POS AM 1 reitiii-prospectus.htm POS AM Document

As filed with the Securities and Exchange Commission on April 13, 2018
                                                                                                                                                         Registration No. 333-207740
 
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
POST-EFFECTIVE AMENDMENT NO. 8 TO
FORM S-11
REGISTRATION STATEMENT
 
 
 
 
Under
THE SECURITIES ACT OF 1933
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Resource Apartment REIT III, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1845 Walnut Street, 18th Floor
Philadelphia, Pennsylvania 19103
(215) 231-7050
(Address, including zip code, and telephone number, including area code, of the registrant’s principal executive offices)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alan F. Feldman
Chief Executive Officer
Resource Apartment REIT III, Inc.
1845 Walnut Street, 18th Floor
Philadelphia, Pennsylvania 19103
(215) 231-7050
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Copies to:
Robert H. Bergdolt, Esq.
Andrew M. Davisson, Esq.
DLA Piper LLP (US)
4141 Parklake Avenue, Suite 300
Raleigh, North Carolina 27612-2350
(919) 786-2000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Approximate date of commencement of proposed sale to public: As soon as practicable after the effectiveness of the registration statement.
If any of the securities on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ☐
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. ☐
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 (Check One):
 
 
Large accelerated filer
Non-accelerated filer
☐ (Do not check if smaller reporting company)
 
 
 
 
Accelerated filer
Smaller Reporting Company
Emerging Growth Company
 
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☒
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
This Post-Effective Amendment No. 8 consists of the following:
 
 
1.
The Registrant’s final prospectus dated July 3, 2017.
 
 
2.
Supplement No. 1 dated April 13, 2018 to the Registrant’s prospectus dated July 3, 2017.
 
 
3.
Part II, included herewith.
 
 
4.
Signature, included herewith.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



logo.jpg 
Maximum Offering-$1,100,000,000 of Common Stock
 

 
Resource Apartment REIT III, Inc. is a Maryland corporation that intends to take advantage of our sponsor’s multifamily investing and lending platforms to invest in apartment communities in order to provide you with growing cash flows and increasing asset values. We intend to target for acquisition, underperforming apartment communities which we will renovate and optimize in order to increase rents. To a lesser extent, we will also seek to originate and purchase commercial real estate debt secured by apartment communities. We intend to qualify as a real estate investment trust (“REIT”), beginning with the taxable year that will end December 31, 2017. We are an “emerging growth company” under federal securities laws. As of the date of this prospectus, we owned one apartment property located in Alexandria, Virginia.
We are offering up to an aggregate of $1,000,000,000 of shares of our common stock in our primary offering. Through June 30, 2017, we offered shares of Class A and Class T common stock at prices of $10.00 per share and $9.47 per share, respectively. As of July 3, 2017, we ceased offering shares of Class A and Class T common stock in our primary offering. Commencing July 3, 2017, we are offering shares of Class R and Class I common stock at prices of $9.52 per share and $9.13 per share, respectively. As of June 30, 2017, we have received gross offering proceeds in our primary offering of approximately $15.7 million from the sale of approximately 0.6 million Class A shares and approximately 1.0 million Class T shares, resulting in approximately $984.3 million in shares remaining in our primary offering as of such date. We are also offering up to an aggregate of $100,000,000 of shares of Class A, Class T, Class R and Class I common stock pursuant to our distribution reinvestment plan at a purchase price initially for Class A, Class T and Class R shares equal to 96% of the maximum per share purchase prices of Class A, Class T and Class R shares in the primary offering and at a purchase price initially for Class I shares of $8.90 per share. This offering will terminate on or before April 28, 2018 (unless extended by our board of directors for an additional year or as otherwise permitted by applicable securities law).
 
