt on the Company’s consolidated balance sheets. Upon repayment of or in conjunction with a material change in the terms of the underlying debt agreement, any unamortized costs are charged to loss on extinguishment of debt and modification costs (see “Loss on Extinguishment of Debt and Modification Costs” below). For the three months ended September 30, 2017 and 2016, the Company wrote-off deferred financing costs of $0.6 million and $0.4 million, respectively, which is included in loss on extinguishment of debt and modification costs on the consolidated statements of operations and comprehensive income. For the nine months ended September 30, 2017 and 2016, the Company wrote-off deferred financing costs of $1.0 million and $0.7 million, respectively, which is included in loss on extinguishment of debt and modification costs on the consolidated statements of operations and comprehensive income. Amortization of deferred financing costs of $0.6 million and $0.4 million is included in interest expense on the consolidated statements of operations and comprehensive income for the three months ended September 30, 2017 and 2016, respectively. Amortization of deferred financing costs of $1.5 million and $1.1 million is included in interest expense on the consolidated statements of operations and comprehensive income for the nine months ended September 30, 2017 and 2016, respectively.

Loss on Extinguishment of Debt and Modification Costs

Upon repayment of or in conjunction with a material change (i.e. a 10% or greater difference in the cash flows between instruments) in the terms of an underlying debt agreement, the Company writes off any unamortized deferred financing costs related to the original debt. Loss on extinguishment of debt and modification costs also includes prepayment penalties incurred on the early repayment of debt and costs incurred in a debt modification that are not capitalized as deferred financing costs.

Schedule of Debt Maturities

The aggregate scheduled maturities, including amortizing principal payments, of total debt for the next five calendar years subsequent to September 30, 2017 are as follows (in thousands):

	Operating Properties & Other Secured Debt		Held For Sale Properties		Total
2017	$	54,993	$	—	$	54,993
2018		43,352		276		43,628
2019		2,448		309		2,757
2020		2,483		316		2,799
2021		2,531		326		2,857
Thereafter		681,264		29,599		710,863
Total	$	787,071	$	30,826	$	817,897

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Fair Value of Derivative and Financial Instruments

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value Measures and Derivative Financial Instruments

7. Fair Value of Derivatives and Financial Instruments

Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. As a basis for considering market participant assumptions in fair value measurements, FASB ASC 820, Fair Value Measurement and Disclosures, establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy):

• Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.

• Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals.

• Level 3 inputs are the unobservable inputs for the asset or liability, which are typically based on an entity’s own assumption, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on input from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

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. The Company utilizes independent third parties to perform the allocation of value analysis for each property acquisition and to perform the market valuations on its derivative financial instruments and has established policies, as described above, processes and procedures intended to ensure that the valuation methodologies for investments and derivative financial instruments are fair and consistent as of the measurement date.

Derivative Financial Instruments and Hedging Activities

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

The Company utilizes an independent third party to perform the market valuations on its derivative financial instruments. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The fair values of interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. To comply with the provisions of ASC 820, the Company incorporates credit valuation adjustments to appropriately reflect both the Company’s own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of the Company’s derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with the Company’s derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. The Company has determined that the significance of the impact of the credit valuation adjustments made to its derivative contracts, which determination was based on the fair value of each individual contract, was not significant to the overall valuation. As a result, all of the Company’s derivatives held as of September 30, 2017 and December 31, 2016 were classified as Level 2 of the fair value hierarchy.

The Company’s main objective in using interest rate derivatives is to add stability to interest expense related to floating rate debt. To accomplish this objective, the Company primarily uses interest rate swaps and caps as part of its interest rate risk management strategy. Interest rate swaps involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The interest rate swaps have terms ranging from four to five years. Interest rate caps involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. The interest rate caps have terms ranging from three to four years. During the nine months ended September 30, 2017 and 2016, such derivatives were used to hedge the variable cash flows associated with a majority of the Company’s floating rate debt. The interest rate cap agreements the Company has entered into effectively cap one-month LIBOR on $293.2 million of the Company’s floating rate mortgage indebtedness at a weighted average rate of 4.20%.

The effective portion of changes in the fair value of derivative financial instruments that are designated as cash flow hedges is recorded in other comprehensive income (loss) (“OCI”) and is subsequently reclassified into net income (loss) in the period that the hedged forecasted transaction affects earnings. Amounts reported in OCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s floating rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in net income (loss) as interest expense. During the three months ended September 30, 2017 and 2016, the Company recorded less than $0.1 million and $0.6 million, respectively, of gain related to the ineffective portion of changes in the fair value of its derivatives designated as cash flow hedges, which is recorded as a reduction to interest expense on the accompanying consolidated statements of operations and comprehensive income. During the nine months ended September 30, 2017 and 2016, the Company recorded approximately $0.1 million and $0.6 million, respectively, of gain related to the ineffective portion of changes in the fair value of its derivatives designated as cash flow hedges. As of September 30, 2016, the Company had four interest rate swap derivatives, with a notional amount of $400.0 million, designated as cash flow hedges.

In order to fix a portion of, and mitigate the risk associated with, the Company’s floating rate indebtedness (without incurring substantial prepayment penalties or defeasance costs typically associated with fixed rate indebtedness when repaid early or refinanced), the Company, through the OP, has entered into seven interest rate swap transactions with KeyBank (the “Counterparty”) with a combined notional amount of $650.0 million. The interest rate swaps the Company has entered into effectively replace the floating interest rate (one-month LIBOR) with respect to that amount with a weighted average fixed rate of 1.3388%. The Company has designated these interest rate swaps as cash flow hedges of interest rate risk.

As of September 30, 2017, the Company had the following outstanding interest rate swaps that were designated as cash flow hedges of interest rate risk (dollars in thousands):

Effective Date	Termination Date	Notional		Fixed Rate				Floating Rate Option (1)
July 1, 2016	June 1, 2021	$	100,000		1.1055	%		One-month LIBOR
July 1, 2016	June 1, 2021		100,000		1.0210	%		One-month LIBOR
July 1, 2016	June 1, 2021		100,000		0.9000	%		One-month LIBOR
September 1, 2016	June 1, 2021		100,000		0.9560	%		One-month LIBOR
April 1, 2017	April 1, 2022		100,000		1.9570	%		One-month LIBOR
May 1, 2017	April 1, 2022		50,000		1.9610	%		One-month LIBOR
July 1, 2017	July 1, 2022		100,000		1.7820	%		One-month LIBOR
		$	650,000		1.3388	%	(2)

(1) As of September 30, 2017, one-month LIBOR was 1.2322%.

(2) Represents the weighted average fixed rate of the interest rate swaps.

Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements but either do not meet the strict requirements to apply hedge accounting in accordance with FASB ASC 815, Derivatives and Hedging, or the Company has elected not to designate such derivatives. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in net income (loss) as interest expense. As of September 30, 2016, the Company had 36 interest rate cap derivatives, with a notional amount of $578.3 million, which were not designated as hedges in qualifying hedging relationships.

As of September 30, 2017, the Company had the following outstanding derivatives that were not designated as hedges in qualifying hedging relationships (dollars in thousands):

Product	Number of Instruments		Notional
Interest rate caps		17	$	293,184

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of September 30, 2017 and December 31, 2016 (in thousands):

		Asset Derivatives				Liability Derivatives
	Balance Sheet Location	September 30, 2017		December 31, 2016		September 30, 2017			December 31, 2016
Derivatives designated as hedging instruments:
Interest rate swaps	Fair market value of interest rate swaps	$	11,759	$	12,413	$	713	(1)	$	—
Derivatives not designated as hedging instruments:
Interest rate caps	Prepaid and other assets		—		5		—			—
Total		$	11,759	$	12,418	$	713		$	—

(1) Included in accounts payable and other accrued liabilities on the consolidated balance sheet.

The tables below present the effect of the Company’s derivative financial instruments on the consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2017 and 2016 (in thousands):

	Amount of gain (loss) recognized in OCI on derivative (effective portion)						Location of gain (loss) reclassified from accumulated OCI into income	Amount of gain (loss) reclassified from accumulated OCI into income (effective portion)						Location of gain (loss) recognized in income on derivative	Amount of gain (loss) recognized in income on derivative (ineffective portion)*
	2017			2016			(effective portion)	2017			2016			(ineffective portion)*	2017				2016
Derivatives designated as hedging instruments:
For the three months ended September 30,
Interest rate products		(241	)		(1,576	)	Interest expense		(360	)		(479	)	Interest expense		(63	)	(1)		599
For the nine months ended September 30,
Interest rate products		(2,162	)		(1,619	)	Interest expense		(1,142	)		(491	)	Interest expense		(88	)	(2)		599

* Includes amounts excluded from effectiveness testing.

(1) Includes approximately $90,000 of loss reclassified from OCI for missed forecasted transactions due to hedged forecasted transactions being no longer probable.

(2) Includes approximately $185,000 of loss reclassified from OCI for missed forecasted transactions due to hedged forecasted transactions being no longer probable.

	Location of gain (loss)	Amount of gain (loss) recognized in income on derivative
	recognized in income	2017			2016
Derivatives not designated as hedging instruments:
For the three months ended September 30,
Interest rate products	Interest expense		—			(2	)
For the nine months ended September 30,
Interest rate products	Interest expense		(5	)		(8	)

Other Financial Instruments Carried at Fair Value

Redeemable noncontrolling interests in the OP have a redemption feature and are marked to their redemption value if such value exceeds the carrying value of the redeemable noncontrolling interests in the OP (see Note 10). The redemption value is based on the fair value of the Company’s common stock at the redemption date, and therefore, is calculated based on the fair value of the Company’s common stock at the balance sheet date. Since the valuation is based on observable inputs such as quoted prices for similar instruments in active markets, redeemable noncontrolling interests in the OP are classified as Level 2 if they are adjusted to their redemption value.

Financial Instruments Not Carried at Fair Value

At September 30, 2017 and December 31, 2016, the fair values of cash and cash equivalents, restricted cash, accounts receivable, prepaid assets, accounts payable and other accrued liabilities, accrued real estate taxes payable, accrued interest payable, security deposits and prepaid rent approximated their carrying values because of the short term nature of these instruments. The estimated fair values of other financial instruments were determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company would realize on the disposition of the financial instruments. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts.

Long-term indebtedness is carried at amounts that reasonably approximate their fair value. In calculating the fair value of its long-term indebtedness, the Company used interest rate and spread assumptions that reflect current credit worthiness and market conditions available for the issuance of long-term debt with similar terms and remaining maturities. These financial instruments utilize Level 2 inputs.

Real estate assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In such cases, the Company will evaluate the recoverability of such real estate assets based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provide for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate asset. If impaired, the real estate asset will be written down to its estimated fair value. There can be no assurance that the estimates discussed herein, using Level 3 inputs, are indicative of the amounts the Company could realize on disposition of the real estate asset. For the nine months ended September 30, 2017 and 2016, the Company did not record any impairment charges related to real estate assets.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Stockholders' Equity

8. Stockholders’ Equity

Common Stock

The Company began operations on March 31, 2015 as a result of the Spin-Off. During the three and nine months ended September 30, 2017, the Company issued 110,257 shares of common stock pursuant to its long-term incentive plan and retired 308,313 shares of common stock it had repurchased pursuant to its share repurchase program (see “Share Repurchase Program” and “Long Term Incentive Plan” below). As of September 30, 2017, the Company had 21,095,769 shares of common stock, $0.01 par value per share, issued and outstanding.

Share Repurchase Program

On June 15, 2016, the Board authorized the repurchase by the Company of up to $30.0 million of its common stock, $0.01 par value per share. This authorization expires on June 15, 2018. The Company may utilize various methods to effect the repurchases, and the timing and extent of the repurchases will depend upon several factors, including market and business conditions, regulatory requirements and other corporate considerations, including whether the Company’s common stock is trading at a significant discount to net asset value per share. Repurchases under this program may be discontinued at any time. During the nine months ended September 30, 2017, the Company repurchased 58,157 shares of its common stock, $0.01 par value per share, at a total cost of approximately $1,354,000, or $23.27 per share. As of September 30, 2017, the Company has repurchased 308,313 shares of its common stock, $0.01 par value per share, at a total cost of approximately $5,941,000, or $19.27 per share.

Treasury Stock

From time to time, in accordance with the Company’s share repurchase program, the Company may repurchase shares of its common stock in the open market. Until any such shares are retired, the cost of the shares is included in common stock held in treasury at cost on the consolidated balance sheet. The number of shares of common stock classified as treasury shares reduces the number of shares of the Company’s common stock outstanding and, accordingly, are considered in the weighted average number of shares outstanding during the period. During the nine months ended September 30, 2017, the Company retired 308,313 shares of its common stock held in treasury. As of September 30, 2017 and December 31, 2016, the Company had 0 shares and 250,156 shares, respectively, of common stock held in treasury.

Long Term Incentive Plan

On June 15, 2016, the Company’s stockholders approved a long-term incentive plan (the “2016 LTIP”) and the Company filed a registration statement on Form S-8 registering 2,100,000 shares of common stock, $0.01 par value per share, that the Company may issue pursuant to the 2016 LTIP. The 2016 LTIP authorizes the compensation committee of the Board to provide equity-based compensation in the form of stock options, appreciation rights, restricted shares, restricted stock units, performance shares, performance units and certain other awards denominated or payable in, or otherwise based on, the Company’s common stock or factors that may influence the value of the Company’s common stock, plus cash incentive awards, for the purpose of providing the Company’s directors, officers and other key employees (and those of the Adviser and the Company’s subsidiaries), the Company’s non-employee directors, and potentially certain non-employees who perform employee-type functions, incentives and rewards for performance.

Restricted Stock Units. Under the 2016 LTIP, restricted stock units may be granted to the Company’s directors, officers and other key employees (andthose of the Adviser and the Company’s subsidiaries) and typically vest over a three to four year period for officers and annually for directors. Beginning on the date of grant, restricted stock units earn dividends that are payable in cash on the vesting date. On August 11, 2016, pursuant to the 2016 LTIP, the Company granted 209,797 restricted stock unitsto its directors and officers. On March 16, 2017, pursuant to the 2016 LTIP, the Company granted 219,802 restricted stock units to its directors and officers.The following table includes the number of restricted stock units granted, vested, forfeited and outstanding as of September 30, 2017:

	2017
	Number of Units				Weighted Average Grant Date Fair Value
Outstanding January 1,		209,797			$	19.20
Granted		219,802				22.57
Vested		(110,257	)			19.20
Forfeited		—				—
Outstanding September 30,		319,342		(1)	$	21.52

(1) 49,768 restricted stock units vest in August 2018 and 49,772 restricted stock units vest in August 2019. 80,742 restricted stock units vest in March 2018 and 69,530 restricted stock units vest in each of March 2019 and March 2020.

As of September 30, 2017, the Company has issued 110,257 shares of common stock under the 2016 LTIP. For the three months ended September 30, 2017 and 2016, the Company recognized approximately $0.8 million and $0.3 million, respectively, of equity-based compensation expense related to grants of restricted stock units, which is included in corporate general and administrative expenses on the consolidated statements of operations and comprehensive income. For the nine months ended September 30, 2017 and 2016, the Company recognized approximately $2.4 million and $0.3 million, respectively, of equity-based compensation expense related to grants of restricted stock units. As of September 30, 2017, the Company has recognized a liability of approximately $0.3 million related to dividends earned on restricted stock units that are payable in cash upon vesting.

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Earnings (Loss) Per Share

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Earnings (Loss) Per Share

9. Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of the Company’s common stock outstanding, which is adjusted for shares classified as treasury shares during the period and excludes any unvested restricted stock units issued pursuant to the 2016 LTIP. Diluted earnings (loss) per share is computed by adjusting basic earnings (loss) per share for the dilutive effect of the assumed vesting of restricted stock units. During periods of net loss, the assumed vesting of restricted stock units is anti-dilutive and is not included in the calculation of earnings (loss) per share.

The effect of the conversion of OP Units held by noncontrolling limited partners is not reflected in the computation of basic and diluted earnings (loss) per share, as they are exchangeable for common stock on a one-for-one basis. The income (loss) allocable to such units is allocated on this same basis and reflected as net income attributable to redeemable noncontrolling interests in the Operating Partnership in the accompanying consolidated statements of operations and comprehensive income. As such, the assumed conversion of these units would have no net impact on the determination of diluted earnings (loss) per share. See Note 10 for additional information.

The following table sets forth the computation of basic and diluted earnings per share for the periods presented (in thousands, except per share amounts):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
Numerator for earnings per share:
Net income	$	54,076	$	8,825	$	60,702	$	25,712
Net income attributable to noncontrolling interests		—		1,735		2,836		4,047
Net income attributable to redeemable noncontrolling interests in the Operating Partnership		162		—		162		—
Net income attributable to common stockholders	$	53,914	$	7,090	$	57,704	$	21,665
Denominator for earnings per share:
Weighted average common shares outstanding		21,085		21,260		21,057		21,282
Denominator for basic earnings per share		21,085		21,260		21,057		21,282
Unvested restricted stock units		368		116		350		40
Denominator for diluted earnings per share		21,453		21,376		21,407		21,322
Earnings per weighted average common share:
Basic	$	2.56	$	0.33	$	2.74	$	1.02
Diluted	$	2.51	$	0.33	$	2.70	$	1.02

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Noncontrolling Interests

9 Months Ended

Sep. 30, 2017

Noncontrolling Interest [Abstract]

Noncontrolling Interests

10. Noncontrolling Interests

Redeemable Noncontrolling Interests in the OP

Interests in the OP held by limited partners are represented by OP Units. Net income (loss) is allocated to holders of OP Units based upon net income (loss) attributable to common stockholders and the weighted average number of OP Units outstanding to total common shares plus OP Units outstanding during the period. Capital contributions, distributions, and profits and losses are allocated to OP Units in accordance with the terms of the partnership agreement of the OP. Each time the OP distributes cash to the Company, outside limited partners of the OP receive their pro-rata share of the distribution.Redeemable noncontrolling interests in the OP have a redemption feature and are marked to their redemption value if such value exceeds the carrying value of the redeemable noncontrolling interests in the OP.

On June 30, 2017, the Company and the OP entered into a contribution agreement (the “Contribution Agreement”) with BH Equities, LLC and its affiliates (collectively, “BH Equity”), whereby the Company purchased 100% of the joint venture interests in the Portfolio owned by BH Equity, representing approximately 8.4% ownership in the Portfolio (the “BH Buyout”), for total consideration of approximately $51.7 million (the “Purchase Amount”). The Purchase Amount consisted of approximately $49.7 million in cash that was paid on June 30, 2017 and 73,233 OP Units (initially valued at $2.0 million) that were issued on August 1, 2017. The number of OP Units issued was calculated by dividing $2.0 million by the midpoint of the range of the Company’s net asset value as publicly disclosed in connection with the Company’s release of its second quarter of 2017 earnings results, which was $27.31 per share. The Company financed the cash portion of the Purchase Amount with $21.4 million of proceeds from the 2017 Bridge Facility, $16.3 million of proceeds from the Freddie Refinance, $11.0 million of proceeds from the $30 Million Credit Facility and $1.0 million of cash on hand.

In connection with the issuance of OP Units to BH Equity on August 1, 2017, the Company and the OP amended the partnership agreement of the OP (the “Amendment”). Pursuant to the Amendment, limited partners holding OP Units have the right to cause the OP to redeem their units at a redemption price equal to and in the form of the Cash Amount (as defined in the partnership agreement of the OP), provided that such OP Units have been outstanding for at least one year. The Company, through the OP GP, as the general partner of the OP may, in its sole discretion, purchase the OP Units by paying to the limited partner either the Cash Amount or the REIT Share Amount (one share of common stock of the Company for each OP Unit), as defined in the partnership agreement of the OP. Notwithstanding the foregoing, a limited partner will not be entitled to exercise its redemption right to the extent the issuance of the Company’s common stock to the redeeming limited partner would (1) be prohibited, as determined in the Company’s sole discretion, under the Company’s charter or (2) cause the acquisition of common stock by such redeeming limited partner to be "integrated" with any other distribution of the Company’s common stock for purposes of complying with the Securities Act of 1933, as amended. Accordingly, the Company records the OP Units held by noncontrolling limited partners outside of permanent equity and reports the OP Units at the greater of their carrying value or their redemption value using the Company’s stock price at each balance sheet date.