 
 
Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 33 to read about risks you should consider before buying shares of our common stock. These risks include the following:
No public market currently exists for our shares of common stock, and our charter does not require our board of directors to provide our stockholders a liquidity event by a specified date or at all.
We set the $9.52 primary offering price of our Class R shares arbitrarily, and based on that price, set the $9.13 primary offering price of our Class I shares, to account for differing selling commissions and dealer manager fees. The offering prices are unrelated to the book or net value of our assets or to our expected operating income.
We have a limited operating history, and as of the date of this prospectus, we owned one apartment property. Other than as described in a supplement to this prospectus, we have not identified any additional investments to acquire with the proceeds from this offering and are considered to be a “blind pool.” In addition, you will not have the opportunity to evaluate our investments before we make them.
We are dependent on our advisor and its affiliates to select investments and conduct our operations and this offering. Our advisor has no prior operating history and no prior experience operating a public company.
We pay substantial fees and expenses to our advisor, its affiliates and broker-dealers, which payments increase the risk that you will not earn a profit on your investment.
Our executive officers and some of our directors will face conflicts of interest.
We may lack diversification if we do not raise substantial offering proceeds.
There are restrictions on the ownership and transferability of our shares of common stock. See “Description of Shares-Restriction on Ownership of Shares.”
Our charter permits us to pay distributions from any source without limitation, including from offering proceeds, borrowings, sales of assets or waivers or deferrals of fees otherwise owed to our advisor. Distributions that exceed our net income or net capital gain will likely represent a return of capital as opposed to current income or gain, as applicable. Through the first quarter of 2017, all of our distributions were funded by proceeds from this offering.
We may change our targeted investments without stockholder consent.
Some of the other programs sponsored by our sponsor have experienced adverse business developments or conditions.
Neither the Securities and Exchange Commission, the Attorney General of the State of New York nor any other state securities regulator has approved or disapproved of our common stock, determined if this prospectus is truthful or complete or passed on or endorsed the merits of this offering. Any representation to the contrary is a criminal offense.
This investment involves a high degree of risk. You should purchase these securities only if you can afford a complete loss of your investment. The use of projections or forecasts in this offering is prohibited. Any representation to the contrary and any predictions, written or oral, as to the amount or certainty of any present or future cash benefit or tax consequence which may flow from an investment in this offering is not permitted.
 
 
 
 
 
 
Price
to Public(2)
Selling
Commissions(3)(4)
Dealer
Manager Fee(3)(4)
Net Proceeds
(Before Expenses)(4)
Primary Offering
 
 
 
 
Per A Share(1)
$10.00
$0.70
$0.30
$9.00
Per T Share(1)
$9.47
$0.1894
$0.2841
$9.00
                    Per R Share
$9.52
$0.2856(5)
$0.238(5)
$9.00
                    Per I Share
$9.13
$0.00
$0.1370
$9.00
                    Total Maximum
$1,000,000,000
$22,750,712
$28,523,619
$948,725,669
Distribution Reinvestment Plan
 
 
 
 
                    Per A Share
$9.60
$0.00
$0.00
$9.60
                    Per T Share
$9.09
$0.00
$0.00
$9.09
                    Per R Share
$9.14
$0.00
$0.00
$9.14
                    Per I Share
$8.90
$0.00
$0.00
$8.90
                    Total Maximum
$100,000,000
$0.00
$0.00
$100,000,000
(1)
As of July 3, 2017, we ceased offering shares of Class A and Class T common stock in our primary offering.
(2)
Discounts are available for some categories of investors. Reductions in commissions and fees will result in corresponding reductions in the purchase price.
(3)
The maximum selling commissions and dealer manager fee assumes that 90% and 10% of the remaining amount of common stock to be sold in the primary offering is Class R common stock and Class I common stock, respectively, and includes the actual sale of approximately $5.8 million and $9.9 million of Class A and Class T common stock, respectively, prior to July 3, 2017.
(4)
In addition to the selling commissions and dealer manager fee, we will pay additional underwriting compensation in the form of a distribution and shareholder servicing fee on the shares of Class T and Class R common stock sold in the primary offering. This fee is subject to certain limits and will be in annual amounts equal to 1% of the purchase price (or, once reported, the amount of our estimated net asset value) per share of Class T and Class R common stock sold in the primary offering. The total distribution and shareholder servicing fees payable with respect to a share of Class T common stock may be as great as 5% of the purchase price of such share. The total underwriting compensation (including selling commissions, dealer manager fees and distribution and shareholder servicing fees) payable with respect to Class R shares may be as great as 8.5% of the purchase price of such shares. See “Plan of Distribution.”
(5)
We will pay selling commissions to our dealer manager of up to 3% of the gross offering proceeds from the sale of Class R common stock and we will pay a dealer manager fee to our dealer manager of up to 3.5% of the gross offering proceeds from the sale of Class R common stock. However, the aggregate amount of selling commissions and dealer manager fees paid in connection with the sale of Class R common stock will be no more than 5.5% of the gross offering proceeds from the sale of such Class R shares. Therefore, the table assumes that the average selling commissions and dealer manager fees to be paid with respect to the sale of Class R shares are 2.5% and 3%, respectively, which, in the aggregate, do not exceed the 5.5% limit on selling commissions and dealer manager fees to be paid in connection with the sale of Class R shares.
The dealer manager, Resource Securities Inc., our affiliate, is not required to sell any specific number or dollar amount of shares but will use its best efforts to sell the shares offered. The minimum permitted purchase is $2,500.
The date of this prospectus is July 3, 2017.



SUITABILITY STANDARDS
The shares we are offering through this prospectus are suitable only as a long-term investment for persons of adequate financial means and who have no need for liquidity in this investment. Because there is no public market for our shares, you will have difficulty selling your shares.
In consideration of these factors, we have established suitability standards for investors in this offering and subsequent purchasers of our shares. These suitability standards require that a purchaser of shares have either:
 
 
a net worth of at least $250,000; or
 
 
gross annual income of at least $70,000 and a net worth of at least $70,000.
In addition, the states listed below have established suitability requirements that are more stringent than ours and investors in these states are directed to the following special suitability standards:
 
 
Alabama—Investors must have a liquid net worth of at least 10 times their investment in us and our affiliates.
 
 
Kansas—It is recommended by the office of the Kansas Securities Commissioner that Kansas investors do not invest, in the aggregate, more than 10% of their liquid net worth in this and other non-traded REITs.
 
 
Maine—It is recommended by the Maine Office of Securities that Maine investors do not invest, in the aggregate, more than 10% of their liquid net worth in this and similar direct participation investments.
 
 
California and North Dakota—Investors must have a net worth of at least 10 times their investment in us.
 
 
Michigan, Pennsylvania, Oregon and Tennessee—Investors must have a liquid net worth of at least 10 times their investment in us.
 
 
Idaho—Investors must have either (a) a liquid net worth of at least $300,000 or (b) a gross annual income of at least $85,000 and a liquid net worth of at least $85,000. In addition, an investor’s investment in us cannot exceed 10% of his or her liquid net worth.
 
 
Iowa—Investors must have either (a) a net worth of $350,000 or (b) a gross annual income of $70,000 and a net worth of at least $100,000. In addition, investors must have a net worth of at least 10 times their investment in us.
 
 
Massachusetts—Investors must have a liquid net worth of at least 10 times their investment in us and other illiquid direct participation program investments.
 
 
Missouri—Investors must limit their investment in us to 10% of their liquid net worth.
 
 
Nebraska—Investors must limit their aggregate investment in this offering and in the securities of other non-publicly traded REITs to 10% of their net worth. An investment by a Nebraska investor who is an “accredited investor” within the meaning of the federal securities laws is not subject to the foregoing limitations.
 
 
New Jersey—Investors must have either (a) a minimum liquid net worth of at least $100,000 and a minimum annual gross income of not less than $85,000, or (b) a minimum liquid net worth of at least $350,000. In addition, investors must limit their investment in us, our affiliates and other non-publicly traded direct investment programs (including real estate investment trusts, business development companies, oil and gas programs, equipment leasing programs, and commodity pools, but excluding unregistered, federally and state exempt private offerings) to 10% of their liquid net worth.
 
 
New Mexico—Investors must have a liquid net worth of at least 10 times their investment in us, our affiliates and other similar direct participation programs.
 
 
Ohio—Investors must limit their aggregate investment in us, our affiliates and other non-publicly traded real estate investment trusts to 10% of their liquid net worth.
 
 
Kentucky—Investors must limit their investment in us and affiliated non-publicly traded real estate investment trusts to 10% of their liquid net worth.
 