The following table sets forth the redeemable noncontrolling interests in the OP for the nine months ended September 30, 2017 (in thousands):

Redeemable noncontrolling interests in the OP, December 31, 2016	$	—
Issuance of redeemable noncontrolling interests in the OP		2,000
Net income attributable to redeemable noncontrolling interests in the OP		162
Other comprehensive income attributable to redeemable noncontrolling interests in the OP		1
Distributions to redeemable noncontrolling interests in the OP		(53	)
Redeemable noncontrolling interests in the OP, September 30, 2017	$	2,110

Noncontrolling Interests

Noncontrolling interests have in the past and may in the future be comprised of joint venture partners’ interests in joint ventures the Company consolidates. When applicable, the Company reports its joint venture partners’ interests in its consolidated joint ventures and other subsidiary interests held by third parties as noncontrolling interests. The Company records these noncontrolling interests at their initial fair value, adjusting the basis prospectively for their share of the respective consolidated investment’s net income or loss, equity contributions, return of capital, and distributions. Generally, these noncontrolling interests are not redeemable by the equity holders and are presented as part of permanent equity. Income and losses are allocated to the noncontrolling interest holder based on its economic ownership percentage.

During the period ended June 30, 2017, prior to the BH Buyout, the Company purchased 100% of the noncontrolling interests in three of its joint ventures for approximately $2.0 million. On June 30, 2017, in connection with the BH Buyout, the Company purchased 100% of the outstanding noncontrolling interests in its remaining joint ventures for approximately $51.7 million. On June 30, 2017, prior to the BH Buyout, the carrying value of such noncontrolling interests was approximately $20.5 million. On June 30, 2017, the Company eliminated the carrying value of such noncontrolling interests on its consolidated balance sheet. The remaining $31.2 million of the Purchase Amount resulted in a reduction to additional paid-in capital on the Company’s consolidated balance sheet.

In connection with the Contribution Agreement, the Company fully indemnified BH Equity on all non-recourse carve out guarantees it had previously provided for mortgage indebtedness secured by certain properties in the Portfolio. In consideration of the guarantees previously provided by BH Equity, it was entitled to an additional profit interest in each entity (the “Total Promote”) such that distributions were to be made to the members of the entity pro rata in proportion to their relative percentage interests until the members received an internal rate of return equal to 13%. Then, the proportion of distributions changed to a predetermined allocation according to the agreements between each entity and BH Equity. The Total Promote due by the Company to BH Equity was relinquished in connection with the BH Buyout.

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Related Party Transactions

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

Related Party Transactions

11. Related Party Transactions

Fees and Reimbursements to BH and its Affiliates

The Company has entered into management agreements with BH Management Services, LLC (“BH”), the Company’s property manager and an independently owned third party, who manages the Company’s properties and supervises the implementation of the Company’s value-add program. BH is an affiliate of BH Equity, who was a noncontrolling interest member of the Company’s joint ventures prior to the BH Buyout on June 30, 2017. Through BH Equity’s noncontrolling interests in such joint ventures, BH Equity was deemed to be a related party. With the completion of the BH Buyout, BH Equity is no longer deemed to be a related party. BH Equity became a noncontrolling limited partner of the OP upon execution of the Amendment. BH and its affiliates do not have common ownership in any joint venture with the Company’s Adviser; there is also no common ownership between BH and its affiliates and the Company’s Adviser.

The property management fee paid to BH is approximately 3% of the monthly gross income from each property managed. Currently, BH manages all of the Company’s properties. Additionally, the Company may pay BH certain other fees, including: (1) a fee of $15.00 per unit for the one-time setup and inspection of properties, (2) a construction supervision fee of 5-6% of total project costs, which is capitalized, (3) acquisition fees and due diligence costs reimbursements, and (4) other owner approved fees at $55 per hour. BH also acts as a paymaster for the properties and is reimbursed at cost for various operating expenses it pays on behalf of the properties. The following is a summary of fees that the properties incurred to BH and its affiliates, as well as reimbursements paid to BH from the properties for various operating expenses, for the three and nine months ended September 30, 2017 and 2016 (in thousands):

		For the Three Months Ended September 30,				For the Nine Months Ended September 30,
		2017		2016		2017		2016
Fees incurred
Property management fees	(1)	$	1,110	$	989	$	3,280	$	3,007
Construction supervision fees	(2)		213		247		651		624
Acquisition fees	(3)		—		139		505		139
Reimbursements
Payroll and benefits	(4)		4,131		4,140		11,855		12,212
Other reimbursements	(5)		432		460		1,457		1,465

(1) Included in property management fees on the consolidated statements of operations and comprehensive income.

(2) Capitalized on the consolidated balance sheets and reflected in buildings and improvements.

(3) Includes due diligence costs. Acquisition fees incurred prior to October 1, 2016 are included in acquisition costs on the consolidated statements of operations and comprehensive income. Acquisition fees incurred for the period beginning on October 1, 2016 are capitalized to operating real estate assets on the consolidated balance sheets.

(4) Included in property operating expenses on the consolidated statements of operations and comprehensive income.

(5) Includes property operating expenses such as repairs and maintenance costs and certain property general and administrative expenses, which are included on the consolidated statements of operations and comprehensive income.

Asset Management Fee

Until the BH Buyout on June 30, 2017, in accordance with the operating agreement of each entity that owns the properties, the Company earned an asset management fee for services provided in connection with monitoring the operations of the properties. The asset management fee was equal to 0.5% per annum of the aggregate effective gross income of the properties, as defined in each of the operating agreements. For the three and six months ended June 30, 2017, the properties incurred asset management fees to the Company of approximately $0.2 million and $0.4 million, respectively. For the three and nine months ended September 30, 2016, the properties incurred asset management fees to the Company of approximately $0.2 million and $0.5 million, respectively. Since the fees were paid to the Company (and not the Adviser) by consolidated properties, they have been eliminated in consolidation. However, because the Company’s previous joint venture partners owned a portion of each of a majority of the properties in the Portfolio, prior to the Company’s purchase of 100% of their joint venture interests, they absorbed their pro rata share of the asset management fee. This amount is reflected on the consolidated statements of operations and comprehensive income in the net income attributable to noncontrolling interests. 

Advisory and Administrative Fee

In accordance with the Advisory Agreement, the Company pays the Adviser an advisory fee equal to 1.00% of the Average Real Estate Assets (as defined below). The duties performed by the Company’s Adviser under the terms of the Advisory Agreement include, but are not limited to: providing daily management for the Company, selecting and working with third party service providers, managing the Company’s properties or overseeing the third party property manager, formulating an investment strategy for the Company and selecting suitable properties and investments, managing the Company’s outstanding debt and its interest rate exposure through derivative instruments, determining when to sell assets, and managing the value-add program or overseeing a third party vendor that implements the value-add program. “Average Real Estate Assets” means the average of the aggregate book value of Real Estate Assets before reserves for depreciation or other non-cash reserves, computed by taking the average of the book value of real estate assets at the end of each month (1) for which any fee under the Advisory Agreement is calculated or (2) during the year for which any expense reimbursement under the Advisory Agreement is calculated. “Real Estate Assets” is defined broadly in the Advisory Agreement to include, among other things, investments in real estate-related securities and mortgages and reserves for capital expenditures (the value-add program). The advisory fee is payable monthly in arrears in cash, unless the Adviser elects, in its sole discretion, to receive all or a portion of the advisory fee in shares of common stock, subject to certain limitations.

In accordance with the Advisory Agreement, the Company also pays the Adviser an administrative fee equal to 0.20% of the Average Real Estate Assets. The administrative fee is payable monthly in arrears in cash, unless the Adviser elects, in its sole discretion, to receive all or a portion of the administrative fee in shares of common stock, subject to certain limitations.

The advisory and administrative fees paid to the Adviser on the Contributed Assets (as defined below) are subject to an annual cap of approximately $5.4 million (the “Contributed Assets Cap”) (see “Expense Cap” below).

Pursuant to the terms of the Advisory Agreement, the Company will reimburse the Adviser for all documented Operating Expenses and Offering Expenses it incurs on behalf of the Company. “Operating Expenses” include legal, accounting, financial and due diligence services performed by the Adviser that outside professionals or outside consultants would otherwise perform, the Company’s pro rata share of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the Adviser required for the Company’s operations, and compensation expenses under the 2016 LTIP. Operating Expenses do not include expenses for the advisory and administrative services described in the Advisory Agreement. Certain Operating Expenses, such as the Company’s ratable share of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses incurred by the Adviser or its affiliates that relate to the operations of the Company, may be billed monthly to the Company under a shared services agreement. “Offering Expenses” include all expenses (other than underwriters’ discounts) in connection with an offering, including, without limitation, legal, accounting, printing, mailing and filing fees and other documented offering expenses. For the three and nine months ended September 30, 2017 and 2016, the Adviser did not bill any Operating Expenses or Offering Expenses to the Company and any such expenses the Adviser incurred during the periods are considered to be permanently waived.

Expense Cap

Pursuant to the terms of the Advisory Agreement, expenses paid or incurred by the Company for advisory and administrative fees payable to the Adviser and Operating Expenses will not exceed 1.5% of Average Real Estate Assets per calendar year (or part thereof that the Advisory Agreement is in effect (the “Expense Cap”)). The Expense Cap does not limit the reimbursement of expenses related to Offering Expenses. The Expense Cap also does not apply to legal, accounting, financial, due diligence and other service fees incurred in connection with mergers and acquisitions, extraordinary litigation or other events outside the Company’s ordinary course of business or any out-of-pocket acquisitions or due diligence expenses incurred in connection with the acquisition or disposition of real estate assets. Also, advisory and administrative fees are further limited on Contributed Assets to approximately $5.4 million in any calendar year. Contributed Assets refers to all Real Estate Assets contributed to the Company as part of the Spin-Off. The Contributed Assets Cap is not reduced for dispositions of such assets subsequent to the Spin-Off. Advisory and administrative fees on New Assets are not subject to the above limitation and are based on an annual rate of 1.2% on Average Real Estate Assets, but are subject to the Expense Cap. New Assets are all Real Estate Assets that are not Contributed Assets.

For the three months ended September 30, 2017 and 2016, the Company incurred advisory and administrative fees of $1.9 million and $1.7 million, respectively. The amount paid for the three months ended September 30, 2017 and 2016 represents the maximum fee allowed on Contributed Assets (as defined in the Advisory Agreement) under the Advisory Agreement plus approximately $0.5 million and $0.3 million, respectively, of advisory and administrative fees incurred on New Assets (as defined in the Advisory Agreement). For the nine months ended September 30, 2017 and 2016, the Company incurred advisory and administrative fees of $5.5 million and $4.9 million, respectively. The amount paid for the nine months ended September 30, 2017 and 2016 represents the maximum fee allowed on Contributed Assets (as defined in the Advisory Agreement) under the Advisory Agreement plus approximately $1.5 million and $0.9 million, respectively, of advisory and administrative fees incurred on New Assets (as defined in the Advisory Agreement). These fees are reflected on the consolidated statements of operations and comprehensive income in advisory and administrative fees.

The increase in advisory and administrative fees on New Assets between both the periods was due to the acquisition of additional properties classified as New Assets after the Spin-Off, for which the Adviser has elected to receive fees on, and the timing of the acquisitions (the Company acquired one property in July 2016 and one property in October 2016 that the Adviser elected to receive advisory and administrative fees on). For the three and nine months ended September 30, 2017, the Adviser elected to voluntarily waive the advisory and administrative fees incurred on the two properties acquired in December 2016, the property acquired in February 2017 and the property acquired in June 2017, which are considered to be permanently waived for the periods. The Adviser is not contractually obligated to waive fees on New Assets in the future and may cease waiving fees on New Assets at its discretion.

Other Related Party Transactions

The Company has in the past, and may in the future, utilize the services of affiliated parties. For the nine months ended September 30, 2017 and 2016, the Company paid approximately $1.2 million and $0.6 million, respectively, to NexBank Title, Inc. (“NexBank Title”). NexBank Title is an affiliate of the Adviser through common beneficial ownership. NexBank Title provides title insurance and work related to providing title insurance on properties related to acquisitions, dispositions and refinancing transactions. These amounts are either capitalized as real estate assets or deferred financing costs, expensed as loss on extinguishment of debt and modification costs, or expensed as selling costs when determining gain (loss) on sales of real estate, depending on the appropriate accounting as determined for each specific transaction.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

12. Commitments and Contingencies

Commitments

In the normal course of business, the Company enters into various rehabilitation construction related purchase commitments with parties that provide these goods and services. In the event the Company were to terminate rehabilitation construction services prior to the completion of projects, the Company could potentially be committed to satisfy outstanding or uncompleted purchase orders with such parties. As of September 30, 2017, management does not anticipate any material deviations from schedule or budget related to rehabilitation projects currently in process.

Contingencies

In the normal course of business, the Company is subject to claims, lawsuits, and legal proceedings. While it is not possible to ascertain the ultimate outcome of all such matters, management believes that the aggregate amount of such liabilities, if any, in excess of amounts provided or covered by insurance, will not have a material adverse effect on the consolidated balance sheets or consolidated statements of operations and comprehensive income of the Company. The Company is not involved in any material litigation nor, to management’s knowledge, is any material litigation currently threatened against the Company or its properties or subsidiaries.

The Company is not aware of any environmental liability with respect to the properties that could have a material adverse effect on the Company’s business, assets, or results of operations. However, there can be no assurance that such a material environmental liability does not exist. The existence of any such material environmental liability could have an adverse effect on the Company’s results of operations and cash flows.

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Subsequent Events

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

Subsequent Events

13. Subsequent Events

Acquisition of Multifamily Property

Subsequent to September 30, 2017, the Company acquired the following property through a 1031 Exchange with the NAVA Portfolio and a reverse 1031 Exchange with Timberglen (anticipated to close in the first quarter of 2018) (dollars in thousands) (unaudited):

Property Name	Location	Date of Acquisition	Purchase Price			Debt			# Units		Ownership
Atera	Dallas, Texas	October 25, 2017	$	59,200	(1)	$	29,500	(2)		380		100	%

(1) The Company used approximately $14.1 million of proceeds from the sale of the NAVA Portfolio to fund part of the equity portion of the purchase price.

(2) The Company placed a first mortgage on the property with a floating interest rate at 1.48% over one-month LIBOR and an 84-month term that is full-term, interest-only.

2017 Bridge Facility

On October 19, 2017, the Company used proceeds from the sale of the NAVA Portfolio to pay down approximately $46.0 million on the 2017 Bridge Facility.

On October 26, 2017, the Company, through the OP, amended the 2017 Bridge Facility (the “Extension”) to extend the maturity date on the remaining balance of approximately $8.6 million to March 31, 2018. The Company paid an amendment fee of approximately $34,000 in connection with the Extension.

Dividends Declared

On October 30, 2017, the Company’s board of directors increased the Company’s quarterly dividend 13.6%, or by $0.03 per share, declaring a quarterly dividend of $0.25 per share, payable on December 29, 2017 to stockholders of record on December 15, 2017.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Predecessor

Predecessor

With the exception of a nominal amount of initial cash funded at inception, the Company did not own any assets prior to March 31, 2015. The business and operations of the Company prior to March 31, 2015 occurred under the predecessor. The predecessor included all of the properties in the Portfolio that were held directly or indirectly by NREO prior to the Spin-Off that occurred on March 31, 2015. However, the Company’s consolidated financial statements reflect operations of the predecessor through March 31, 2015 as if they were incurred by the Company. The predecessor was determined in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). References throughout these consolidated financial statements to the “Company”, “we”, or “our”, include the activity of the predecessor defined above.

Basis of Accounting

Basis of Accounting

The accompanying unaudited consolidated financial statements have been prepared according to the rules and regulations of the SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted according to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading.

In the opinion of management, all adjustments and eliminations necessary for the fair presentation of the Company’s financial position as of September 30, 2017, and results of operations for the three and nine months ended September 30, 2017 and 2016 have been included. Such adjustments are normal and recurring in nature. The interim results presented are not necessarily indicative of future financial results. The unaudited information included in this quarterly report on Form 10-Q should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2016 and notes thereto included in its annual report on Form 10-K filed with the SEC on March 15, 2017.

The accompanying unaudited consolidated financial statements are presented in accordance with GAAP. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the unaudited consolidated financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates. All significant intercompany accounts and transactions have been eliminated in consolidation. There have been no significant changes to the Company’s significant accounting policies during the nine months ended September 30, 2017.

Principles of Consolidation

Principles of Consolidation

The Company accounts for subsidiary partnerships, joint ventures and other similar entities in which it holds an ownership interest in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation. The Company first evaluates whether each entity is a variable interest entity ("VIE"). Under the VIE model, the Company consolidates an entity when it has control to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Under the voting model, the Company consolidates an entity when it controls the entity through ownership of a majority voting interest. The consolidated financial statements include the accounts of the Company and its subsidiaries, including the OP.

Revenue Recognition

Revenue Recognition

The Company’s primary operations consist of rental income earned from its residents under lease agreements typically with terms of one year or less. Rental income is recognized when earned. This policy effectively results in income recognition on the straight-line method over the related terms of the leases. Resident reimbursements and other income consist of charges billed to residents for utilities, carport and garage rental, and pets, administrative, application and other fees and are recognized when earned. 

Real Estate Investments

Real Estate Investments

Upon acquisition of a property, the purchase price and related acquisition costs (“total consideration”) are allocated to land, buildings, improvements, furniture, fixtures, and equipment, and intangible lease assets in accordance with FASB ASC 805, Business Combinations, and Accounting Standards Update (“ASU”) 2017-01, Clarifying the Definition of a Business (Topic 805) (“ASU 2017-01”), which the Company early adopted on October 1, 2016 (see “Recent Accounting Pronouncements” below). The Company believes most future acquisition costs will be capitalized in accordance with ASU 2017-01. Prior to the Company’s adoption of ASU 2017-01, acquisition costs were expensed as incurred.

The allocation of total consideration, which is determined using inputs that are classified within Level 3 of the fair value hierarchy established by FASB ASC 820, Fair Value Measurement and Disclosures (see Note 7), is based on management’s estimate of the property’s “as-if” vacant fair value and is calculated by using all available information such as the replacement cost of such asset, appraisals, property condition reports, market data and other related information. The allocation of the total consideration to intangible lease assets represents the value associated with the in-place leases, which may include lost rent, leasing commissions, legal and other related costs, which the Company, as buyer of the property, did not have to incur to obtain the residents. If any debt is assumed in an acquisition, the difference between the fair value, which is estimated using inputs that are classified within Level 2 of the fair value hierarchy, and the face value of debt is recorded as a premium or discount and amortized as interest expense over the life of the debt assumed.

Real estate assets, including land, buildings, improvements, furniture, fixtures and equipment, and intangible lease assets are stated at historical cost less accumulated depreciation and amortization. Costs incurred in making repairs and maintaining real estate assets are expensed as incurred. Expenditures for improvements, renovations, and replacements are capitalized at cost. Real estate-related depreciation and amortization are computed on a straight-line basis over the estimated useful lives as described in the following table:

Land	Not depreciated
Buildings	30 years
Improvements	15 years
Furniture, fixtures, and equipment	3 years
Intangible lease assets	6 months

Construction in progress includes the cost of renovation projects being performed at the various properties. Once a project is complete, the historical cost of the renovation is placed into service in one of the categories above depending on the type of renovation project and is depreciated over the estimated useful lives as described in the table above.

Real estate assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In such cases, the Company will evaluate the recoverability of such real estate assets based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provide for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate asset. If impaired, the real estate asset will be written down to its estimated fair value.