 
Vermont—Investors must limit their investment in this offering to 10% of their liquid net worth. For these purposes, liquid net worth is defined as an investor’s total assets (not including home, home furnishings and automobiles) minus total liabilities. An investment by a Vermont investor who is an “accredited investor” within the meaning of the federal securities laws is not subject to the foregoing limitation.

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In addition, because the minimum offering amount was less than $100 million, Pennsylvania investors are cautioned to carefully evaluate our ability to fully accomplish our stated objectives and to inquire as to the current dollar volume of subscriptions. Please refer to “Prospectus Summary—How does a “best efforts” offering work?” on page 23 and “Plan of Distribution—Special Notice to Pennsylvania Investors” on page 197.
For purposes of determining the suitability of an investor, net worth in all cases should be calculated excluding the value of an investor’s home, home furnishings and automobiles. Except as otherwise stated above, liquid net worth is defined as that portion of net worth that consists of cash, cash equivalents and readily marketable securities. In the case of sales to fiduciary accounts, these suitability standards must be met by the fiduciary account, by the person who directly or indirectly supplied the funds for the purchase of the shares if such person is the fiduciary or by the beneficiary of the account.
Our sponsor, those selling shares on our behalf and participating broker-dealers and registered investment advisors recommending the purchase of shares in this offering must make every reasonable effort to determine that the purchase of shares in this offering is a suitable and appropriate investment for each stockholder based on information provided by the stockholder regarding the stockholder’s financial situation and investment objectives. See “Plan of Distribution—Suitability Standards” for a detailed discussion of the determinations regarding suitability that we require.


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TABLE OF CONTENTS
 
 

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PROSPECTUS SUMMARY

 
 
                   This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus, including the information set forth in “Risk Factors,” for a more complete understanding of this offering. Except where the context suggests otherwise, the terms “we,” “us” and “our” refer to Resource Apartment REIT III, Inc. and its subsidiaries; “Operating Partnership” refers to our operating partnership, Resource Apartment OP III, LP; “advisor” refers to Resource REIT Advisor, LLC; “Resource Apartment Manager III” refers to our property manager, Resource Apartment Manager III, LLC; “dealer manager” refers to Resource Securities, Inc.; “Resource Real Estate” refers to our sole sponsor, Resource Real Estate, Inc.; and “Resource America” refers to Resource America, Inc., the parent corporation of our sponsor.

 
 

What is Resource Apartment REIT III, Inc.?
           Resource Apartment REIT III, Inc. is a Maryland corporation that intends to take advantage of our sponsor’s multifamily investing and lending platforms to invest in apartment communities in order to provide you with growing cash flow and increasing asset values. We intend to acquire underperforming apartments, which we will renovate and stabilize in order to increase rents. To a lesser extent, we will also seek to originate and acquire commercial real estate debt secured by apartments. We believe multiple opportunities exist within the apartment industry today and will continue to present themselves over the next few years to real estate investors who possess the following characteristics: (i) extensive experience in multifamily investing, (ii) strong management platforms specializing in operational and financial performance optimization, (iii) financial sophistication allowing them to benefit from complex opportunities and (iv) the overall scale and breadth of a national real estate platform in both the equity and debt markets. Our mailing address is 1845 Walnut Street, 18th Floor, Philadelphia, Pennsylvania 19103. Our telephone number is (215) 231-7050, our fax number is (215) 640-6320 and our email address is info@resourcereit.com. We also maintain an Internet site at www.resourcereit3.com, at which there is additional information about us and our affiliates, but the contents of that site are not incorporated by reference in or otherwise a part of this prospectus.
          We were incorporated in the State of Maryland on July 15, 2015. We intend to qualify as a REIT beginning with the taxable year that will end December 31, 2017. As of the date of this prospectus, we owned one apartment property located in Alexandria, Virginia. Because we have a limited portfolio of investments and, except as described in a supplement to this prospectus, we have not yet identified any additional assets to acquire, we are considered to be a “blind pool.”
           Our external advisor, Resource REIT Advisor, LLC, conducts our operations and manages our portfolio of real estate investments, all subject to the supervision of our board of directors. We have no paid employees.

 
 

What is a REIT?
      In general, a REIT is an entity that:
combines the capital of many investors to acquire or provide financing for real estate investments;
allows individual investors to invest in a professionally managed, large-scale, diversified real estate portfolio through the purchase of interests, typically shares, in the REIT;
is required to pay distributions to investors of at least 90% of its annual REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain); and
avoids the “double taxation” treatment of income that normally results from investments in a corporation because a REIT is not generally subject to federal corporate income taxes on that portion of its income distributed to its stockholders, provided certain income tax requirements are satisfied.

 
 
 
 

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However, under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), REITs are subject to numerous organizational and operational requirements. If we fail to qualify for taxation as a REIT in any year after electing REIT status, our income will be taxed at regular corporate rates, and we may be
precluded from qualifying for treatment as a REIT for the four-year period following our failure to qualify. Even if we qualify as a REIT for federal income tax purposes, we may still be subject to state and local taxes on our income and property and to federal income and excise taxes on our undistributed income.
 
 
 

Why does Resource Apartment REIT III Focus Primarily on the U.S. Apartment Market?
        We believe the demand for quality workforce rental housing currently does and, will continue to exceed the supply. The idea of the “typical” American household has been changing and today’s younger generation is not following the path of the traditional “American dream.” In December 2016, the Harvard Joint Center for Housing Studies (“JCHS”) updated its household projections for 2015-2035 based on newly updated population projections from the US Census Bureau. The JCHS projects that the United States will add 13.6 million households between 2015 and 2025 and 11.5 million households between 2025 and 2035. The age groups that will lead the growth between 2015 and 2025 will be households aged 75 and older, which are projected to increase by 5.8 million, Millennials, (35-44 years old) increasing by 2.5 million households, and 25-34 year olds forming 1.25 million households. These three age groups will continue to fuel demand for rental housing. The households aged 75 and older are a result of declining mortality rates of those aged 65-74, which has led to more seniors living (or renting) in their own homes, rather than living in nursing facilities. The two younger age cohorts will continue to struggle to attain home ownership; with home prices outpacing incomes and interest rates heading higher, affordability has declined. (Freddie Mac, March 2017 Economic & Housing Research Outlook).
        The current state of the existing apartment supply in the United States is old and in need of renovation. Of the 15,400,000 multifamily units that have been constructed since 1970, 60% were built before 1980 and 33% were built before 1990. In addition to the aging apartment stock, new supply of apartment completions is far below historical norms, as demonstrated in the table below:

 
 
 
  Average Annual Multifamily Completions 1970—2016            
(5+ units in structure)
 
 
 
 
1970's
500,880

 
 
 
 
1980's
420,050

 
 
 
 
1990's
222,230

 
 
 
 
2000's
274,600

 
 
 
 
2010-2016
212,300

 
 
 
 
Source: Survey of Market Absorption of New Multifamily Units 4Q2016; US Census Bureau Table of New Privately Owned Housing Units Completed in the United States.    
 
 
 
The new supply of apartments is and has been well below the 300,000 new units annually that most demographic analysts believe is needed just to meet expected apartment demand. In 2015 and 2016, deliveries were just above 300,000, the highest level since 2000. However, beginning in 2017, deliveries are projected to decline to approximately 280,000 units in 2017; under 200,000 units in 2018, and under 100,000 units for years 2019-2021 (Reis 4Q16). Future deliveries are expected to be constrained by rising construction costs in both labor and materials, and the restrained lending environment related to multifamily lending.
        We believe that demand for apartments in the United States will continue to increase due to demographic shifts, economic challenges and changing consumer preferences. Furthermore, the existing apartment inventory is old and inadequate to serve the increasing demand for rentals and that new supply of apartments

 