The Company periodically classifies real estate assets as held for sale when certain criteria are met, in accordance with GAAP. At that time, the Company presents the net real estate assets and the net debt associated with the real estate held for sale separately in its consolidated balance sheet, and the Company ceases recording depreciation and amortization expense related to that property. Real estate held for sale is reported at the lower of its carrying amount or its estimated fair value less estimated costs to sell.

Reclassifications

Reclassifications

Certain reclassifications have been made to amounts in the prior year consolidated statements of operations and comprehensive income to conform to current year presentations as a result of an accounting policy election to classify certain expenses incurred in connection with the extinguishment or modification of debt separately from interest expense. These expenses are recorded in loss on extinguishment of debt and modification costs on the consolidated statements of operations and comprehensive income. As a result, for the three and nine months ended September 30, 2016, interest expense decreased by approximately $0.9 million and $1.7 million, respectively. See Note 6 for additional information.

Reportable Segment

Reportable Segment

Substantially all of the Company’s net income (loss) is from investments in real estate properties within the multifamily sector that the Company owns through LLCs. The Company evaluates operating performance on an individual property level and views its real estate assets as one industry segment and, accordingly, its properties are aggregated into one reportable segment.

Income Taxes

Income Taxes

The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Code and expects to continue to qualify as a REIT. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to distribute annually at least 90% of its “REIT taxable income,” as defined by the Code, to its stockholders. As a REIT, the Company will be subject to federal income tax on its undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions it pays with respect to any calendar year are less than the sum of (1) 85% of its ordinary income, (2) 95% of its capital gain net income and (3) 100% of its undistributed income from prior years. The Company intends to operate in such a manner so as to qualify as a REIT, but no assurance can be given that the Company will operate in a manner so as to qualify as a REIT. Taxable income from certain non-REIT activities is managed through a TRS and is subject to applicable federal, state, and local income and margin taxes. The Company has no significant taxes associated with its TRS for the nine months ended September 30, 2017 and 2016.

If the Company fails to meet these requirements, it could be subject to federal income tax on all of the Company’s taxable income at regular corporate rates for that year. The Company would not be able to deduct distributions paid to stockholders in any year in which it fails to qualify as a REIT. Additionally, the Company will also be disqualified from electing to be taxed as a REIT for the four taxable years following the year during which qualification was lost unless the Company is entitled to relief under specific statutory provisions. As of September 30, 2017, the Company believes it is in compliance with all applicable REIT requirements.

The Company evaluates the accounting and disclosure of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” (greater than 50 percent probability) of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. The Company’s management is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which include federal and certain states. The Company has no examinations in progress and none are expected at this time.

The Company recognizes its tax positions and evaluates them using a two-step process. First, the Company determines whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Second, the Company will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement.

The Company had no material unrecognized tax benefit or expense, accrued interest or penalties as of September 30, 2017. The Company and its subsidiaries are subject to federal income tax as well as income tax of various state and local jurisdictions. The 2016 and 2015 tax years remain open to examination by tax jurisdictions to which the Company and its subsidiaries are subject. When applicable, the Company recognizes interest and/or penalties related to uncertain tax positions on its consolidated statements of operations and comprehensive income.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 13(a) of the Exchange Act, for complying with new or revised accounting standards applicable to public companies. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to take advantage of this extended transition period. As a result of this election, the Company’s financial statements may not be comparable to companies that comply with public company effective dates for such new or revised standards. The Company may elect to comply with public company effective dates at any time, and such election would be irrevocable pursuant to Section 107(b) of the JOBS Act. The following recent accounting pronouncements reflect effective dates that delay the adoption until those standards would otherwise apply to private companies.

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business (Topic 805), which clarifies the definition of a business and provides further guidance for evaluating whether a transaction will be accounted for as an acquisition of an asset or a business. The ASU provides a test to determine whether a set of assets and activities acquired is a business. When substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. Under the updated guidance, an acquisition of a single property will likely be treated as an asset acquisition as opposed to a business combination and associated transaction costs will be capitalized rather than expensed as incurred. Additionally, assets acquired, liabilities assumed, and any noncontrolling interest will be measured at their relative fair values. The Company early adopted ASU 2017-01 on October 1, 2016, on a prospective basis, and there was no material impact on its consolidated financial statements or disclosures. The Company believes most of its future acquisitions of properties will qualify as asset acquisitions and most future transaction costs associated with these acquisitions will be capitalized.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which clarifies the presentation of restricted cash and restricted cash equivalents in the statements of cash flows. Under ASU 2016-18, restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statements of cash flows. The Company adopted ASU 2016-18 during the three months ended December 31, 2016 on a retrospective basis. As a result, net cash provided by operating activities decreased by $2.2 million in the nine months ended September 30, 2016. Net cash provided by investing activities increased by $10.6 million in the nine months ended September 30, 2016. Beginning-of-period cash and restricted cash total increased by $46.9 million in 2016. The following is a summary of the Company’s cash and restricted cash total as presented in the consolidated statements of cash flows for the nine months ended September 30, 2017 and 2016 (in thousands):

	September 30, 2017		September 30, 2016
Cash and cash equivalents	$	92,695	$	34,086
Restricted cash		29,417		34,110
Total cash and restricted cash	$	122,112	$	68,196

In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis, which changes the way reporting enterprises evaluate whether (1) they should consolidate limited partnerships and similar entities, (2) fees paid to a decision maker or service provider are variable interests in a VIE, and (3) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. The ASU also significantly changes how to evaluate voting rights for entities that are not similar to limited partnerships when determining whether the entity is a VIE, which may affect entities for which the decision making rights are conveyed through a contractual arrangement. The Company implemented the provisions of ASU 2015-02 as of January 1, 2017 and there was no material impact on its consolidated financial statements. Upon issuing OP Units to an unaffiliated limited partner on August 1, 2017, the OP became a VIE as such limited partner of the OP lacks substantive kick-out rights and substantive participating rights. The Company is the primary beneficiary of, and continues to consolidate, the OP.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends several aspects of the accounting for share-based payment transactions, including the income tax consequences, accrual of compensation cost, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this standard must be applied prospectively, retrospectively, or as of the beginning of the earliest comparative period presented in the year of adoption, depending on the type of amendment. The Company implemented the provisions of ASU 2016-09 as of January 1, 2017 and there was no material impact on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should also disclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date, which amends ASU 2014-09 to defer the effective date by one year. The new standard is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Entities are allowed to use either the full or modified retrospective approach when transitioning to the ASU. The Company expects to implement the provisions of ASU 2014-09 as of January 1, 2019 and has not yet selected a transition method. The Company is continuing to evaluate ASU 2014-09 (and related clarifying guidance issued by the FASB); however, the Company does not expect its adoption to have a material impact on its consolidated financial statements, as a substantial portion of its revenue consists of rental income from leasing arrangements, which is specifically excluded from ASU 2014-09.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which changes certain recognition, measurement, presentation, and disclosure requirements for financial instruments. The ASU requires all equity investments, except those accounted for under the equity method of accounting or resulting in consolidation, to be measured at fair value with changes in fair value recognized in net income. The ASU also simplifies the impairment assessment for equity investments without readily determinable fair values, amends the presentation requirements for changes in the fair value of financial liabilities, requires presentation of financial instruments by measurement category and form of financial asset, and eliminates the requirement to disclose the methods and significant assumptions used in estimating the fair value of financial instruments. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. The Company expects to implement the provisions of ASU 2016-01 as of January 1, 2019, and does not expect the new standard to have a material impact on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which supersedes the current accounting for leases and while retaining two distinct types of leases, finance and operating, (1) requires lessees to record a right of use asset and a related liability for the rights and obligations associated with a lease, regardless of lease classification, and recognize lease expense in a manner similar to current accounting, (2) eliminates most real estate specific lease provisions, and, (3) aligns many of the underlying lessor model principles with those in the new revenue standard. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Entities are required to use a modified retrospective approach when transitioning to the ASU for leases that exist as of or are entered into after the beginning of the earliest comparative period presented in the financial statements. The Company expects to implement the provisions of ASU 2016-02 as of January 1, 2019 in conjunction with the adoption of ASU 2014-09 discussed above. As lessors, substantially all of the Company’s agreements have a term of 12 months or less. Based on a preliminary assessment, the Company expects most of its operating leases will be subject to the new guidance and recognized as operating lease liabilities and right-of-use assets upon adoption, resulting in an immaterial increase in the assets and liabilities on its consolidated balance sheets. The Company is continuing its evaluation, which may identify additional impacts this standard will have on its consolidated financial statements and related disclosures.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Estimated Useful Lives of Assets

Expenditures for improvements, renovations, and replacements are capitalized at cost. Real estate-related depreciation and amortization are computed on a straight-line basis over the estimated useful lives as described in the following table:

Land	Not depreciated
Buildings	30 years
Improvements	15 years
Furniture, fixtures, and equipment	3 years
Intangible lease assets	6 months

Summary of Company's Cash and Restricted Cash

The following is a summary of the Company’s cash and restricted cash total as presented in the consolidated statements of cash flows for the nine months ended September 30, 2017 and 2016 (in thousands):

	September 30, 2017		September 30, 2016
Cash and cash equivalents	$	92,695	$	34,086
Restricted cash		29,417		34,110
Total cash and restricted cash	$	122,112	$	68,196

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Investments in Subsidiaries (Tables)

9 Months Ended

Sep. 30, 2017

Schedule Of Investments [Abstract]

Schedule of Investments

The following table represents the Company’s investments as of September 30, 2017 and December 31, 2016:

Property Name		Location	YearAcquired	Effective Ownership Percentage at September 30, 2017				Effective Ownership Percentage at December 31, 2016
The Miramar Apartments		Dallas, Texas	2013		—		(1)		100	%
Arbors on Forest Ridge		Bedford, Texas	2014		100	%	(2)		90	%
Cutter’s Point		Richardson, Texas	2014		100	%	(2)		90	%
Eagle Crest		Irving, Texas	2014		100	%	(2)		90	%
Silverbrook		Grand Prairie, Texas	2014		100	%	(2)		90	%
Timberglen	(3)	Dallas, Texas	2014		100	%	(2)		90	%
Toscana		Dallas, Texas	2014		—		(1)		90	%
The Grove at Alban		Frederick, Maryland	2014		—		(1)		76	%	(4)
Edgewater at Sandy Springs		Atlanta, Georgia	2014		100	%	(2)		90	%
Beechwood Terrace		Nashville, Tennessee	2014		100	%	(2)		90	%
Willow Grove		Nashville, Tennessee	2014		100	%	(2)		90	%
Woodbridge		Nashville, Tennessee	2014		100	%	(2)		90	%
Abbington Heights		Antioch, Tennessee	2014		100	%	(2)		90	%	(4)
The Summit at Sabal Park		Tampa, Florida	2014		100	%	(2)		90	%	(4)
Courtney Cove		Tampa, Florida	2014		100	%	(2)		90	%	(4)
Radbourne Lake		Charlotte, North Carolina	2014		100	%	(2)		90	%	(4)
Timber Creek		Charlotte, North Carolina	2014		100	%	(2)		90	%	(4)
Belmont at Duck Creek		Garland, Texas	2014		100	%	(2)		90	%	(4)
The Arbors		Tucker, Georgia	2014		—		(1)		90	%	(4)
The Crossings		Marietta, Georgia	2014		—		(1)		90	%	(4)
The Crossings at Holcomb Bridge		Roswell, Georgia	2014		—		(1)		90	%	(4)
The Knolls		Marietta, Georgia	2014		—		(1)		90	%	(4)
Regatta Bay		Seabrook, Texas	2014		—		(1)		90	%	(4)
Sabal Palm at Lake Buena Vista		Orlando, Florida	2014		100	%	(2)		90	%	(4)
Southpoint Reserve at Stoney Creek	(3)	Fredericksburg, Virginia	2014		100	%	(2)		85	%	(4)
Cornerstone		Orlando, Florida	2015		100	%	(2)		90	%	(4)
Twelve 6 Ten at the Park		Dallas, Texas	2015		—		(1)		90	%	(4)
The Preserve at Terrell Mill		Marietta, Georgia	2015		100	%	(2)		90	%	(4)
The Ashlar		Dallas, Texas	2015		100	%	(2)		90	%	(4)
Heatherstone		Dallas, Texas	2015		100	%	(2)		90	%	(4)
Versailles		Dallas, Texas	2015		100	%	(2)		90	%	(4)
Seasons 704 Apartments		West Palm Beach, Florida	2015		100	%	(2)		90	%	(4)
Madera Point		Mesa, Arizona	2015		100	%	(2)		95	%
The Pointe at the Foothills		Mesa, Arizona	2015		100	%	(2)		95	%
Venue at 8651		Fort Worth, Texas	2015		100	%	(2)		95	%
Parc500		West Palm Beach, Florida	2016		100	%	(2)		91	%
The Colonnade		Phoenix, Arizona	2016		100	%	(2)		97	%
Old Farm		Houston, Texas	2016		100	%	(2)		100	%	(5)
Stone Creek at Old Farm		Houston, Texas	2016		100	%	(2)		100	%	(5)
Hollister Place		Houston, Texas	2017		100	%			—		(6)
Rockledge Apartments		Marietta, Georgia	2017		100	%			—		(6)

(1) Properties were sold during the nine months ended September 30, 2017.

(2) The Company purchased 100% of the ownership interest in the property held by the noncontrolling interest holders on June 30, 2017 (see Note 10).

(3) Properties were classified as held for sale as of September 30, 2017.

(4) Properties were considered VIEs at December 31, 2016.

(5) Properties were Parked Assets and considered VIEs at December 31, 2016. The Company completed the reverse 1031 Exchanges of these properties during the nine months ended September 30, 2017 with the sales of the replacement properties, at which time legal title to the properties transferred to the Company. Upon the transfer of title, the properties were no longer considered Parked Assets or VIEs (see Note 5).

(6) Properties were acquired in 2017; therefore, no ownership as of December 31, 2016.

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Real Estate Investments Statistics (Tables)

9 Months Ended

Sep. 30, 2017

Multifamily Properties

Business Acquisition [Line Items]

Summary of Investment in Multifamily Properties

As of September 30, 2017, the Company is invested in a total of 32 multifamily properties, as listed below:

Property Name		Rentable Square Footage (in thousands)		Number of Units		Date Acquired	Average Effective Monthly Rent Per Unit (1)		% Occupied as of September 30, 2017 (2)			% Occupied as of December 31, 2016 (2)
Arbors on Forest Ridge			155	210		1/31/2014		859		95.2	%		92.9	%
Cutter’s Point			198	196		1/31/2014		1,052		94.4	%		93.9	%
Eagle Crest			396	447		1/31/2014		876		95.3	%		94.4	%
Silverbrook			526	642		1/31/2014		781		95.6	%		93.5	%
Timberglen	(3)		221	304		1/31/2014		846		95.1	%		92.8	%
Edgewater at Sandy Springs			727	760		7/18/2014		929		94.5	%		94.5	%
Beechwood Terrace			272	300		7/21/2014		921		96.0	%		95.3	%
Willow Grove			229	244		7/21/2014		912		93.4	%		96.7	%
Woodbridge			247	220		7/21/2014		945		95.5	%		87.7	%
Abbington Heights			239	274		8/1/2014		879		93.8	%		95.3	%
The Summit at Sabal Park			205	252		8/20/2014		907		95.2	%		90.9	%
Courtney Cove			225	324		8/20/2014		817		93.8	%		94.4	%
Radbourne Lake			247	225		9/30/2014		1,059		93.3	%		96.9	%
Timber Creek			248	352		9/30/2014		819		95.2	%		95.5	%
Belmont at Duck Creek			198	240		9/30/2014		990		95.4	%		95.0	%
Sabal Palm at Lake Buena Vista			371	400		11/5/2014		1,158		93.5	%		95.0	%
Southpoint Reserve at Stoney Creek	(3)		116	156		12/18/2014		1,069		96.8	%		92.9	%
Cornerstone			318	430		1/15/2015		910		94.9	%		95.8	%
The Preserve at Terrell Mill			692	752		2/6/2015		850		93.1	%		92.0	%
The Ashlar			206	264		2/26/2015		819		92.4	%		91.3	%
Heatherstone			116	152		2/26/2015		838		94.1	%		92.8	%
Versailles			301	388		2/26/2015		860		95.1	%		93.0	%
Seasons 704 Apartments			217	222		4/15/2015		1,056		95.9	%		95.0	%
Madera Point			193	256		8/5/2015		797		93.8	%		93.8	%
The Pointe at the Foothills			473	528		8/5/2015		817		92.2	%		92.2	%
Venue at 8651			289	333		10/30/2015		800		94.3	%		90.4	%
Parc500			266	217		7/27/2016		1,167		93.5	%		93.5	%
The Colonnade			256	415		10/11/2016		695		92.0	%		88.0	%
Old Farm			697	734		12/29/2016		1,177		92.8	%		93.6	%
Stone Creek at Old Farm			186	190		12/29/2016		1,186		93.7	%		93.2	%
Hollister Place			246	260		2/1/2017		969		93.5	%		—		(4)
Rockledge Apartments			802	708		6/30/2017		1,153		91.9	%		—		(4)
			10,078		11,395

(1) Average effective monthly rent per unit is equal to the average of the contractual rent for commenced leases as of September 30, 2017 minus any tenant concessions over the term of the lease, divided by the number of units under commenced leases as of September 30, 2017.

(2) Percent occupied is calculated as the number of units occupied as of September 30, 2017 and December 31, 2016, divided by the total number of units, expressed as a percentage.

(3) Properties were classified as held for sale as of September 30, 2017.

(4) Properties were acquired in 2017.

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Real Estate Investments (Tables)

9 Months Ended

Sep. 30, 2017

Real Estate [Abstract]

Summary of Major Components of Investments in Multifamily Properties

As of September 30, 2017, the major components of the Company’s investments in multifamily properties were as follows (in thousands):

Operating Properties	Land		Buildingsand Improvements			IntangibleLease Assets			Construction in Progress		Furniture, Fixtures and Equipment			Totals
Arbors on Forest Ridge	$	2,330	$	11,073		$	—		$	—	$	794		$	14,197
Cutter’s Point		3,330		12,995			—			—		946			17,271
Eagle Crest		5,450		22,227			—			—		1,231			28,908
Silverbrook		4,860		25,643			—			—		2,363			32,866
Edgewater at Sandy Springs		14,290		43,959			—			9		4,057			62,315
Beechwood Terrace		1,390		20,662			—			78		1,229			23,359
Willow Grove		3,940		10,739			—			—		882			15,561
Woodbridge		3,651		12,995			—			1		1,029			17,676
Abbington Heights		1,770		16,602			—			112		1,101			19,585
The Summit at Sabal Park		5,770		13,355			—			—		1,107			20,232
Courtney Cove		5,880		12,913			—			—		1,055			19,848
Radbourne Lake		2,440		21,801			—			5		1,255			25,501
Timber Creek		11,260		13,429			—			—		1,086			25,775
Belmont at Duck Creek		1,910		17,157			—			—		1,170			20,237
Sabal Palm at Lake Buena Vista		7,580		41,173			—			—		1,024			49,777
Cornerstone		1,500		30,357			—			—		1,395			33,252
The Preserve at Terrell Mill		10,170		48,609			—			—		3,895			62,674
The Ashlar		4,090		12,631			—			—		1,459			18,180
Heatherstone		2,320		7,862			—			—		909			11,091
Versailles		6,720		19,735			—			6		2,155			28,616
Seasons 704 Apartments		7,480		14,071			—			2		867			22,420
Madera Point		4,920		17,369			—			43		1,130			23,462
The Pointe at the Foothills		4,840		46,402			—			108		1,669			53,019
Venue at 8651		2,350		16,910			—			813		1,744			21,817
Parc500		3,860		19,297			—			589		1,217			24,963
The Colonnade		8,340		36,677			—			55		805			45,877
Old Farm		11,078		69,718			—			29		1,304			82,129
Stone Creek at Old Farm		3,493		19,123			—			—		350			22,966
Hollister Place		2,782		20,719			—			—		593			24,094
Rockledge Apartments		17,451		92,296			3,021			—		1,369			114,137
		167,245		768,499			3,021			1,850		41,190			981,805
Accumulated depreciation and amortization		—		(57,876	)		(1,007	)		—		(19,504	)		(78,387	)
Total Operating Properties	$	167,245	$	710,623		$	2,014		$	1,850	$	21,686		$	903,418
Held For Sale Properties
Timberglen		2,510		14,718			—			—		1,049			18,277
Southpoint Reserve at Stoney Creek		6,120		11,252			—			—		663			18,035
		8,630		25,970			—			—		1,712			36,312
Accumulated depreciation and amortization		—		(2,630	)		—			—		(767	)		(3,397	)
Total Held For Sale Properties	$	8,630	$	23,340		$	—		$	—	$	945		$	32,915
Total	$	175,875	$	733,963		$	2,014		$	1,850	$	22,631		$	936,333

As of December 31, 2016, the major components of the Company’s investments in multifamily properties were as follows (in thousands):

Operating Properties	Land		Buildings and Improvements			Intangible Lease Assets			Construction in Progress		Furniture, Fixtures and Equipment			Totals
Arbors on Forest Ridge	$	2,330	$	11,014		$	—		$	3	$	717		$	14,064
Cutter's Point		3,330		12,871			—			—		810			17,011
Eagle Crest		5,450		21,990			—			—		1,052			28,492
Silverbrook		4,860		25,335			—			—		1,996			32,191
Timberglen		2,510		14,527			—			—		894			17,931
Edgewater at Sandy Springs		14,290		43,709			—			123		3,295			61,417
Beechwood Terrace		1,390		20,561			—			—		940			22,891
Willow Grove		3,940		10,672			—			—		668			15,280
Woodbridge		3,650		12,708			—			215		759			17,332
Abbington Heights		1,770		16,426			—			75		916			19,187
The Summit at Sabal Park		5,770		13,342			—			9		956			20,077
Courtney Cove		5,880		12,886			—			42		910			19,718
Radbourne Lake		2,440		21,445			—			257		1,025			25,167
Timber Creek		11,260		13,252			—			69		864			25,445
Belmont at Duck Creek		1,910		17,034			—			—		941			19,885
The Arbors		1,730		6,587			—			5		413			8,735
The Crossings		3,982		17,662			—			155		1,429			23,228
The Crossings at Holcomb Bridge		5,560		10,925			—			—		1,178			17,663
The Knolls		3,410		17,707			—			8		1,615			22,740
Regatta Bay		1,660		16,155			—			89		891			18,795
Sabal Palm at Lake Buena Vista		7,580		41,147			—			3		874			49,604
Cornerstone		1,500		30,354			—			29		906			32,789
The Preserve at Terrell Mill		10,170		48,163			—			516		2,872			61,721
The Ashlar		4,090		12,348			—			124		1,129			17,691
Heatherstone		2,320		7,521			—			224		749			10,814
Versailles		6,720		20,267			—			286		1,597			28,870
Seasons 704 Apartments		7,480		14,043			—			—		696			22,219
Madera Point		4,920		17,079			—			15		865			22,879
The Pointe at the Foothills		4,840		45,975			—			157		1,289			52,261
Venue at 8651		2,350		16,815			—			311		1,162			20,638
Parc500		3,860		18,700			491			113		504			23,668
The Colonnade		8,340		35,473			723			—		376			44,912
Old Farm		11,078		69,580			3,354			—		1,052			85,064
Stone Creek at Old Farm		3,493		19,101			572			—		276			23,442
		165,863		733,374			5,140			2,828		36,616			943,821
Accumulated depreciation and amortization		—		(46,044	)		(650	)		—		(13,520	)		(60,214	)
Total Operating Properties	$	165,863	$	687,330		$	4,490		$	2,828	$	23,096		$	883,607
Held For Sale Properties
The Grove at Alban		3,640		19,033			—			—		1,318			23,991
The Miramar Apartments		1,580		8,870			—			—		711			11,161
Toscana		1,730		7,341			—			3		684			9,758
Southpoint Reserve at Stoney Creek		6,120		11,218			—			31		605			17,974
Twelve 6 Ten at the Park		3,610		18,088			—			21		925			22,644
		16,680		64,550			—			55		4,243			85,528
Accumulated depreciation and amortization		—		(4,896	)		—			—		(1,202	)		(6,098	)
Total Held For Sale Properties	$	16,680	$	59,654		$	—		$	55	$	3,041		$	79,430
Total	$	182,543	$	746,984		$	4,490		$	2,883	$	26,137		$	963,037

Schedule for Acquisitions of Real Estate

The following table presents the Company’s acquisitions of real estate during the nine months ended September 30, 2017 (dollars in thousands);

Property Name	Location	Date of Acquisition	Purchase Price		Debt (1)		# Units		Effective Ownership
Hollister Place	Houston, Texas	February 1, 2017	$	24,500	$	24,500		260		100	%
Rockledge Apartments	Marietta, Georgia	June 30, 2017		113,500		113,500		708		100	%
			$	138,000	$	138,000		968

(1) For additional information regarding the Company’s debt, see Note 6.

Summary of Sold Properties

The following table presents the Company’s sales of real estate during the nine months ended September 30, 2017 (in thousands). The Company sold seven properties for approximately $134.0 million during the nine months ended September 30, 2016.

Property Name		Location	Date of Sale	Sales Price		Net Cash Proceeds(1)			Gain on Sale of Real Estate
The Miramar Apartments	(2)	Dallas, Texas	April 3, 2017	$	16,550	$	16,326		$	6,368
Toscana	(3)	Dallas, Texas	April 3, 2017		13,250		13,040			4,283
The Grove at Alban		Frederick, Maryland	April 3, 2017		27,500		27,021			4,514
Twelve 6 Ten at the Park	(2)	Dallas, Texas	April 27, 2017		26,600		26,349			4,731
Regatta Bay	(4)	Seabrook, Texas	July 14, 2017		28,200		27,670			10,423
The Arbors, The Crossings, The Crossings at Holcomb Bridge and The Knolls	(5)	Atlanta, Georgia	September 29, 2017		116,000		114,010			48,067
				$	228,100	$	224,416	(6)	$	78,386

(1) Represents sales price, net of closing costs.

(2) The Company completed the reverse 1031 Exchange of Old Farm with the sales of The Miramar Apartments and Twelve 6 Ten at the Park.

(3) The Company completed the reverse 1031 Exchange of Stone Creek at Old Farm with the sale of Toscana.

(4) The Company completed the reverse 1031 Exchange of Hollister Place with the sale of Regatta Bay.

(5) Properties were sold as a portfolio. The Company completed the reverse 1031 Exchange of Rockledge Apartments with the sales of The Arbors, The Crossings, The Crossings at Holcomb Bridge and The Knolls (the “NAVA Portfolio”). Approximately $14.1 million of the proceeds from the sale of the NAVA Portfolio was placed with a qualified intermediary for use in a forward 1031 Exchange that was completed on October 25, 2017 (see Note 13).

(6) During the nine months ended September 30, 2017, the Company used cash on hand plus its share of the proceeds, net of mortgage repayments and distributions to noncontrolling interests, from the sales of these properties to repay the entire $30.0 million outstanding on its 2016 bridge facility, which retired the bridge facility, to pay down $10.0 million on its $30.0 million credit facility and to pay down approximately $11.3 million on its 2017 bridge facility (see Note 6).

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Debt (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Summary of Mortgage Debt of Company and Encumbers Multifamily Properties

The following table contains summary information concerning the mortgage debt of the Company as of September 30, 2017 (dollars in thousands):

Operating Properties		Type	Term(months)		Outstanding Principal (1)				Interest Rate (2)		Maturity Date
Arbors on Forest Ridge	(3)	Floating		84	$	13,130				2.91%	7/1/2024
Cutter's Point	(3)	Floating		84		16,640				2.91%	7/1/2024
Eagle Crest	(3)	Floating		84		29,510				2.91%	7/1/2024
Silverbrook	(3)	Floating		84		30,590				2.91%	7/1/2024
Edgewater at Sandy Springs	(3)	Floating		84		52,000				2.91%	7/1/2024
Beechwood Terrace	(3)	Floating		84		20,150				2.91%	7/1/2024
Willow Grove	(3)	Floating		84		14,818				3.01%	7/1/2024
Woodbridge	(3)	Floating		84		13,677				3.01%	7/1/2024
The Summit at Sabal Park	(3)	Floating		84		13,560				2.85%	7/1/2024
Courtney Cove	(3)	Floating		84		13,680				2.85%	7/1/2024
The Preserve at Terrell Mill	(3)	Floating		84		42,480				2.85%	7/1/2024
The Ashlar	(3)	Floating		84		14,520				2.85%	7/1/2024
Heatherstone	(3)	Floating		84		8,880				2.85%	7/1/2024
Versailles	(3)	Floating		84		23,880				2.85%	7/1/2024
Seasons 704 Apartments	(3)	Floating		84		17,460				2.85%	7/1/2024
Madera Point	(3)	Floating		84		15,150				2.85%	7/1/2024
The Pointe at the Foothills	(3)	Floating		84		34,800				2.85%	7/1/2024
Venue at 8651	(3)	Floating		84		13,734				3.01%	7/1/2024
The Colonnade	(3)	Floating		84		28,093				2.91%	7/1/2024
Old Farm	(3)	Floating		84		52,886				2.91%	7/1/2024
Stone Creek at Old Farm	(3)	Floating		84		15,274				2.91%	7/1/2024
Timber Creek	(4)	Floating		120		19,482				3.05%	10/1/2024
Radbourne Lake	(4)	Floating		120		19,213				3.04%	10/1/2024
Sabal Palm at Lake Buena Vista	(4)	Floating		120		37,680				3.04%	12/1/2024
Abbington Heights	(5)	Fixed		120		10,053				3.79%	9/1/2022
Belmont at Duck Creek	(6)	Fixed		84		10,995				4.68%	9/1/2018
Cornerstone	(7)	Fixed		120		22,771				4.24%	3/1/2023
Parc500	(8)	Fixed		120		15,793				4.49%	8/1/2025
Hollister Place	(3)	Floating		84		13,475				3.47%	2/1/2024
Rockledge Apartments	(3)	Floating		84		68,100				2.80%	7/1/2024
					$	702,474
Fair market value adjustment						852		(9)
Deferred financing costs, net of accumulated amortization of $592						(8,358	)
					$	694,968
Held for Sale Properties
Timberglen	(3)	Floating		84		17,226				3.11%	7/1/2024
Southpoint Reserve at Stoney Creek	(3)	Floating		84		13,600				3.34%	1/1/2022
					$	30,826
Deferred financing costs, net of accumulated amortization of $80						(499	)
					$	30,327

(1) Mortgage debt that is non-recourse to the Company and encumbers the multifamily properties.

(2) Interest rate is based on one-month LIBOR plus an applicable margin, except for fixed rate mortgage debt. One-month LIBOR as of September 30, 2017 was 1.2322%.

(3) Loan can be pre-paid in the first 12 months of the term at par plus 5.00%. Starting in the 13^th month of the term through the 81^st month of the term, the loan can be pre-paid at par plus 1.00% of the unpaid principal balance and at par during the last three months of the term.

(4) Loan can be pre-paid in the first 12 months of the term at par plus 5.00%. Starting in the 13^th month of the term through the 116^th month of the term, the loan can be pre-paid at par plus 1.00% of the unpaid principal balance and at par during the last four months of the term.

(5) Debt was assumed upon acquisition of this property at approximated fair value. The loan is open to pre-payment in the last three months of the term.

(6) Debt was assumed upon acquisition of this property at approximated fair value. The loan is open to pre-payment in the last six months of the term.

(7) Debt in the amount of $18.0 million was assumed upon acquisition of this property at approximated fair value. The assumed debt carries a 4.09% fixed rate, was originally issued in March 2013, and had a term of 120 months with an initial 24 months of interest only. At the time of acquisition, the principal balance of the first mortgage remained unchanged and had a remaining term of 98 months with 2 months of interest only. The first mortgage is pre-payable and subject to yield maintenance from month 13 through August 31, 2022 and is pre-payable at par September 1, 2022 until maturity. Concurrently with the acquisition of the property, the Company placed a supplemental second mortgage on the property with a principal amount of approximately $5.8 million, a fixed rate of 4.70%, and with a maturity date that is the same time as the first mortgage. The supplemental second mortgage is pre-payable and subject to yield maintenance from the date of issuance through August 31, 2022 and is pre-payable at par September 1, 2022 until maturity. As of September 30, 2017, the total indebtedness secured by the property had a blended interest rate of 4.24%.

(8) Debt was assumed upon acquisition of this property at approximated fair value. The loan is open to pre-payment in the last four months of the term.

(9) The Company reflected valuation adjustments on its fixed rate debt for Belmont at Duck Creek and Parc500 to adjust it to fair market value on the date of acquisition for the difference between the fair value and the assumed principal amount of debt. The difference is amortized into interest expense over the remaining terms of the mortgages. 

Sale of Properties and Repayment of Related Mortgage Loans

During the nine months ended September 30, 2017, the Company sold nine properties and repaid the related mortgage loans that encumbered eight of the properties, as detailed in the table below (in thousands):

Property Name		Date of Sale	Type	Outstanding Principal (1)
The Miramar Apartments		April 3, 2017	Floating	$	8,400
The Grove at Alban		April 3, 2017	Floating		18,374
Twelve 6 Ten at the Park		April 27, 2017	Floating		15,711
Regatta Bay		July 14, 2017	Floating		14,000
The Arbors, The Crossings, The Crossings at Holcomb Bridge and The Knolls	(2)	September 29, 2017	Floating		50,177
				$	106,662

(1) Represents the outstanding principal balance when the loan was repaid.

(2) Properties were sold as a portfolio.

Summary of Credit and Bridge Facilities

The following table contains summary information concerning the Company’s credit and bridge facilities as of September 30, 2017 (dollars in thousands):

	Type	Term(months)		Amortization (months)		Outstanding Principal			Interest Rate (1)		Maturity Date
$30 Million Credit Facility	Floating		24		360	$	30,000			5.23%	12/29/2018
Deferred financing costs, net of accumulated amortization of $115							(197	)
						$	29,803
2017 Bridge Facility	Floating		4		360	$	54,597			4.98%	10/31/2017
Deferred financing costs, net of accumulated amortization of $198							(66	)
						$	54,531

(1) Interest rate is based on one-month LIBOR plus an applicable margin. One-month LIBOR as of September 30, 2017 was 1.2322%.

Schedule of Debt Maturities

The aggregate scheduled maturities, including amortizing principal payments, of total debt for the next five calendar years subsequent to September 30, 2017 are as follows (in thousands):

	Operating Properties & Other Secured Debt		Held For Sale Properties		Total
2017	$	54,993	$	—	$	54,993
2018		43,352		276		43,628
2019		2,448		309		2,757
2020		2,483		316		2,799
2021		2,531		326		2,857
Thereafter		681,264		29,599		710,863
Total	$	787,071	$	30,826	$	817,897

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Fair Value of Derivative and Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Summary of Company's Outstanding Interest Rate Swaps

As of September 30, 2017, the Company had the following outstanding interest rate swaps that were designated as cash flow hedges of interest rate risk (dollars in thousands):

Effective Date	Termination Date	Notional		Fixed Rate				Floating Rate Option (1)
July 1, 2016	June 1, 2021	$	100,000		1.1055	%		One-month LIBOR
July 1, 2016	June 1, 2021		100,000		1.0210	%		One-month LIBOR
July 1, 2016	June 1, 2021		100,000		0.9000	%		One-month LIBOR
September 1, 2016	June 1, 2021		100,000		0.9560	%		One-month LIBOR
April 1, 2017	April 1, 2022		100,000		1.9570	%		One-month LIBOR
May 1, 2017	April 1, 2022		50,000		1.9610	%		One-month LIBOR
July 1, 2017	July 1, 2022		100,000		1.7820	%		One-month LIBOR
		$	650,000		1.3388	%	(2)

(1) As of September 30, 2017, one-month LIBOR was 1.2322%.

(2) Represents the weighted average fixed rate of the interest rate swaps.

Schedule of Outstanding Interest Rate Derivatives

As of September 30, 2017, the Company had the following outstanding derivatives that were not designated as hedges in qualifying hedging relationships (dollars in thousands):

Product	Number of Instruments		Notional
Interest rate caps		17	$	293,184

Summary of Derivative Financial Instruments and Classification on the Consolidated Balance Sheet

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of September 30, 2017 and December 31, 2016 (in thousands):

		Asset Derivatives				Liability Derivatives
	Balance Sheet Location	September 30, 2017		December 31, 2016		September 30, 2017			December 31, 2016
Derivatives designated as hedging instruments:
Interest rate swaps	Fair market value of interest rate swaps	$	11,759	$	12,413	$	713	(1)	$	—
Derivatives not designated as hedging instruments:
Interest rate caps	Prepaid and other assets		—		5		—			—
Total		$	11,759	$	12,418	$	713		$	—

(1) Included in accounts payable and other accrued liabilities on the consolidated balance sheet.

Summary of Derivative Financial Instruments and Combined Consolidated Statements of Operations and Comprehensive Loss

The tables below present the effect of the Company’s derivative financial instruments on the consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2017 and 2016 (in thousands):

	Amount of gain (loss) recognized in OCI on derivative (effective portion)						Location of gain (loss) reclassified from accumulated OCI into income	Amount of gain (loss) reclassified from accumulated OCI into income (effective portion)						Location of gain (loss) recognized in income on derivative	Amount of gain (loss) recognized in income on derivative (ineffective portion)*
	2017			2016			(effective portion)	2017			2016			(ineffective portion)*	2017				2016
Derivatives designated as hedging instruments:
For the three months ended September 30,
Interest rate products		(241	)		(1,576	)	Interest expense		(360	)		(479	)	Interest expense		(63	)	(1)		599
For the nine months ended September 30,
Interest rate products		(2,162	)		(1,619	)	Interest expense		(1,142	)		(491	)	Interest expense		(88	)	(2)		599

* Includes amounts excluded from effectiveness testing.

(1) Includes approximately $90,000 of loss reclassified from OCI for missed forecasted transactions due to hedged forecasted transactions being no longer probable.

(2) Includes approximately $185,000 of loss reclassified from OCI for missed forecasted transactions due to hedged forecasted transactions being no longer probable.

	Location of gain (loss)	Amount of gain (loss) recognized in income on derivative
	recognized in income	2017			2016
Derivatives not designated as hedging instruments:
For the three months ended September 30,
Interest rate products	Interest expense		—			(2	)
For the nine months ended September 30,
Interest rate products	Interest expense		(5	)		(8	)

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Summary of Restricted Stock Units

The following table includes the number of restricted stock units granted, vested, forfeited and outstanding as of September 30, 2017:

	2017
	Number of Units				Weighted Average Grant Date Fair Value
Outstanding January 1,		209,797			$	19.20
Granted		219,802				22.57
Vested		(110,257	)			19.20
Forfeited		—				—
Outstanding September 30,		319,342		(1)	$	21.52

(1) 49,768 restricted stock units vest in August 2018 and 49,772 restricted stock units vest in August 2019. 80,742 restricted stock units vest in March 2018 and 69,530 restricted stock units vest in each of March 2019 and March 2020.