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will be significantly constrained by the rising cost of new construction. Therefore, we believe that the overall supply and demand imbalance will continue to offer significant opportunities throughout the next decade to apartment owners who understand how to opportunistically benefit from this imbalance and have the experience and management infrastructure to execute such opportunistic strategies.
         Second, our sponsor has focused on the multifamily sector, which includes student housing and senior residential, with 10 its last 11 funds and will focus this program on multifamily rental property investments because apartments have traditionally produced the highest risk-adjusted investment returns compared to other property sectors. Historically, apartments have produced higher returns with lower volatility than the other major real estate sectors, which include office, retail industrial, hospitality and healthcare. Furthermore, according to data from the National Bureau of Economic Research and the National Council of Real Estate Investment Fiduciaries, multifamily rental properties have demonstrated returns during recessionary periods that are higher than those of other major property classes, and have been an effective inflation hedge due to the short term of the typical apartment lease, which is generally 12 months or less. Our sponsor also believes that some of the key factors for investing in multifamily rental properties include stable access to debt, due in part to the lending activities of government-sponsored entities, the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), lower cost of debt capital and the ability to support more debt with the same level of risk.

 
 

What are the market opportunities for Resource Apartment REIT III?
         We believe multiple opportunities exist within the multifamily industry today and will continue to present themselves over the next few years to real estate investors who possess the following characteristics: (i) extensive experience in investing in apartments, (ii) strong management platforms specializing in operational and financial performance optimization, (iii) financial sophistication allowing them to benefit from complex opportunities and (iv) the overall scale and breadth of a national real estate platform in both the equity and debt markets. We seek to utilize our sponsor’s dedicated multifamily investing and lending platforms to take advantage of the full range of opportunities across the entire multifamily spectrum of investments.
         One of our primary activities will be to acquire underperforming apartment properties that will benefit from strong management and capital infusions for renovations to improve the overall appearance and quality of the assets. We intend to buy apartment properties that are cash flowing or expected to be cash flowing soon after acquisition with the potential for near-term capital appreciation resulting from unit and exterior upgrades and enhanced property management. These assets, generally are Class B or B- properties built in the 1970s and 1980s in cities demonstrating a stable multifamily supply and the ability to attract a young, creative and educated labor force. According to the U.S. Census Bureau, during the 20-year period from 1970 to 1989, over 9.3 million housing units were completed in the United States within structures containing five or more units, which is substantially higher than the approximately 5 million units completed between 1990 and 2009. Apartments completed between 1970 and 1989 are now 28 to 47 years old and many of these apartments have not had substantial renovations in their lifetimes. Therefore, we believe that there is a large inventory of un-renovated apartments built in the 1970s and 1980s to acquire and renovate. Resource Real Estate has a dedicated acquisition team that includes personnel who have been integral to the acquisition of underperforming properties for the multifamily funds offered by our sponsor over the past ten years.
         We also believe opportunities exist in directly lending to real estate borrowers who are acquiring or refinancing multifamily properties, and we may originate loans directly to such borrowers. Lending presents us an opportunity to benefit from the positive trends in the multifamily industry, while being senior to an equity investor and typically receiving regular cash interest payments. Direct lending enables us to better control the structure of the loans and to maintain direct relationships with the borrowers. We intend to invest in first- and second-priority mortgages, as well as mezzanine loans that are senior to the borrower’s equity in,
 
 
 
 
 

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and subordinate to a first mortgage loan on, a property. Mezzanine loans are secured by pledges of ownership interests, in whole or in part, in entities that directly own the real property. In addition, we may require other collateral to secure mezzanine loans, including letters of credit, personal guarantees of the principals of the borrower, or collateral unrelated to the property. We may also invest in preferred equity or subordinate interests in whole loans. Resource Real Estate has a dedicated nationwide lending team that includes senior personnel who have been with Resource Real Estate since 2005.

 
 

What is your investment approach for this real estate program?
      We seek to acquire cash flowing assets at a discount to their perceived value, increase their cash flowing potential, and then sell or finance them when market conditions warrant. Specifically, we expect to enhance the properties’ values by instituting significant renovations to update their appearance, aggressively market them and increase occupancy in order to realize steady current income as well as capital appreciation. With respect to performing real estate loans, we will seek to originate or purchase loans secured directly or indirectly by real estate that will generate steady interest income from the underlying real estate.