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Earnings (Loss) Per Share (Tables)

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Schedule of Computation of Basic and Diluted Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share for the periods presented (in thousands, except per share amounts):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
Numerator for earnings per share:
Net income	$	54,076	$	8,825	$	60,702	$	25,712
Net income attributable to noncontrolling interests		—		1,735		2,836		4,047
Net income attributable to redeemable noncontrolling interests in the Operating Partnership		162		—		162		—
Net income attributable to common stockholders	$	53,914	$	7,090	$	57,704	$	21,665
Denominator for earnings per share:
Weighted average common shares outstanding		21,085		21,260		21,057		21,282
Denominator for basic earnings per share		21,085		21,260		21,057		21,282
Unvested restricted stock units		368		116		350		40
Denominator for diluted earnings per share		21,453		21,376		21,407		21,322
Earnings per weighted average common share:
Basic	$	2.56	$	0.33	$	2.74	$	1.02
Diluted	$	2.51	$	0.33	$	2.70	$	1.02

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Noncontrolling Interests (Tables)

9 Months Ended

Sep. 30, 2017

Noncontrolling Interest [Abstract]

Schedule of Redeemable Noncontrolling Interests

The following table sets forth the redeemable noncontrolling interests in the OP for the nine months ended September 30, 2017 (in thousands):

Redeemable noncontrolling interests in the OP, December 31, 2016	$	—
Issuance of redeemable noncontrolling interests in the OP		2,000
Net income attributable to redeemable noncontrolling interests in the OP		162
Other comprehensive income attributable to redeemable noncontrolling interests in the OP		1
Distributions to redeemable noncontrolling interests in the OP		(53	)
Redeemable noncontrolling interests in the OP, September 30, 2017	$	2,110

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Related Party Transactions (Tables)

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

Summary of Fees Incurred to BH And Its Affiliates As Well As Reimbursements Paid to BH

The following is a summary of fees that the properties incurred to BH and its affiliates, as well as reimbursements paid to BH from the properties for various operating expenses, for the three and nine months ended September 30, 2017 and 2016 (in thousands):

		For the Three Months Ended September 30,				For the Nine Months Ended September 30,
		2017		2016		2017		2016
Fees incurred
Property management fees	(1)	$	1,110	$	989	$	3,280	$	3,007
Construction supervision fees	(2)		213		247		651		624
Acquisition fees	(3)		—		139		505		139
Reimbursements
Payroll and benefits	(4)		4,131		4,140		11,855		12,212
Other reimbursements	(5)		432		460		1,457		1,465

(1) Included in property management fees on the consolidated statements of operations and comprehensive income.

(2) Capitalized on the consolidated balance sheets and reflected in buildings and improvements.

(3) Includes due diligence costs. Acquisition fees incurred prior to October 1, 2016 are included in acquisition costs on the consolidated statements of operations and comprehensive income. Acquisition fees incurred for the period beginning on October 1, 2016 are capitalized to operating real estate assets on the consolidated balance sheets.

(4) Included in property operating expenses on the consolidated statements of operations and comprehensive income.

(5) Includes property operating expenses such as repairs and maintenance costs and certain property general and administrative expenses, which are included on the consolidated statements of operations and comprehensive income.

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Subsequent Events (Tables)

9 Months Ended

Sep. 30, 2017

Schedule for Acquisitions of Real Estate

The following table presents the Company’s acquisitions of real estate during the nine months ended September 30, 2017 (dollars in thousands);

Property Name	Location	Date of Acquisition	Purchase Price		Debt (1)		# Units		Effective Ownership
Hollister Place	Houston, Texas	February 1, 2017	$	24,500	$	24,500		260		100	%
Rockledge Apartments	Marietta, Georgia	June 30, 2017		113,500		113,500		708		100	%
			$	138,000	$	138,000		968

(1) For additional information regarding the Company’s debt, see Note 6.

Multifamily Properties

Schedule for Acquisitions of Real Estate

Subsequent to September 30, 2017, the Company acquired the following property through a 1031 Exchange with the NAVA Portfolio and a reverse 1031 Exchange with Timberglen (anticipated to close in the first quarter of 2018) (dollars in thousands) (unaudited):

Property Name	Location	Date of Acquisition	Purchase Price			Debt			# Units		Ownership
Atera	Dallas, Texas	October 25, 2017	$	59,200	(1)	$	29,500	(2)		380		100	%

(1) The Company used approximately $14.1 million of proceeds from the sale of the NAVA Portfolio to fund part of the equity portion of the purchase price.

(2) The Company placed a first mortgage on the property with a floating interest rate at 1.48% over one-month LIBOR and an 84-month term that is full-term, interest-only.

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Organization and Description of Business - Additional Information (Details)	9 Months Ended
	Sep. 30, 2017 shares
Real Estate Properties [Line Items]
Date of incorporation	Sep. 19, 2014
OP Units, outstanding	21,116,902
OP Units, outstanding owned by company	21,043,669
Percentage of OP Units, outstanding owned by company	99.70%
OP Units, outstanding owned by unaffiliated limited partner	73,233
Percentage of OP Units, outstanding owned by unaffiliated limited partner	0.30%
Maximum
Real Estate Properties [Line Items]
Investments in real estate-related debt and securities	30.00%
OP
Real Estate Properties [Line Items]
Percentage of ownership in portfolio	99.90%
TRS
Real Estate Properties [Line Items]
Percentage of ownership in portfolio	0.10%

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Summary of Significant Accounting Policies - Estimated Useful Lives of Assets (Details)	9 Months Ended
	Sep. 30, 2017
Land
Property Plant And Equipment [Line Items]
Estimated useful lives of assets	Not depreciated
Buildings
Property Plant And Equipment [Line Items]
Estimated useful lives of assets	30 years
Improvements
Property Plant And Equipment [Line Items]
Estimated useful lives of assets	15 years
Furniture, Fixtures, and Equipment
Property Plant And Equipment [Line Items]
Estimated useful lives of assets	3 years
Intangible Lease Assets
Property Plant And Equipment [Line Items]
Estimated useful lives of assets	6 months

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Summary of Significant Accounting Policies - Additional Information (Details)		3 Months Ended	9 Months Ended
	Jan. 01, 2016 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($) Segment	Sep. 30, 2016 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Number of reportable segments | Segment			1
Minimum percentage of distributed taxable income to qualify as REIT			90.00%
Percentage of non-deductible excise tax on distribution			4.00%
Percentage of ordinary income considered for payment of distribution			85.00%
Percentage of capital gain net income considered for payment of distribution			95.00%
Percentage of undistributed income of prior considered for payment of distribution			100.00%
Unrecognized tax benefit or expense, accrued interest or penalties			$ 0
Net cash provided by operating activities			27,499,000	$ 26,281,000
Net cash used in investing activities			67,618,000	105,865,000
Increase (decrease) in cash and restricted cash			$ 66,851,000	5,101,000
Minimum
Summary Of Significant Accounting Policies [Line Items]
Percentage of uncertain tax positions likelihood of being sustained			50.00%
Reclassifications
Summary Of Significant Accounting Policies [Line Items]
Interest expense decreased		$ 900,000		1,700,000
Reclassification of deferred financing costs, net | ASU 2016-18
Summary Of Significant Accounting Policies [Line Items]
Net cash provided by operating activities				(2,200,000)
Net cash used in investing activities				$ 10,600,000
Increase (decrease) in cash and restricted cash	$ 46,900,000

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Summary of Significant Accounting Policies - Summary of Company's Cash and Restricted Cash (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016	Dec. 31, 2015
Cash And Cash Equivalents [Abstract]
Cash and cash equivalents	$ 92,695	$ 22,705	$ 34,086
Restricted cash	29,417	32,556	34,110
Total cash and restricted cash	$ 122,112	$ 55,261	$ 68,196	$ 63,095

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Investments in Subsidiaries - Additional Information (Details)	9 Months Ended
	Sep. 30, 2017 subsidiary
Schedule Of Investments [Abstract]
Consolidated investment in single-asset LLCs	100.00%
Number of wholly owned subsidiaries	32

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Investments in Subsidiaries - Schedule of Investments (Details)	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, wholly owned subsidiary	100.00%
The Miramar Apartments | Dallas | Texas
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2013
Effective ownership percentage, wholly owned subsidiary		100.00%
Arbors on Forest Ridge | Bedford | Texas
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
Effective ownership percentage, wholly owned subsidiary	100.00%	90.00%
Cutter’s Point | Richardson | Texas
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
Effective ownership percentage, wholly owned subsidiary	100.00%	90.00%
Eagle Crest | Irving | Texas
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
Effective ownership percentage, wholly owned subsidiary	100.00%	90.00%
Silverbrook | Grand Prairie | Texas
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
Effective ownership percentage, wholly owned subsidiary	100.00%	90.00%
Timberglen | Dallas | Texas
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
Effective ownership percentage, wholly owned subsidiary	100.00%	90.00%
Toscana | Dallas | Texas
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
Effective ownership percentage, wholly owned subsidiary		90.00%
The Grove at Alban | Frederick | Maryland
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
The Grove at Alban | Frederick | Maryland | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		76.00%
Edgewater at Sandy Springs | Atlanta | Georgia
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
Effective ownership percentage, wholly owned subsidiary	100.00%	90.00%
Beechwood Terrace | Nashville | Tennessee
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
Effective ownership percentage, wholly owned subsidiary	100.00%	90.00%
Willow Grove | Nashville | Tennessee
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
Effective ownership percentage, wholly owned subsidiary	100.00%	90.00%
Woodbridge | Nashville | Tennessee
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
Effective ownership percentage, wholly owned subsidiary	100.00%	90.00%
Abbington Heights | Antioch | Tennessee
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
Effective ownership percentage, wholly owned subsidiary	100.00%
Abbington Heights | Antioch | Tennessee | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		90.00%
The Summit at Sabal Park | Tampa | Florida
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
Effective ownership percentage, wholly owned subsidiary	100.00%
The Summit at Sabal Park | Tampa | Florida | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		90.00%
Courtney Cove | Tampa | Florida
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
Effective ownership percentage, wholly owned subsidiary	100.00%
Courtney Cove | Tampa | Florida | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		90.00%
Radbourne Lake | Charlotte | North Carolina
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
Effective ownership percentage, wholly owned subsidiary	100.00%
Radbourne Lake | Charlotte | North Carolina | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		90.00%
Timber Creek | Charlotte | North Carolina
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
Effective ownership percentage, wholly owned subsidiary	100.00%
Timber Creek | Charlotte | North Carolina | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		90.00%
Belmont at Duck Creek | Garland | Texas
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
Effective ownership percentage, wholly owned subsidiary	100.00%
Belmont at Duck Creek | Garland | Texas | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		90.00%
The Arbors | Tucker | Georgia
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
The Arbors | Tucker | Georgia | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		90.00%
The Crossings | Marietta | Georgia
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
The Crossings | Marietta | Georgia | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		90.00%
The Crossings at Holcomb Bridge | Roswell | Georgia
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
The Crossings at Holcomb Bridge | Roswell | Georgia | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		90.00%
The Knolls | Marietta | Georgia
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
The Knolls | Marietta | Georgia | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		90.00%
Regatta Bay | Seabrook | Texas
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
Regatta Bay | Seabrook | Texas | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		90.00%
Sabal Palm at Lake Buena Vista | Orlando | Florida
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
Effective ownership percentage, wholly owned subsidiary	100.00%
Sabal Palm at Lake Buena Vista | Orlando | Florida | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		90.00%
Southpoint Reserve at Stoney Creek | Fredericksburg | Virginia
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2014
Effective ownership percentage, wholly owned subsidiary	100.00%
Southpoint Reserve at Stoney Creek | Fredericksburg | Virginia | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		85.00%
Cornerstone | Orlando | Florida
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2015
Effective ownership percentage, wholly owned subsidiary	100.00%
Cornerstone | Orlando | Florida | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		90.00%
Twelve 6 Ten at the Park | Dallas | Texas
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2015
Twelve 6 Ten at the Park | Dallas | Texas | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		90.00%
The Preserve at Terrell Mill | Marietta | Georgia
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2015
Effective ownership percentage, wholly owned subsidiary	100.00%
The Preserve at Terrell Mill | Marietta | Georgia | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		90.00%
The Ashlar | Dallas | Texas
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2015
Effective ownership percentage, wholly owned subsidiary	100.00%
The Ashlar | Dallas | Texas | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		90.00%
Heatherstone | Dallas | Texas
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2015
Effective ownership percentage, wholly owned subsidiary	100.00%
Heatherstone | Dallas | Texas | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		90.00%
Versailles | Dallas | Texas
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2015
Effective ownership percentage, wholly owned subsidiary	100.00%
Versailles | Dallas | Texas | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		90.00%
Seasons 704 Apartments | West Palm Beach | Florida
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2015
Effective ownership percentage, wholly owned subsidiary	100.00%
Seasons 704 Apartments | West Palm Beach | Florida | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		90.00%
Madera Point | Mesa | Arizona
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2015
Effective ownership percentage, wholly owned subsidiary	100.00%	95.00%
The Pointe at the Foothills | Mesa | Arizona
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2015
Effective ownership percentage, wholly owned subsidiary	100.00%	95.00%
Venue at 8651 | Fort Worth | Texas
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2015
Effective ownership percentage, wholly owned subsidiary	100.00%	95.00%
Parc500 | West Palm Beach | Florida
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2016
Effective ownership percentage, wholly owned subsidiary	100.00%	91.00%
The Colonnade | Phoenix | Arizona
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2016
Effective ownership percentage, wholly owned subsidiary	100.00%	97.00%
Old Farm | Houston | Texas
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2016
Effective ownership percentage, wholly owned subsidiary	100.00%
Old Farm | Houston | Texas | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		100.00%
Stone Creek at Old Farm | Houston | Texas
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2016
Effective ownership percentage, wholly owned subsidiary	100.00%
Stone Creek at Old Farm | Houston | Texas | Variable Interest Entities
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Effective ownership percentage, variable interest entities		100.00%
Hollister Place | Houston | Texas
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2017
Effective ownership percentage, wholly owned subsidiary	100.00%
Rockledge Apartments | Marietta | Georgia
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Year of acquisition	2017
Effective ownership percentage, wholly owned subsidiary	100.00%

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Investments in Subsidiaries - Schedule of Investments (Parenthetical) (Details)	Sep. 30, 2017
Voting Interest Entities | Noncontrolling Interests
Wholly Owned Subsidiaries And Variable Interest Entities [Line Items]
Acquisition of ownership interest in property held by noncontrolling interest, percentage	100.00%

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Real Estate Investments Statistics - Additional Information (Details)	Sep. 30, 2017 Property
Multifamily Properties
Business Acquisition [Line Items]
Number of multifamily properties	32

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Real Estate Investments Statistics - Summary of Investment in Multifamily Properties (Details) ft² in Thousands		9 Months Ended
		Sep. 30, 2017 ft² Property $ / Units	Dec. 31, 2016
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		10,078
Number of Units | Property		11,395
Arbors on Forest Ridge
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		155
Number of Units | Property		210
Date Acquired		Jan. 31, 2014
Average Effective Monthly Rent Per Unit | $ / Units	[1]	859
% Occupied	[2]	95.20%	92.90%
Cutter’s Point
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		198
Number of Units | Property		196
Date Acquired		Jan. 31, 2014
Average Effective Monthly Rent Per Unit | $ / Units	[1]	1,052
% Occupied	[2]	94.40%	93.90%
Eagle Crest
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		396
Number of Units | Property		447
Date Acquired		Jan. 31, 2014
Average Effective Monthly Rent Per Unit | $ / Units	[1]	876
% Occupied	[2]	95.30%	94.40%
Silverbrook
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		526
Number of Units | Property		642
Date Acquired		Jan. 31, 2014
Average Effective Monthly Rent Per Unit | $ / Units	[1]	781
% Occupied	[2]	95.60%	93.50%
Timberglen
Real Estate Properties [Line Items]
Rentable Square Footage | ft²	[3]	221
Number of Units | Property	[3]	304
Date Acquired	[3]	Jan. 31, 2014
Average Effective Monthly Rent Per Unit | $ / Units	[1],[3]	846
% Occupied	[2],[3]	95.10%	92.80%
Edgewater at Sandy Springs
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		727
Number of Units | Property		760
Date Acquired		Jul. 18, 2014
Average Effective Monthly Rent Per Unit | $ / Units	[1]	929
% Occupied	[2]	94.50%	94.50%
Beechwood Terrace
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		272
Number of Units | Property		300
Date Acquired		Jul. 21, 2014
Average Effective Monthly Rent Per Unit | $ / Units	[1]	921
% Occupied	[2]	96.00%	95.30%
Willow Grove
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		229
Number of Units | Property		244
Date Acquired		Jul. 21, 2014
Average Effective Monthly Rent Per Unit | $ / Units	[1]	912
% Occupied	[2]	93.40%	96.70%
Woodbridge
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		247
Number of Units | Property		220
Date Acquired		Jul. 21, 2014
Average Effective Monthly Rent Per Unit | $ / Units	[1]	945
% Occupied	[2]	95.50%	87.70%
Abbington Heights
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		239
Number of Units | Property		274
Date Acquired		Aug. 01, 2014
Average Effective Monthly Rent Per Unit | $ / Units	[1]	879
% Occupied	[2]	93.80%	95.30%
The Summit at Sabal Park
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		205
Number of Units | Property		252
Date Acquired		Aug. 20, 2014
Average Effective Monthly Rent Per Unit | $ / Units	[1]	907
% Occupied	[2]	95.20%	90.90%
Courtney Cove
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		225
Number of Units | Property		324
Date Acquired		Aug. 20, 2014
Average Effective Monthly Rent Per Unit | $ / Units	[1]	817
% Occupied	[2]	93.80%	94.40%
Radbourne Lake
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		247
Number of Units | Property		225
Date Acquired		Sep. 30, 2014
Average Effective Monthly Rent Per Unit | $ / Units	[1]	1,059
% Occupied	[2]	93.30%	96.90%
Timber Creek
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		248
Number of Units | Property		352
Date Acquired		Sep. 30, 2014
Average Effective Monthly Rent Per Unit | $ / Units	[1]	819
% Occupied	[2]	95.20%	95.50%
Belmont at Duck Creek
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		198
Number of Units | Property		240
Date Acquired		Sep. 30, 2014
Average Effective Monthly Rent Per Unit | $ / Units	[1]	990
% Occupied	[2]	95.40%	95.00%
Sabal Palm at Lake Buena Vista
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		371
Number of Units | Property		400
Date Acquired		Nov. 05, 2014
Average Effective Monthly Rent Per Unit | $ / Units	[1]	1,158
% Occupied	[2]	93.50%	95.00%
Southpoint Reserve at Stoney Creek
Real Estate Properties [Line Items]
Rentable Square Footage | ft²	[3]	116
Number of Units | Property	[3]	156
Date Acquired	[3]	Dec. 18, 2014
Average Effective Monthly Rent Per Unit | $ / Units	[1],[3]	1,069
% Occupied	[2],[3]	96.80%	92.90%
Cornerstone
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		318
Number of Units | Property		430
Date Acquired		Jan. 15, 2015
Average Effective Monthly Rent Per Unit | $ / Units	[1]	910
% Occupied	[2]	94.90%	95.80%
The Preserve at Terrell Mill
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		692
Number of Units | Property		752
Date Acquired		Feb. 06, 2015
Average Effective Monthly Rent Per Unit | $ / Units	[1]	850
% Occupied	[2]	93.10%	92.00%
The Ashlar
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		206
Number of Units | Property		264
Date Acquired		Feb. 26, 2015
Average Effective Monthly Rent Per Unit | $ / Units	[1]	819
% Occupied	[2]	92.40%	91.30%
Heatherstone
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		116
Number of Units | Property		152
Date Acquired		Feb. 26, 2015
Average Effective Monthly Rent Per Unit | $ / Units	[1]	838
% Occupied	[2]	94.10%	92.80%
Versailles
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		301
Number of Units | Property		388
Date Acquired		Feb. 26, 2015
Average Effective Monthly Rent Per Unit | $ / Units	[1]	860
% Occupied	[2]	95.10%	93.00%
Seasons 704 Apartments
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		217
Number of Units | Property		222
Date Acquired		Apr. 15, 2015
Average Effective Monthly Rent Per Unit | $ / Units	[1]	1,056
% Occupied	[2]	95.90%	95.00%
Madera Point
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		193
Number of Units | Property		256
Date Acquired		Aug. 05, 2015
Average Effective Monthly Rent Per Unit | $ / Units	[1]	797
% Occupied	[2]	93.80%	93.80%
The Pointe at the Foothills
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		473
Number of Units | Property		528
Date Acquired		Aug. 05, 2015
Average Effective Monthly Rent Per Unit | $ / Units	[1]	817
% Occupied	[2]	92.20%	92.20%
Venue at 8651
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		289
Number of Units | Property		333
Date Acquired		Oct. 30, 2015
Average Effective Monthly Rent Per Unit | $ / Units	[1]	800
% Occupied	[2]	94.30%	90.40%
Parc500
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		266
Number of Units | Property		217
Date Acquired		Jul. 27, 2016
Average Effective Monthly Rent Per Unit | $ / Units	[1]	1,167
% Occupied	[2]	93.50%	93.50%
The Colonnade
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		256
Number of Units | Property		415
Date Acquired		Oct. 11, 2016
Average Effective Monthly Rent Per Unit | $ / Units	[1]	695
% Occupied	[2]	92.00%	88.00%
Old Farm
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		697
Number of Units | Property		734
Date Acquired		Dec. 29, 2016
Average Effective Monthly Rent Per Unit | $ / Units	[1]	1,177
% Occupied	[2]	92.80%	93.60%
Stone Creek at Old Farm
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		186
Number of Units | Property		190
Date Acquired		Dec. 29, 2016
Average Effective Monthly Rent Per Unit | $ / Units	[1]	1,186
% Occupied	[2]	93.70%	93.20%
Hollister Place
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		246
Number of Units | Property		260
Date Acquired		Feb. 01, 2017
Average Effective Monthly Rent Per Unit | $ / Units	[1]	969
% Occupied	[2]	93.50%
Rockledge Apartments
Real Estate Properties [Line Items]
Rentable Square Footage | ft²		802
Number of Units | Property		708
Date Acquired		Jun. 30, 2017
Average Effective Monthly Rent Per Unit | $ / Units	[1]	1,153
% Occupied	[2]	91.90%

[1] Average effective monthly rent per unit is equal to the average of the contractual rent for commenced leases as of September 30, 2017 minus any tenant concessions over the term of the lease, divided by the number of units under commenced leases as of September 30, 2017

[2] Percent occupied is calculated as the number of units occupied as of September 30, 2017 and December 31, 2016, divided by the total number of units, expressed as a percentage.

[3] Properties were classified as held for sale as of September 30, 2017.

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Real Estate Investments - Summary of Major Components of Investments in Multifamily Properties (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Real Estate Properties [Line Items]
Land	$ 167,245	$ 165,863
Buildings and improvements	768,499	733,374
Intangible lease assets	3,021	5,140
Construction in progress	1,850	2,828
Furniture, fixtures, and equipment	41,190	36,616
Real estate investment, gross	981,805	943,821
Accumulated depreciation and amortization	(78,387)	(60,214)
Total Net Operating Real Estate Investments	903,418	883,607
Accumulated depreciation and amortization	(3,397)	(6,099)
Total Held For Sale Properties	32,915	79,430
Total Net Real Estate Investments	936,333	963,037
Multifamily Properties
Real Estate Properties [Line Items]
Accumulated depreciation and amortization	(3,397)	(6,098)
Total Held For Sale Properties	32,915	79,430
Total Net Real Estate Investments	936,333	963,037
Multifamily Properties | Intangible Lease Assets
Real Estate Properties [Line Items]
Total Net Real Estate Investments	2,014	4,490
Multifamily Properties | Land
Real Estate Properties [Line Items]
Total Held For Sale Properties	8,630	16,680
Total Net Real Estate Investments	175,875	182,543
Multifamily Properties | Buildings and Improvements
Real Estate Properties [Line Items]
Accumulated depreciation and amortization	(2,630)	(4,896)
Total Held For Sale Properties	23,340	59,654
Total Net Real Estate Investments	733,963	746,984
Multifamily Properties | Construction in Progress
Real Estate Properties [Line Items]
Total Held For Sale Properties		55
Total Net Real Estate Investments	1,850	2,883
Multifamily Properties | Furniture, Fixtures, and Equipment
Real Estate Properties [Line Items]
Accumulated depreciation and amortization	(767)	(1,202)
Total Held For Sale Properties	945	3,041
Total Net Real Estate Investments	22,631	26,137
Multifamily Properties | Held For Sale Properties
Real Estate Properties [Line Items]
Real estate investment, gross	36,312	85,528
Multifamily Properties | Held For Sale Properties | Land
Real Estate Properties [Line Items]
Real estate investment, gross	8,630	16,680
Multifamily Properties | Held For Sale Properties | Buildings and Improvements
Real Estate Properties [Line Items]
Real estate investment, gross	25,970	64,550
Multifamily Properties | Held For Sale Properties | Construction in Progress
Real Estate Properties [Line Items]
Real estate investment, gross		55
Multifamily Properties | Held For Sale Properties | Furniture, Fixtures, and Equipment
Real Estate Properties [Line Items]
Real estate investment, gross	1,712	4,243
Multifamily Properties | Arbors on Forest Ridge
Real Estate Properties [Line Items]
Land	2,330	2,330
Buildings and improvements	11,073	11,014
Construction in progress		3
Furniture, fixtures, and equipment	794	717
Real estate investment, gross	14,197	14,064
Multifamily Properties | Cutter’s Point
Real Estate Properties [Line Items]
Land	3,330	3,330
Buildings and improvements	12,995	12,871
Furniture, fixtures, and equipment	946	810
Real estate investment, gross	17,271	17,011
Multifamily Properties | Eagle Crest
Real Estate Properties [Line Items]
Land	5,450	5,450
Buildings and improvements	22,227	21,990
Furniture, fixtures, and equipment	1,231	1,052
Real estate investment, gross	28,908	28,492
Multifamily Properties | Silverbrook
Real Estate Properties [Line Items]
Land	4,860	4,860
Buildings and improvements	25,643	25,335
Furniture, fixtures, and equipment	2,363	1,996
Real estate investment, gross	32,866	32,191
Multifamily Properties | Timberglen
Real Estate Properties [Line Items]
Land		2,510
Buildings and improvements		14,527
Furniture, fixtures, and equipment		894
Real estate investment, gross		17,931
Multifamily Properties | Timberglen | Held For Sale Properties
Real Estate Properties [Line Items]
Land	2,510
Buildings and improvements	14,718
Furniture, fixtures, and equipment	1,049
Real estate investment, gross	18,277
Multifamily Properties | Edgewater at Sandy Springs
Real Estate Properties [Line Items]
Land	14,290	14,290
Buildings and improvements	43,959	43,709
Construction in progress	9	123
Furniture, fixtures, and equipment	4,057	3,295
Real estate investment, gross	62,315	61,417
Multifamily Properties | Beechwood Terrace
Real Estate Properties [Line Items]
Land	1,390	1,390
Buildings and improvements	20,662	20,561
Construction in progress	78
Furniture, fixtures, and equipment	1,229	940
Real estate investment, gross	23,359	22,891
Multifamily Properties | Willow Grove
Real Estate Properties [Line Items]
Land	3,940	3,940
Buildings and improvements	10,739	10,672
Furniture, fixtures, and equipment	882	668
Real estate investment, gross	15,561	15,280
Multifamily Properties | Woodbridge
Real Estate Properties [Line Items]
Land	3,651	3,650
Buildings and improvements	12,995	12,708
Construction in progress	1	215
Furniture, fixtures, and equipment	1,029	759
Real estate investment, gross	17,676	17,332
Multifamily Properties | Abbington Heights
Real Estate Properties [Line Items]
Land	1,770	1,770
Buildings and improvements	16,602	16,426
Construction in progress	112	75
Furniture, fixtures, and equipment	1,101	916
Real estate investment, gross	19,585	19,187
Multifamily Properties | The Summit at Sabal Park
Real Estate Properties [Line Items]
Land	5,770	5,770
Buildings and improvements	13,355	13,342
Construction in progress		9
Furniture, fixtures, and equipment	1,107	956
Real estate investment, gross	20,232	20,077
Multifamily Properties | Courtney Cove
Real Estate Properties [Line Items]
Land	5,880	5,880
Buildings and improvements	12,913	12,886
Construction in progress		42
Furniture, fixtures, and equipment	1,055	910
Real estate investment, gross	19,848	19,718
Multifamily Properties | Radbourne Lake
Real Estate Properties [Line Items]
Land	2,440	2,440
Buildings and improvements	21,801	21,445
Construction in progress	5	257
Furniture, fixtures, and equipment	1,255	1,025
Real estate investment, gross	25,501	25,167
Multifamily Properties | Timber Creek
Real Estate Properties [Line Items]
Land	11,260	11,260
Buildings and improvements	13,429	13,252
Construction in progress		69
Furniture, fixtures, and equipment	1,086	864
Real estate investment, gross	25,775	25,445
Multifamily Properties | Belmont at Duck Creek
Real Estate Properties [Line Items]
Land	1,910	1,910
Buildings and improvements	17,157	17,034
Furniture, fixtures, and equipment	1,170	941
Real estate investment, gross	20,237	19,885
Multifamily Properties | The Arbors
Real Estate Properties [Line Items]
Land		1,730
Buildings and improvements		6,587
Construction in progress		5
Furniture, fixtures, and equipment		413
Real estate investment, gross		8,735
Multifamily Properties | The Crossings
Real Estate Properties [Line Items]
Land		3,982
Buildings and improvements		17,662
Construction in progress		155
Furniture, fixtures, and equipment		1,429
Real estate investment, gross		23,228
Multifamily Properties | The Crossings at Holcomb Bridge
Real Estate Properties [Line Items]
Land		5,560
Buildings and improvements		10,925
Furniture, fixtures, and equipment		1,178
Real estate investment, gross		17,663
Multifamily Properties | The Knolls
Real Estate Properties [Line Items]
Land		3,410
Buildings and improvements		17,707
Construction in progress		8
Furniture, fixtures, and equipment		1,615
Real estate investment, gross		22,740
Multifamily Properties | Regatta Bay
Real Estate Properties [Line Items]
Land		1,660
Buildings and improvements		16,155
Construction in progress		89
Furniture, fixtures, and equipment		891
Real estate investment, gross		18,795
Multifamily Properties | Sabal Palm at Lake Buena Vista
Real Estate Properties [Line Items]
Land	7,580	7,580
Buildings and improvements	41,173	41,147
Construction in progress		3
Furniture, fixtures, and equipment	1,024	874
Real estate investment, gross	49,777	49,604
Multifamily Properties | Cornerstone
Real Estate Properties [Line Items]
Land	1,500	1,500
Buildings and improvements	30,357	30,354
Construction in progress		29
Furniture, fixtures, and equipment	1,395	906
Real estate investment, gross	33,252	32,789
Multifamily Properties | The Preserve at Terrell Mill
Real Estate Properties [Line Items]
Land	10,170	10,170
Buildings and improvements	48,609	48,163
Construction in progress		516
Furniture, fixtures, and equipment	3,895	2,872
Real estate investment, gross	62,674	61,721
Multifamily Properties | The Ashlar
Real Estate Properties [Line Items]
Land	4,090	4,090
Buildings and improvements	12,631	12,348
Construction in progress		124
Furniture, fixtures, and equipment	1,459	1,129
Real estate investment, gross	18,180	17,691
Multifamily Properties | Heatherstone
Real Estate Properties [Line Items]
Land	2,320	2,320
Buildings and improvements	7,862	7,521
Construction in progress		224
Furniture, fixtures, and equipment	909	749
Real estate investment, gross	11,091	10,814
Multifamily Properties | Versailles
Real Estate Properties [Line Items]
Land	6,720	6,720
Buildings and improvements	19,735	20,267
Construction in progress	6	286
Furniture, fixtures, and equipment	2,155	1,597
Real estate investment, gross	28,616	28,870
Multifamily Properties | Seasons 704 Apartments
Real Estate Properties [Line Items]
Land	7,480	7,480
Buildings and improvements	14,071	14,043
Construction in progress	2
Furniture, fixtures, and equipment	867	696
Real estate investment, gross	22,420	22,219
Multifamily Properties | Madera Point
Real Estate Properties [Line Items]
Land	4,920	4,920
Buildings and improvements	17,369	17,079
Construction in progress	43	15
Furniture, fixtures, and equipment	1,130	865
Real estate investment, gross	23,462	22,879
Multifamily Properties | Parc500
Real Estate Properties [Line Items]
Land	3,860	3,860
Buildings and improvements	19,297	18,700
Intangible lease assets		491
Construction in progress	589	113
Furniture, fixtures, and equipment	1,217	504
Real estate investment, gross	24,963	23,668
Multifamily Properties | The Pointe at the Foothills
Real Estate Properties [Line Items]
Land	4,840	4,840
Buildings and improvements	46,402	45,975
Construction in progress	108	157
Furniture, fixtures, and equipment	1,669	1,289
Real estate investment, gross	53,019	52,261
Multifamily Properties | Venue at 8651
Real Estate Properties [Line Items]
Land	2,350	2,350
Buildings and improvements	16,910	16,815
Construction in progress	813	311
Furniture, fixtures, and equipment	1,744	1,162
Real estate investment, gross	21,817	20,638
Multifamily Properties | The Colonnade
Real Estate Properties [Line Items]
Land	8,340	8,340
Buildings and improvements	36,677	35,473
Intangible lease assets		723
Construction in progress	55
Furniture, fixtures, and equipment	805	376
Real estate investment, gross	45,877	44,912
Multifamily Properties | Old Farm
Real Estate Properties [Line Items]
Land	11,078	11,078
Buildings and improvements	69,718	69,580
Intangible lease assets		3,354
Construction in progress	29
Furniture, fixtures, and equipment	1,304	1,052
Real estate investment, gross	82,129	85,064
Multifamily Properties | Rockledge Apartments
Real Estate Properties [Line Items]
Land	17,451
Buildings and improvements	92,296
Intangible lease assets	3,021
Furniture, fixtures, and equipment	1,369
Real estate investment, gross	114,137
Multifamily Properties | Stone Creek at Old Farm
Real Estate Properties [Line Items]
Land	3,493	3,493
Buildings and improvements	19,123	19,101
Intangible lease assets		572
Furniture, fixtures, and equipment	350	276
Real estate investment, gross	22,966	23,442
Multifamily Properties | Hollister Place
Real Estate Properties [Line Items]
Land	2,782
Buildings and improvements	20,719
Furniture, fixtures, and equipment	593
Real estate investment, gross	24,094
Multifamily Properties | Southpoint Reserve at Stoney Creek | Held For Sale Properties
Real Estate Properties [Line Items]
Land	6,120	6,120
Buildings and improvements	11,252	11,218
Construction in progress		31
Furniture, fixtures, and equipment	663	605
Real estate investment, gross	18,035	17,974
Multifamily Properties | Operating Properties
Real Estate Properties [Line Items]
Real estate investment, gross	981,805	943,821
Accumulated depreciation and amortization	(78,387)	(60,214)
Total Net Operating Real Estate Investments	903,418	883,607
Multifamily Properties | Operating Properties | Intangible Lease Assets
Real Estate Properties [Line Items]
Real estate investment, gross	3,021	5,140
Accumulated depreciation and amortization	(1,007)	(650)
Total Net Operating Real Estate Investments	2,014	4,490
Multifamily Properties | Operating Properties | Land
Real Estate Properties [Line Items]
Real estate investment, gross	167,245	165,863
Total Net Operating Real Estate Investments	167,245	165,863
Multifamily Properties | Operating Properties | Buildings and Improvements
Real Estate Properties [Line Items]
Real estate investment, gross	768,499	733,374
Accumulated depreciation and amortization	(57,876)	(46,044)
Total Net Operating Real Estate Investments	710,623	687,330
Multifamily Properties | Operating Properties | Construction in Progress
Real Estate Properties [Line Items]
Real estate investment, gross	1,850	2,828
Total Net Operating Real Estate Investments	1,850	2,828
Multifamily Properties | Operating Properties | Furniture, Fixtures, and Equipment
Real Estate Properties [Line Items]
Real estate investment, gross	41,190	36,616
Accumulated depreciation and amortization	(19,504)	(13,520)
Total Net Operating Real Estate Investments	$ 21,686	23,096
Multifamily Properties | The Grove at Alban | Held For Sale Properties
Real Estate Properties [Line Items]
Land		3,640
Buildings and improvements		19,033
Furniture, fixtures, and equipment		1,318
Real estate investment, gross		23,991
Multifamily Properties | The Miramar Apartments | Held For Sale Properties
Real Estate Properties [Line Items]
Land		1,580
Buildings and improvements		8,870
Furniture, fixtures, and equipment		711
Real estate investment, gross		11,161
Multifamily Properties | Toscana | Held For Sale Properties
Real Estate Properties [Line Items]
Land		1,730
Buildings and improvements		7,341
Construction in progress		3
Furniture, fixtures, and equipment		684
Real estate investment, gross		9,758
Multifamily Properties | Twelve 6 Ten at the Park | Held For Sale Properties
Real Estate Properties [Line Items]
Land		3,610
Buildings and improvements		18,088
Construction in progress		21
Furniture, fixtures, and equipment		925
Real estate investment, gross		$ 22,644

XML

Real Estate Investments - Additional Information (Details)		1 Months Ended	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($) Property	Apr. 30, 2017 Property	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($) Property	Sep. 30, 2016 USD ($) Property
Real Estate Properties [Line Items]
Depreciation expense | $			$ 10,000,000	$ 8,500,000	$ 29,500,000	$ 25,500,000
Amortization expense of intangible lease assets | $			1,200,000	$ 200,000	6,400,000	$ 900,000
Number of properties acquired | Property						1
Purchase Price | $					$ 138,000,000	$ 22,400,000
Number of real estate properties sold | Property		4			9	7
Sales of real estate | $					$ 228,100,000	$ 134,000,000
Estimated damage costs | $	$ 40,000
Houston
Real Estate Properties [Line Items]
Number of real estate properties damaged by hurricanes | Property	3
Miami
Real Estate Properties [Line Items]
Number of real estate properties damaged by hurricanes | Property	2
Tampa
Real Estate Properties [Line Items]
Number of real estate properties damaged by hurricanes | Property	2
Orlando
Real Estate Properties [Line Items]
Number of real estate properties damaged by hurricanes | Property	2
Intangible Lease Assets
Real Estate Properties [Line Items]
Amortization expense of intangible lease assets, remainder of fiscal year | $	$ 2,000,000		$ 2,000,000		$ 2,000,000

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Real Estate Investments - Summary of Acquisitions of Real Estate Property (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($) Property	Sep. 30, 2016 USD ($)
Real Estate Properties [Line Items]
Purchase Price	$ 138,000	$ 22,400
Debt	$ 138,000
Number of Units | Property	968
Effective ownership percentage, wholly owned subsidiary	100.00%
Hollister Place | Houston | Texas
Real Estate Properties [Line Items]
Date of Acquisition	Feb. 01, 2017
Purchase Price	$ 24,500
Debt	$ 24,500
Number of Units | Property	260
Effective ownership percentage, wholly owned subsidiary	100.00%
Rockledge Apartments | Marietta | Georgia
Real Estate Properties [Line Items]
Date of Acquisition	Jun. 30, 2017
Purchase Price	$ 113,500
Debt	$ 113,500
Number of Units | Property	708
Effective ownership percentage, wholly owned subsidiary	100.00%