 
 

Are there any risks involved in an investment in your shares?
        Investing in our common stock involves a high degree of risk. You should carefully review the “Risk Factors” section of this prospectus beginning on page 33, which contains a detailed discussion of the material risks that you should consider before you invest in our common stock. Some of the more significant risks relating to an investment in our shares include the following:

No public market currently exists for our shares of common stock, and our charter does not require our directors to seek stockholder approval to liquidate our assets by a specified date nor list our shares on an exchange by a specified date. If you are able to sell your shares, you would likely have to sell them at a substantial discount from their public offering price.
We set the $9.52 primary offering price of our Class R shares arbitrarily, and based on that price, set the $9.13 primary offering price of our Class I shares to account for differing sales commissions and dealer manager fees that we pay to our dealer manager with respect to Class I shares. These prices may not be indicative of the prices at which our shares would trade if they were listed on an exchange or actively traded, and the prices bear no relationship to the book or net value of our assets or to our expected operating income.
We have a limited operating history. As of the date of this prospectus, we own one apartment property located in Alexandria, Virginia. Because we have not identified any additional real estate assets to acquire with proceeds from this offering, other than as disclosed in a supplement to this prospectus, we are considered a “blind pool” and you will not have an opportunity to evaluate our investments before we make them, making an investment in us more speculative.
We are dependent on our advisor to select investments and conduct our operations. Our advisor has no prior operating history and no prior experience operating a public company. This inexperience makes our future performance difficult to predict.
Our executive officers and some of our directors are also officers, directors, managers or key professionals of our advisor, our dealer manager and other entities affiliated with Resource Real Estate. As a result, they face conflicts of interest, including significant conflicts created by our advisor’s compensation arrangements with us and other programs sponsored by Resource Real Estate and its affiliates and conflicts in allocating time among us and these other programs. These conflicts could result in action or inaction that is not in the best interests of our stockholders.
We pay substantial fees to and expenses of our advisor, its affiliates and participating broker-dealers, which payments increase the risk that you will not earn a profit on your investment. For a summary

 

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of these fees, see “Prospectus Summary—What are the fees that you will pay to the advisor and its affiliates?”
Our advisor and its affiliates receive fees in connection with transactions involving the acquisition and management of our investments. These fees are based on the cost of the investment, and not based on the quality of the investment or the quality of the services rendered to us. This may influence our advisor to recommend riskier transactions to us.
There is no limit on the amount we can borrow to acquire a single real estate investment, but pursuant to our charter, we may not leverage our assets with debt financing such that our borrowings would be in excess of 300% of our net assets unless a majority of the members of our conflicts committee finds justification for borrowing a greater amount. Examples of such a justification include obtaining funds for the following: (i) to repay existing obligations, (ii) to pay sufficient distributions to maintain REIT status, or (iii) to buy an asset where an exceptional acquisition opportunity presents itself and the terms of the debt agreement and the nature of the asset are such that the debt does not increase the risk that we would become unable to meet our financial obligations as they became due. Based on current lending market conditions, we believe we will leverage our assets in an amount equal to 55% to 60% of the cost of our assets.
Our charter prohibits the ownership of more than 9.8% of our common stock, unless exempted by our board of directors (subject to the satisfaction of certain conditions precedent), which may inhibit transfers of our common stock and large investors from desiring to purchase your shares of common stock.
We have issued to our advisor 50,000 shares of our convertible stock, which we may refer to as “convertible stock.” The convertible stock is non-voting, is not entitled to any distributions and is a separate class of stock from the common stock to be issued in this offering. Under limited circumstances, these shares may be converted into shares of our Class A common stock, satisfying our obligation to pay our advisor an incentive fee and diluting our stockholders’ interest in us. Generally, our convertible stock will convert into shares of Class A common stock when one of two events occurs. First, it will convert if we have paid distributions to common stockholders such that aggregate distributions are equal to 100% of the price at which we sold our outstanding shares of common stock plus an amount sufficient to produce a 6% cumulative, non-compounded, annual return at that price. Alternatively, the convertible stock will convert on the 31st trading day after listing, if we list our shares of common stock on a national securities exchange or we consummate a merger pursuant to which the consideration received by our common stockholders is securities of another issuer that are listed on a national securities exchange. Our advisor can influence whether and when our common stock is listed for trading on a national securities exchange or our assets are liquidated, and their interests in our convertible stock could influence their judgment with respect to listing or liquidation.
We may lack property diversification if we do not raise substantial funds.
Our charter permits us to pay distributions from any source without limitation, including from offering proceeds, borrowings, sales of assets or waivers or deferrals of fees otherwise owed to our advisor. To the extent these distributions exceed our net income or net capital gain, a greater proportion of your distributions will generally represent a return of capital as opposed to current income or gain, as applicable. Our organizational documents do not limit the amount of distributions we can fund from sources other than from cash flows from operations. If our cash flow from operations is insufficient to cover our distributions, we expect to use the proceeds from this offering, the proceeds from the issuance of securities in the future or proceeds from borrowings to pay distributions. Through the first quarter of 2017, all of our distributions were funded by proceeds from this offering.