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Real Estate Investments - Summary of Sold Properties (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Real Estate Properties [Line Items]
Sales Price			$ 228,100	$ 134,000
Net proceeds from sales of real estate			224,416	131,786
Gain on sales of real estate	$ 58,490	$ 9,562	$ 78,386	$ 25,932
The Miramar Apartments | Dallas | Texas
Real Estate Properties [Line Items]
Date of Sale			Apr. 03, 2017
Sales Price			$ 16,550
Net proceeds from sales of real estate			16,326
Gain on sales of real estate			$ 6,368
Toscana | Dallas | Texas
Real Estate Properties [Line Items]
Date of Sale			Apr. 03, 2017
Sales Price			$ 13,250
Net proceeds from sales of real estate			13,040
Gain on sales of real estate			$ 4,283
The Grove at Alban | Frederick | Maryland
Real Estate Properties [Line Items]
Date of Sale			Apr. 03, 2017
Sales Price			$ 27,500
Net proceeds from sales of real estate			27,021
Gain on sales of real estate			$ 4,514
Twelve 6 Ten at the Park | Dallas | Texas
Real Estate Properties [Line Items]
Date of Sale			Apr. 27, 2017
Sales Price			$ 26,600
Net proceeds from sales of real estate			26,349
Gain on sales of real estate			$ 4,731
Regatta Bay | Seabrook | Texas
Real Estate Properties [Line Items]
Date of Sale			Jul. 14, 2017
Sales Price			$ 28,200
Net proceeds from sales of real estate			27,670
Gain on sales of real estate			$ 10,423
The Arbors, The Crossings, The Crossings at Holcomb Bridge and The Knolls | Atlanta | Georgia
Real Estate Properties [Line Items]
Date of Sale			Sep. 29, 2017
Sales Price			$ 116,000
Net proceeds from sales of real estate			114,010
Gain on sales of real estate			$ 48,067

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Real Estate Investments - Summary of Sold Properties (Parenthetical) (Details) - USD ($) $ in Thousands		1 Months Ended			9 Months Ended
	Oct. 25, 2017	Oct. 31, 2017	Jul. 31, 2017	Apr. 30, 2017	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016	Dec. 29, 2016
Real Estate Properties [Line Items]
Net proceeds from sales of real estate					$ 224,416	$ 131,786
Bridge facility, net					54,531		$ 29,874
Repayments of bridge loan					41,278	$ 29,000
Repayments of Lines of Credit					310,000
$30 Million Credit Facility
Real Estate Properties [Line Items]
Repayments of Lines of Credit				$ 10,000	10,000
Credit facility, maximum borrowing capacity					30,000			$ 30,000
2016 Bridge Facility
Real Estate Properties [Line Items]
Bridge facility, net					30,000			$ 30,000
Repayments of bridge loan				$ 30,000	30,000
2017 Bridge Facility
Real Estate Properties [Line Items]
Bridge facility, net					54,531
Repayments of bridge loan			$ 11,300		$ 11,300
Subsequent Event | 2017 Bridge Facility
Real Estate Properties [Line Items]
Bridge facility, net		$ 8,600
Repayments of bridge loan		$ 46,000
Subsequent Event | The Arbors, The Crossings, The Crossings at Holcomb Bridge and The Knolls
Real Estate Properties [Line Items]
Net proceeds from sales of real estate	$ 14,100

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Debt - Summary of Mortgage Debt Nonrecourse to Company and Encumbers Multifamily Properties (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Jun. 30, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Deferred financing costs, net of accumulated amortization		$ (4,900)
Mortgages payable, net	$ 694,968		$ 367,453
Mortgages Payable | Operating Properties
Debt Instrument [Line Items]
Outstanding Principal	702,474
Fair market value adjustment	852
Deferred financing costs, net of accumulated amortization	(8,358)
Mortgages payable, net	$ 694,968
Mortgages Payable | Arbors on Forest Ridge | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 13,130
Interest Rate	2.91%
Maturity Date	Jul. 01, 2024
Mortgages Payable | Courtney Cove | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 13,680
Interest Rate	2.85%
Maturity Date	Jul. 01, 2024
Mortgages Payable | Cutter’s Point | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 16,640
Interest Rate	2.91%
Maturity Date	Jul. 01, 2024
Mortgages Payable | The Summit at Sabal Park | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 13,560
Interest Rate	2.85%
Maturity Date	Jul. 01, 2024
Mortgages Payable | Eagle Crest | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 29,510
Interest Rate	2.91%
Maturity Date	Jul. 01, 2024
Mortgages Payable | The Preserve at Terrell Mill | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 42,480
Interest Rate	2.85%
Maturity Date	Jul. 01, 2024
Mortgages Payable | Silverbrook | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 30,590
Interest Rate	2.91%
Maturity Date	Jul. 01, 2024
Mortgages Payable | The Ashlar | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 14,520
Interest Rate	2.85%
Maturity Date	Jul. 01, 2024
Mortgages Payable | Heatherstone | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 8,880
Interest Rate	2.85%
Maturity Date	Jul. 01, 2024
Mortgages Payable | Edgewater at Sandy Springs | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 52,000
Interest Rate	2.91%
Maturity Date	Jul. 01, 2024
Mortgages Payable | Versailles | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 23,880
Interest Rate	2.85%
Maturity Date	Jul. 01, 2024
Mortgages Payable | Beechwood Terrace | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 20,150
Interest Rate	2.91%
Maturity Date	Jul. 01, 2024
Mortgages Payable | Seasons 704 Apartments | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 17,460
Interest Rate	2.85%
Maturity Date	Jul. 01, 2024
Mortgages Payable | Willow Grove | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 14,818
Interest Rate	3.01%
Maturity Date	Jul. 01, 2024
Mortgages Payable | Timber Creek | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	120 months
Outstanding Principal	$ 19,482
Interest Rate	3.05%
Maturity Date	Oct. 01, 2024
Mortgages Payable | Woodbridge | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 13,677
Interest Rate	3.01%
Maturity Date	Jul. 01, 2024
Mortgages Payable | Radbourne Lake | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	120 months
Outstanding Principal	$ 19,213
Interest Rate	3.04%
Maturity Date	Oct. 01, 2024
Mortgages Payable | Sabal Palm at Lake Buena Vista | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	120 months
Outstanding Principal	$ 37,680
Interest Rate	3.04%
Maturity Date	Dec. 01, 2024
Mortgages Payable | Abbington Heights | Debt With Fixed Interest Rate
Debt Instrument [Line Items]
Term (months)	120 months
Outstanding Principal	$ 10,053
Interest Rate	3.79%
Maturity Date	Sep. 01, 2022
Mortgages Payable | Belmont at Duck Creek | Debt With Fixed Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 10,995
Interest Rate	4.68%
Maturity Date	Sep. 01, 2018
Mortgages Payable | Cornerstone | Debt With Fixed Interest Rate
Debt Instrument [Line Items]
Term (months)	120 months
Outstanding Principal	$ 22,771
Interest Rate	4.24%
Maturity Date	Mar. 01, 2023
Mortgages Payable | Madera Point | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 15,150
Interest Rate	2.85%
Maturity Date	Jul. 01, 2024
Mortgages Payable | Venue at 8651 | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 13,734
Interest Rate	3.01%
Maturity Date	Jul. 01, 2024
Mortgages Payable | The Pointe at the Foothills | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 34,800
Interest Rate	2.85%
Maturity Date	Jul. 01, 2024
Mortgages Payable | The Colonnade | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 28,093
Interest Rate	2.91%
Mortgages Payable | Old Farm | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 52,886
Interest Rate	2.91%
Maturity Date	Jul. 01, 2024
Mortgages Payable | Hollister Place | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 13,475
Interest Rate	3.47%
Maturity Date	Feb. 01, 2024
Mortgages Payable | Stone Creek at Old Farm | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 15,274
Interest Rate	2.91%
Maturity Date	Jul. 01, 2024
Mortgages Payable | Parc500 | Debt With Fixed Interest Rate
Debt Instrument [Line Items]
Term (months)	120 months
Outstanding Principal	$ 15,793
Interest Rate	4.49%
Maturity Date	Aug. 01, 2025
Mortgages Payable | Rockledge Apartments | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 68,100
Interest Rate	2.80%
Maturity Date	Jul. 01, 2024
Mortgages Payable | The Colonnade | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Maturity Date	Jul. 01, 2024
Mortgages Payable | Held For Sale Properties
Debt Instrument [Line Items]
Outstanding Principal	$ 30,826
Deferred financing costs, net of accumulated amortization	(499)
Mortgages payable, net	$ 30,327
Mortgages Payable | Held For Sale Properties | Timberglen | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 17,226
Interest Rate	3.11%
Maturity Date	Jul. 01, 2024
Mortgages Payable | Held For Sale Properties | Southpoint Reserve at Stoney Creek | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	84 months
Outstanding Principal	$ 13,600
Interest Rate	3.34%
Maturity Date	Jan. 01, 2022

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Debt - Summary of Mortgage Debt Nonrecourse to Company and Encumbers Multifamily Properties (Parenthetical) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Debt Instrument [Line Items]
Deferred financing costs, net of accumulated amortization	$ 592
13th month through 81st month
Debt Instrument [Line Items]
Mortgage loans payable description	Loan can be pre-paid in the first 12 months of the term at par plus 5.00%. Starting in the 13th month of the term through the 81st month of the term, the loan can be pre-paid at par plus 1.00% of the unpaid principal balance and at par during the last three months of the term.
Loan prepayment fee as a percentage of unpaid principal balance	1.00%
First 12 months
Debt Instrument [Line Items]
Loan prepayment fee as a percentage of unpaid principal balance	5.00%
13th month through 116th month
Debt Instrument [Line Items]
Mortgage loans payable description	Loan can be pre-paid in the first 12 months of the term at par plus 5.00%. Starting in the 13th month of the term through the 116th month of the term, the loan can be pre-paid at par plus 1.00% of the unpaid principal balance and at par during the last four months of the term.
Loan prepayment fee as a percentage of unpaid principal balance	1.00%
Abbington Heights | Last Three Months
Debt Instrument [Line Items]
Mortgage loans payable description	Debt was assumed upon acquisition of this property at approximated fair value. The loan is open to pre-payment in the last three months of the term.
Belmont at Duck Creek | Last Six Months
Debt Instrument [Line Items]
Mortgage loans payable description	Debt was assumed upon acquisition of this property at approximated fair value. The loan is open to pre-payment in the last six months of the term.
Cornerstone | Debt With Fixed Interest Rate
Debt Instrument [Line Items]
Interest Rate	4.09%
Fair value of debt assumed upon acquisition	$ 18,000
Debt instrument, payment terms	The assumed debt carries a 4.09% fixed rate, was originally issued in March 2013, and had a term of 120 months with an initial 24 months of interest only.
Blended pay rate	4.24%
Cornerstone | Debt With Fixed Interest Rate | First Mortgage
Debt Instrument [Line Items]
Debt instrument, payment terms	At the time of acquisition, the principal balance of the first mortgage remained unchanged and had a remaining term of 98 months with 2 months of interest only. The first mortgage is pre-payable and subject to yield maintenance from month 13 through August 31, 2022 and is pre-payable at par September 1, 2022 until maturity.
Cornerstone | Debt With Fixed Interest Rate | Second Mortgage
Debt Instrument [Line Items]
Interest Rate	4.70%
Debt instrument, payment terms	The supplemental second mortgage is pre-payable and subject to yield maintenance from the date of issuance through August 31, 2022 and is pre-payable at par September 1, 2022 until maturity.
Acquired property mortgage loan principle amount	$ 5,800
Parc500 | Last Four Months
Debt Instrument [Line Items]
Mortgage loans payable description	Debt was assumed upon acquisition of this property at approximated fair value. The loan is open to pre-payment in the last four months of the term
Mortgages Payable | Abbington Heights | Debt With Fixed Interest Rate
Debt Instrument [Line Items]
Interest Rate	1.2322%
Held For Sale Properties
Debt Instrument [Line Items]
Deferred financing costs, net of accumulated amortization	$ 80

XML

Debt - Additional Information (Details)						1 Months Ended			3 Months Ended		6 Months Ended	9 Months Ended
	Jun. 30, 2017 USD ($)	Jun. 30, 2017 USD ($) Property Loan	Feb. 01, 2017 USD ($)	Dec. 29, 2016 USD ($)	Jun. 06, 2016 USD ($) Property	Oct. 31, 2017 USD ($)	Jul. 31, 2017 USD ($)	Apr. 30, 2017 USD ($) Property	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Jun. 30, 2017 USD ($)	Sep. 30, 2017 USD ($) Property	Sep. 30, 2016 USD ($) Property	Dec. 31, 2016 USD ($)
Debt Instrument [Line Items]
Mortgage indebtedness	$ 168,400,000	$ 168,400,000									$ 168,400,000
Number of properties refinanced under existing mortgage debt | Property		9
Credit facilities, net									$ 29,803,000			$ 29,803,000		$ 310,492,000
Deferred financing costs, net	4,900,000	$ 4,900,000									4,900,000
Loss on extinguishment of debt and modification costs									$ 914,000	$ 888,000		$ 5,717,000	$ 1,722,000
Number of properties sold | Property								4				9	7
Number of properties encumbered | Property												8
Derivative financial instruments cap weighted average rate									4.20%			4.20%
Credit facilities proceeds received	11,000,000											$ 25,000,000	$ 200,000,000
Proceeds from expansion of credit facility to fund a portion of purchase price												17,192,000	18,022,000
Repayments of Lines of Credit												310,000,000
Repayments of bridge loan												41,278,000	$ 29,000,000
Bridge facility, net									$ 54,531,000			54,531,000		$ 29,874,000
Credit facility, additional borrowing capacity	30,000,000	$ 30,000,000									30,000,000
Number of properties acquired | Property													1
Number Of Cross Collateralized Properties | Property					12
Drawing from bridge facility												65,875,000
Write-off deferred financing costs									600,000	400,000		1,000,000	$ 700,000
2017 Bridge Facility
Debt Instrument [Line Items]
Deferred financing costs, net									66,000			66,000
Interest rate description		one-month LIBOR plus 3.75%.
Bridge facility	65,900,000	$ 65,900,000									$ 65,900,000
Repayments of bridge loan							$ 11,300,000					11,300,000
Bridge facility, net									54,531,000			54,531,000
Bridge facility extension term		4 months
2017 Bridge Facility | Subsequent Event
Debt Instrument [Line Items]
Repayments of bridge loan						$ 46,000,000
Bridge facility, net						$ 8,600,000
Maturity Date						Mar. 31, 2018
2016 Bridge Facility
Debt Instrument [Line Items]
Repayments of bridge loan								$ 30,000,000				30,000,000
Bridge facility, net				$ 30,000,000					$ 30,000,000			$ 30,000,000
Maturity Date											Apr. 28, 2017
Drawing from bridge facility				30,000,000
Bridge facility principal payment funded with share proceeds								30,000,000
BH Equities, LLC | 2017 Bridge Facility
Debt Instrument [Line Items]
Payments for property		$ 21,400,000
Freddie Mac Multifamily Green Advantage Program
Debt Instrument [Line Items]
Percentage of weighted average reduction									0.10%			0.10%
Mortgage debt financing, amount escrowed									$ 4,200,000			$ 4,200,000
Number of properties covered under mortgage loan program | Property												20
Freddie Mac Multifamily Green Advantage Program | Minimum
Debt Instrument [Line Items]
Percentage of expected cost reduction at each property												15.00%
Mortgages Payable
Debt Instrument [Line Items]
Adjusted weighted average interest rate									3.14%			3.14%
Weighted average fixed rate									1.3388%			1.3388%
Interest rate description												The interest rate cap agreements the Company has entered into effectively cap one-month LIBOR on $293.2 million of the Company’s floating rate mortgage indebtedness at a weighted average rate of 4.20%
Derivative financial instruments cap weighted average rate									4.20%			4.20%
Mortgages Payable | One-month LIBOR
Debt Instrument [Line Items]
Mortgage indebtedness									$ 293,200,000			$ 293,200,000
Mortgages Payable | Floating Interest Rate Swap
Debt Instrument [Line Items]
Combined notional amount									650,000,000			650,000,000
Mortgages Payable | Interest Rate Swap
Debt Instrument [Line Items]
Mortgage indebtedness									650,000,000			650,000,000
Interest expense
Debt Instrument [Line Items]
Amortization of deferred financing fees									$ 600,000	$ 400,000		1,500,000	$ 1,100,000
Toscana | Loss on early extinguishment of debt and other
Debt Instrument [Line Items]
Mortgage prepayment penalties												900,000
Mortgage fee												$ 100,000
Rockledge Apartments | 2017 Bridge Facility
Debt Instrument [Line Items]
Payments for property		$ 44,500,000
Freddie Refinance
Debt Instrument [Line Items]
Number of mortgages | Loan		22
Mortgage loan principal amount		$ 502,100,000
Refinancing of existing mortgage debt incurred, prepayment penalties		1,700,000
Deferred financing costs, net	2,900,000	2,900,000									$ 2,900,000
Loss on extinguishment of debt and modification costs		2,000,000
Proceeds from mortgage debt to fund BH buyout		16,300,000
Freddie Refinance | Mortgages Payable
Debt Instrument [Line Items]
Weighted average interest rate of mortgage indebtedness									3.04%			3.04%		2.95%
Percentage of weighted average reduction									0.57%			0.57%
$300 Million Credit Facility
Debt Instrument [Line Items]
Credit facilities, net	300,000,000	300,000,000									$ 300,000,000
Credit facility, maximum borrowing capacity					$ 200,000,000
Credit facility, additional borrowing capacity					$ 300,000,000
Number of properties acquired | Property					3
$300 Million Credit Facility | Freddie Refinance
Debt Instrument [Line Items]
Credit facility repaid and retired	300,000,000
Prepayment penalties	$ 0
$30 Million Credit Facility
Debt Instrument [Line Items]
Credit facilities, net			$ 14,000,000						$ 29,803,000			$ 29,803,000
Deferred financing costs, net									197,000			197,000
Credit facility, maximum borrowing capacity				30,000,000					$ 30,000,000			30,000,000
Credit facilities proceeds received				$ 15,000,000
Credit facility, one extension term				12 months
Proceeds from expansion of credit facility to fund a portion of purchase price			2,000,000
Repayments of Lines of Credit								$ 10,000,000				$ 10,000,000
$30 Million Credit Facility | BH Equities, LLC
Debt Instrument [Line Items]
Payments for property		$ 11,000,000
$30 Million Credit Facility | Hollister Place
Debt Instrument [Line Items]
Payments for property			$ 12,000,000

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Debt - Sale of Properties and Repayment of Related Mortgage Loans That Encumbered (Details) - Mortgages Loans - Debt With Floating Interest Rate $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Debt Instrument [Line Items]
Outstanding Principal	$ 106,662
The Miramar Apartments
Debt Instrument [Line Items]
Date of Sale	Apr. 03, 2017
Outstanding Principal	$ 8,400
The Grove at Alban
Debt Instrument [Line Items]
Date of Sale	Apr. 03, 2017
Outstanding Principal	$ 18,374
Twelve 6 Ten at the Park
Debt Instrument [Line Items]
Date of Sale	Apr. 27, 2017
Outstanding Principal	$ 15,711
Regatta Bay
Debt Instrument [Line Items]
Date of Sale	Jul. 14, 2017
Outstanding Principal	$ 14,000
The Arbors, The Crossings, The Crossings at Holcomb Bridge and The Knolls
Debt Instrument [Line Items]
Date of Sale	Sep. 29, 2017
Outstanding Principal	$ 50,177

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Debt - Summary of the Company's Credit and Bridge Facilities (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Jun. 30, 2017	Feb. 01, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Deferred financing costs, net of accumulated amortization		$ (4,900)
Credit facilities, net	$ 29,803			$ 310,492
Bridge facility, net	54,531			$ 29,874
2017 Bridge Facility
Debt Instrument [Line Items]
Deferred financing costs, net of accumulated amortization	(66)
Bridge facility		$ 65,900
Bridge facility, net	$ 54,531
2017 Bridge Facility | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	4 months
Amortization (months)	360 months
Interest Rate	4.98%
Bridge facility	$ 54,597
Maturity Date	Oct. 31, 2017
$30 Million Credit Facility
Debt Instrument [Line Items]
Deferred financing costs, net of accumulated amortization	$ (197)
Credit facilities, net	$ 29,803		$ 14,000
$30 Million Credit Facility | Debt With Floating Interest Rate
Debt Instrument [Line Items]
Term (months)	24 months
Amortization (months)	360 months
Interest Rate	5.23%
Credit facilities	$ 30,000
Maturity Date	Dec. 29, 2018

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Debt - Summary of the Company's Credit and Bridge Facilities (Parenthetical) (Details)	Sep. 30, 2017
One-month LIBOR
Debt Instrument [Line Items]
Interest Rate	1.2322%

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Debt - Schedule of Debt Maturities (Details) $ in Thousands	Sep. 30, 2017 USD ($)
Debt Instrument [Line Items]
2017	$ 54,993
2018	43,628
2019	2,757
2020	2,799
2021	2,857
Thereafter	710,863
Total	817,897
Operating Properties & Other Secured Debt
Debt Instrument [Line Items]
2017	54,993
2018	43,352
2019	2,448
2020	2,483
2021	2,531
Thereafter	681,264
Total	787,071
Held For Sale Properties
Debt Instrument [Line Items]
2018	276
2019	309
2020	316
2021	326
Thereafter	29,599
Total	$ 30,826

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Fair Value of Derivative and Financial Instruments - Additional Information (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($) DerivativeInstrument	Sep. 30, 2016 USD ($) DerivativeInstrument	Sep. 30, 2017 USD ($) DerivativeInstrument	Sep. 30, 2016 USD ($) DerivativeInstrument
Fair Value Inputs Assets Quantitative Information [Line Items]
Derivative financial instruments cap weighted average rate	4.20%		4.20%
Impairment charges related to real estate assets			$ 0	$ 0
KeyBank
Fair Value Inputs Assets Quantitative Information [Line Items]
Combined notional amount	$ 650,000,000		$ 650,000,000
Weighted average fixed rate	1.3388%		1.3388%
Designated as hedging instrument
Fair Value Inputs Assets Quantitative Information [Line Items]
Gain (loss) ineffectiveness to derivatives designated as cash flow hedges	$ 0.1			0.1
One-month LIBOR | KeyBank | Interest Rate Swap
Fair Value Inputs Assets Quantitative Information [Line Items]
Combined notional amount	$ 650,000,000		$ 650,000,000
Interest rate description			floating interest rate (one-month LIBOR)
Weighted average fixed rate	1.3388%		1.3388%
Interest rate caps
Fair Value Inputs Assets Quantitative Information [Line Items]
Interest rate description			The interest rate cap agreements the Company has entered into effectively cap one-month LIBOR on $293.2 million of the Company’s floating rate mortgage indebtedness at a weighted average rate of 4.20%.
Interest rate caps | Not designated as hedging instrument
Fair Value Inputs Assets Quantitative Information [Line Items]
Derivative notional amount	$ 293,184,000	$ 578,300,000	$ 293,184,000	$ 578,300,000
Interest rate caps | DerivativeInstrument	17	36	17	36
Interest rate caps | One-month LIBOR
Fair Value Inputs Assets Quantitative Information [Line Items]
Combined notional amount	$ 293,200,000		$ 293,200,000
Interest Rate Swap | Designated as hedging instrument
Fair Value Inputs Assets Quantitative Information [Line Items]
Number of derivatives designated as cash flow hedges | DerivativeInstrument	4		4
Derivative notional amount		$ 400,000,000		$ 400,000,000
Minimum | Interest rate caps
Fair Value Inputs Assets Quantitative Information [Line Items]
Interest rate term range			3 years
Minimum | Interest Rate Swap
Fair Value Inputs Assets Quantitative Information [Line Items]
Interest rate term range			4 years
Maximum | Designated as hedging instrument
Fair Value Inputs Assets Quantitative Information [Line Items]
Gain (loss) ineffectiveness to derivatives designated as cash flow hedges	$ 100,000	$ 600,000
Maximum | Interest rate caps
Fair Value Inputs Assets Quantitative Information [Line Items]
Interest rate term range			4 years
Maximum | Interest Rate Swap
Fair Value Inputs Assets Quantitative Information [Line Items]
Interest rate term range			5 years

XML

Fair Value of Derivative and Financial Instruments - Summary of Company's Outstanding Interest Rate Swaps (Details) - KeyBank	9 Months Ended
	Sep. 30, 2017 USD ($)
Debt Instrument [Line Items]
Notional Amount	$ 650,000,000
Fixed Rate	1.3388%
Interest Rate Swap Transaction One
Debt Instrument [Line Items]
Effective Date	Jul. 01, 2016
Termination Date	Jun. 01, 2021
Notional Amount	$ 100,000,000
Fixed Rate	1.1055%
Floating Rate Option	One-month LIBOR
Interest Rate Swap Transaction Two
Debt Instrument [Line Items]
Effective Date	Jul. 01, 2016
Termination Date	Jun. 01, 2021
Notional Amount	$ 100,000,000
Fixed Rate	1.021%
Floating Rate Option	One-month LIBOR
Interest Rate Swap Transaction Three
Debt Instrument [Line Items]
Effective Date	Jul. 01, 2016
Termination Date	Jun. 01, 2021
Notional Amount	$ 100,000,000
Fixed Rate	0.90%
Floating Rate Option	One-month LIBOR
Interest Rate Swap Transaction Four
Debt Instrument [Line Items]
Effective Date	Sep. 01, 2016
Termination Date	Jun. 01, 2021
Notional Amount	$ 100,000,000
Fixed Rate	0.956%
Floating Rate Option	One-month LIBOR
Interest Rate Swap Transaction Five
Debt Instrument [Line Items]
Effective Date	Apr. 01, 2017
Termination Date	Apr. 01, 2022
Notional Amount	$ 100,000,000
Fixed Rate	1.957%
Floating Rate Option	One-month LIBOR
Interest Rate Swap Transaction Six
Debt Instrument [Line Items]
Effective Date	May 01, 2017
Termination Date	Apr. 01, 2022
Notional Amount	$ 50,000,000
Fixed Rate	1.961%
Floating Rate Option	One-month LIBOR
Interest Rate Swap Transaction Seven
Debt Instrument [Line Items]
Effective Date	Jul. 01, 2017
Termination Date	Jul. 01, 2022
Notional Amount	$ 100,000,000
Fixed Rate	1.782%
Floating Rate Option	One-month LIBOR

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Fair Value of Derivative and Financial Instruments - Summary of Company's Outstanding Interest Rate Swaps (Parenthetical) (Details)	Sep. 30, 2017
One-month LIBOR | KeyBank
Debt Instrument [Line Items]
LIBOR, interest rate	1.2322%

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Fair Value of Derivative and Financial Instruments - Outstanding Interest Rate Derivatives Not Designated as Cash Flow Hedges of Interest Rate Risk (Details) - Not designated as hedging instrument - Interest rate caps	Sep. 30, 2017 USD ($) DerivativeInstrument	Sep. 30, 2016 USD ($) DerivativeInstrument
Derivative Instruments And Hedging Activities Disclosures [Line Items]
Interest rate caps | DerivativeInstrument	17	36
Derivative notional amount | $	$ 293,184,000	$ 578,300,000

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Fair Value of Derivative and Financial Instruments - Summary of Derivative Financial Instruments and Classification on the Consolidated Balance Sheet (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Derivative Instruments And Hedging Activities Disclosures [Line Items]
Asset Derivatives	$ 11,759	$ 12,418
Liability Derivatives	713
Fair Market Value Of Interest Rate Swaps | Interest rate swaps | Designated as hedging instrument
Derivative Instruments And Hedging Activities Disclosures [Line Items]
Asset Derivatives	11,759	12,413
Liability Derivatives	$ 713
Prepaid and Other Assets | Interest rate caps | Not designated as hedging instrument
Derivative Instruments And Hedging Activities Disclosures [Line Items]
Asset Derivatives		$ 5

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Fair Value of Derivative and Financial Instruments - Summary of Derivative Financial Instruments and Combined Consolidated Statements of Operations and Comprehensive Loss (Details) - Interest rate products - Interest expense - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Derivative Instruments Gain Loss [Line Items]
Amount of gain (loss) recognized in OCI on derivative (effective portion)	$ (241)	$ (1,576)	$ (2,162)	$ (1,619)
Amount of gain (loss) reclassified from accumulated OCI into income (effective portion)	(360)	(479)	(1,142)	(491)
Amount of gain (loss) recognized in income on derivative (ineffective portion)*	$ (63)	599	(88)	599
Amount of gain (loss) recognized in income on derivative		$ (2)	$ (5)	$ (8)

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Fair Value of Derivative and Financial Instruments - Summary of Derivative Financial Instruments and Combined Consolidated Statements of Operations and Comprehensive Loss (Parenthetical) (Details) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2017
Fair Value Disclosures [Abstract]
Loss reclassified from OCI	$ 90,000	$ 185,000

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Stockholders' Equity - Additional Information (Details) - USD ($)				3 Months Ended		9 Months Ended
	Sep. 30, 2017	Mar. 16, 2017	Aug. 11, 2016	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016	Jun. 15, 2016
Class Of Stock [Line Items]
Common stock, shares, issued	21,095,769			21,095,769		21,095,769		21,043,669
Common stock, shares, retired						308,313
Common stock, shares, outstanding	21,095,769			21,095,769		21,095,769		21,043,669
Common stock, par value	$ 0.01			$ 0.01		$ 0.01		$ 0.01	$ 0.01
Share repurchase program, authorized amount									$ 30,000,000
Stock repurchase program, expiration date						Jun. 15, 2018
Share repurchase program, treasury stock shares	308,313					58,157
Share repurchase program, treasury stock, value	$ 5,941,000					$ 1,354,000
Share repurchase program, treasury stock, per share	$ 19.27					$ 23.27
Treasury stock, shares	0			0		0		250,156
Restricted Stock Units
Class Of Stock [Line Items]
Restricted stock units, granted						219,802
2016 LTIP
Class Of Stock [Line Items]
Common stock, shares, issued	110,257			110,257		110,257
Common stock, par value									$ 0.01
Number of shares authorized to issue									2,100,000
2016 LTIP | Restricted Stock Units
Class Of Stock [Line Items]
Equity-based compensation expense				$ 300,000	$ 800,000	$ 300,000	$ 2,400,000
Dividends earned on restricted stock units	$ 300,000			$ 300,000		$ 300,000
2016 LTIP | Restricted Stock Units | Director
Class Of Stock [Line Items]
Vesting period description						annually
2016 LTIP | Restricted Stock Units | Directors and Officers
Class Of Stock [Line Items]
Restricted stock units, granted		219,802	209,797
2016 LTIP | Restricted Stock Units | Minimum | Officers
Class Of Stock [Line Items]
Restricted stock units, vesting period						3 years
2016 LTIP | Restricted Stock Units | Maximum | Officers
Class Of Stock [Line Items]
Restricted stock units, vesting period						4 years

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Stockholders' Equity - Summary of Restricted Stock Units (Details) - Restricted Stock Units	9 Months Ended
	Sep. 30, 2017 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of Units, Outstanding at beginning of the period | shares	209,797
Number of Units, Granted | shares	219,802
Number of Units, Vested | shares	(110,257)
Number of Units, Outstanding at ending of the period | shares	319,342
Weighted Average Grant Date Fair Value, Outstanding at beginning of the period | $ / shares	$ 19.20
Weighted Average Grant Date Fair Value, Granted | $ / shares	22.57
Weighted Average Grant Date Fair Value, Vested | $ / shares	19.20
Weighted Average Grant Date Fair Value, Outstanding at ending of the period | $ / shares	$ 21.52

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Stockholders' Equity - Summary of Restricted Stock Units (Parenthetical) (Details)	9 Months Ended
	Sep. 30, 2017 shares
Vest in August 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock units, vested	49,768
Vest in August 2019
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock units, vested	49,772
Vest in March 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock units, vested	80,742
Vest in March 2019
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock units, vested	69,530
Vest in March 2020
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock units, vested	69,530

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Earnings (Loss) Per Share - Additional Information (Details)	9 Months Ended
	Sep. 30, 2017
Earnings Per Share [Abstract]
Stock conversion ratio	100.00%

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Earnings (Loss) Per Share - Schedule of Computation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Numerator for earnings per share:
Net income	$ 54,076	$ 8,825	$ 60,702	$ 25,712
Net income attributable to noncontrolling interests		1,735	2,836	4,047
Net income attributable to redeemable noncontrolling interests in the Operating Partnership	162		162
Net income attributable to common stockholders	$ 53,914	$ 7,090	$ 57,704	$ 21,665
Denominator for earnings per share:
Weighted average common shares outstanding - basic	21,085	21,260	21,057	21,282
Unvested restricted stock units	368	116	350	40
Denominator for diluted earnings per share	21,453	21,376	21,407	21,322
Earnings per weighted average common share:
Basic	$ 2.56	$ 0.33	$ 2.74	$ 1.02
Diluted	$ 2.51	$ 0.33	$ 2.70	$ 1.02

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Noncontrolling Interests - Additional Information (Details)			6 Months Ended	9 Months Ended
	Aug. 01, 2017 USD ($) $ / shares shares	Jun. 30, 2017 USD ($)	Jun. 30, 2017 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)
Minority Interest [Line Items]
Common units transferred to acquire ownership interest in properties of noncontrolling interest holders, per share | $ / shares	$ 27.31
Amount used for calculation of OP units of net asset value		$ 2,000,000
Proceeds from a bridge facility		21,400,000
Proceeds from refinancing of properties		16,300,000
Proceeds from a credit facility		11,000,000		$ 25,000,000	$ 200,000,000
Credit facility, maximum borrowing capacity		30,000,000	$ 30,000,000
Cash on hand		$ 1,000,000	$ 1,000,000
Maximum
Minority Interest [Line Items]
Internal rate of return in VIE				13.00%
BH Equity Portfolio
Minority Interest [Line Items]
Percentage of noncontrolling interests in joint ventures acquired		100.00%	100.00%
Consideration transferred to acquire ownership interest in properties of noncontrolling interest holders		$ 51,700,000
Payment to acquire ownership interest in properties of noncontrolling interest holders		49,700,000
Common units transferred to acquire ownership interest in properties of noncontrolling interest holders | shares	73,233
Value of common units transferred to acquire ownership interest in properties of noncontrolling interest holders	$ 2,000,000
Carrying value of noncontrolling interests		20,500,000	$ 20,500,000
Reduction in additional paid in capital		$ 31,200,000
BH Equity Portfolio | B H Equity
Minority Interest [Line Items]
Percentage of ownership interests in portfolio		8.40%	8.40%
BH Equity
Minority Interest [Line Items]
Common stock redemption ratio	1
BH Equity Portfolio Prior
Minority Interest [Line Items]
Percentage of noncontrolling interests in joint ventures acquired		100.00%	100.00%
Consideration transferred to acquire ownership interest in properties of noncontrolling interest holders			$ 2,000,000

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Noncontrolling Interests - Schedule of Redeemable Noncontrolling Interests (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Noncontrolling Interest [Abstract]
Issuance of redeemable noncontrolling interests in the OP	$ 2,000
Net income attributable to redeemable noncontrolling interests in the OP	162
Other comprehensive income attributable to redeemable noncontrolling interests in the OP	1
Distributions to redeemable noncontrolling interests in the OP	(53)
Redeemable noncontrolling interests in the OP, September 30, 2017	$ 2,110

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Related Party Transactions - Additional Information (Details)	1 Months Ended			3 Months Ended			6 Months Ended	9 Months Ended
	Dec. 31, 2016 Property	Oct. 31, 2016 Property	Jul. 31, 2016 Property	Sep. 30, 2017 USD ($)	Jun. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Jun. 30, 2017 USD ($)	Sep. 30, 2017 USD ($) $ / Property $ / h	Sep. 30, 2016 USD ($) Property
Related Party Transaction [Line Items]
Number of properties acquired | Property									1
Advisory and Administrative Fees
Related Party Transaction [Line Items]
Number of properties acquired | Property	2	1	1
Operating Agreement
Related Party Transaction [Line Items]
Asset management fee percent								0.50%
Asset management fees					$ 200,000	$ 200,000	$ 400,000		$ 500,000
Effective ownership percentage, variable interest entities								100.00%
NexPoint Real Estate Advisors, L.P
Related Party Transaction [Line Items]
Advisory fee percentage, paid monthly								1.00%
Percentage of annual administrative fee, paid monthly								0.20%
Advisory and administrative fees on contributed assets								$ 5,400,000
Advisory and administrative fees percentage								1.20%
Advisory and administrative fees				$ 1,900,000		1,700,000		$ 5,500,000	4,900,000
Additional advisory and administrative fees				$ 500,000		$ 300,000		1,500,000	900,000
NexBank Title, Inc.
Related Party Transaction [Line Items]
Payment to affiliate for services rendered								1,200,000	$ 600,000
Maximum | NexPoint Real Estate Advisors, L.P
Related Party Transaction [Line Items]
Advisory and administrative fees on contributed assets								$ 5,400,000
Advisory and administrative fees percentage								1.50%
BH Management Services, LLC
Related Party Transaction [Line Items]
Property management fee percent								3.00%
Inspection of properties fee, per unit | $ / Property								15.00
Other owner approved fees, per hour | $ / h								55
BH Management Services, LLC | Maximum
Related Party Transaction [Line Items]
Construction supervision fee, percent fee								6.00%
BH Management Services, LLC | Minimum
Related Party Transaction [Line Items]
Construction supervision fee, percent fee								5.00%

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Related Party Transactions - Summary of Fees Incurred to BH And Its Affiliates As Well As Reimbursements Paid to BH (Details) - BH Management Services, LLC - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Fees incurred
Property management fees	$ 1,110	$ 989	$ 3,280	$ 3,007
Construction supervision fees	213	247	651	624
Acquisition fees		139	505	139
Reimbursements
Payroll and benefits	4,131	4,140	11,855	12,212
Other reimbursements	$ 432	$ 460	$ 1,457	$ 1,465

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Subsequent Events - Schedule for Acquisitions of Real Estate (Details) $ in Thousands		9 Months Ended
	Oct. 25, 2017 USD ($) Property	Sep. 30, 2017 USD ($) Property	Sep. 30, 2016 USD ($)
Subsequent Event [Line Items]
Purchase Price		$ 138,000	$ 22,400
Debt		$ 138,000
Number of Units | Property		968
Subsequent Event | Multifamily Properties | Atera | Dallas | Texas
Subsequent Event [Line Items]
Date of Acquisition	Oct. 25, 2017
Purchase Price	$ 59,200
Debt	$ 29,500
Number of Units | Property	380
Ownership	100.00%

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Subsequent Events - Schedule for Acquisitions of Real Estate (Parenthetical) (Details) - USD ($) $ in Thousands		9 Months Ended
	Oct. 25, 2017	Sep. 30, 2017	Sep. 30, 2016
Subsequent Event [Line Items]
Net proceeds from sales of real estate		$ 224,416	$ 131,786
Subsequent Event | First Mortgage
Subsequent Event [Line Items]
Mortgage loan term	84 months
Subsequent Event | One-month LIBOR | First Mortgage
Subsequent Event [Line Items]
LIBOR, interest rate	1.48%
Subsequent Event | The Arbors, The Crossings, The Crossings at Holcomb Bridge and The Knolls
Subsequent Event [Line Items]
Net proceeds from sales of real estate	$ 14,100

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Subsequent Events - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands				9 Months Ended
	Oct. 30, 2017	Oct. 26, 2017	Oct. 19, 2017	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Subsequent Event [Line Items]
Repayments of bridge loan				$ 41,278	$ 29,000
Bridge facility, net				$ 54,531		$ 29,874
Subsequent Event
Subsequent Event [Line Items]
Percentage of increase in quarterly dividend	13.60%
Increase in dividends payable, amount per share	$ 0.03
Dividends payable, amount per share	$ 0.25
Dividends payable, date declared	Oct. 30, 2017
Dividends payable, date of record	Dec. 15, 2017
Dividends payable, date to be paid	Dec. 29, 2017
2017 Bridge Facility | Subsequent Event
Subsequent Event [Line Items]
Repayments of bridge loan			$ 46,000
Amended 2017 Bridge Facility | Subsequent Event
Subsequent Event [Line Items]
Bridge facility, extended maturity date		Mar. 31, 2018
Bridge facility, net		$ 8,600
Amendment fee		$ 34,000