 
 
 
 

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We may experience adverse business developments or conditions similar to those affecting certain programs sponsored by our sponsor, which could limit our ability to make distributions and could decrease the value of your investment.
Disruptions in the financial markets and sluggish economic conditions could adversely affect our ability to implement our business strategy and generate returns to you.
Our failure to qualify as a REIT for federal income tax purposes would reduce the amount of income we have available for distribution and limit our ability to make distributions to our stockholders.
We may change our targeted investments without stockholder consent, which could adversely affect the value of our common stock and our ability to make distributions to you.
Investments in non-performing real estate assets involve greater risks than investments in stabilized performing assets and make our future performance more difficult to predict.
Because the dealer manager is one of our affiliates, you will not have the benefit of an independent review of us or the prospectus customarily undertaken in underwritten offerings; the absence of an independent due diligence review increases the risks and uncertainty you face as a stockholder.

 
 

What are your investment objectives?
       Our principal investment objectives are to:
preserve, protect and return your capital contribution;
provide current income to you in the form of cash distributions through increased cash flow from operations or targeted asset sales;
realize growth in the value of our investments; and
enable you to realize a return of your investment by either liquidating our assets or listing our shares on a national securities exchange within three to six years after the termination of this primary offering.
        See the “Investment Objectives and Policies” section of this prospectus for a more complete description of our investment policies and charter-imposed investment restrictions.

 
 

What is the role of the board of directors?
      We operate under the direction of our board of directors, the members of which are accountable to us and our stockholders as fiduciaries. We have five members on our board of directors, three of whom are independent of our advisor and its affiliates. Our charter requires that a majority of our directors be independent of our advisor and creates a committee of our board consisting solely of all of our independent directors. This committee, which we call the conflicts committee, is responsible for reviewing the performance of our advisor and must approve other matters set forth in our charter. See “Conflicts of Interest—Certain Conflict Resolution Measures.” Our directors are elected annually by the stockholders.

 
 

Who is your advisor?
        Resource REIT Advisor, LLC is our advisor. Our advisor is a limited liability company that was formed in the State of Delaware on July 15, 2015. Our advisor has no prior operating history and no prior experience managing a public company. However, our advisor provides substantive advisory services to us and is supported by our sponsor, Resource Real Estate, Inc., and its personnel in providing such services to us. See below for a description of our sponsor, Resource Real Estate, Inc.

 
 
 
 

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Will your advisor make an investment in us?
        Yes. In order to more closely align our investment objectives and goals with those of our advisor, our advisor and its affiliates have invested more than $2,000,000 in this offering. Prior to commencement of this offering, our advisor invested $200,000 in us through the purchase of 20,000 shares of our unclassified common stock (which we classified as Class A common stock prior to commencement of this offering) at $10.00 per share. On August 5, 2016, our advisor exchanged 5,000 shares of our common stock for 50,000 shares of our convertible stock.

 
 

What will the advisor do?
       Our advisor manages our day-to-day operations and our portfolio of real estate investments, and provides asset-management, marketing, investor relations and other administrative services on our behalf, all subject to the supervision of our board of directors. We have entered into a management agreement with Resource Apartment Manager III, our affiliate, to provide property management services for most, if not all, of the properties or other real estate-related assets we acquire, provided our advisor is able to control the operational management of such acquisitions. Resource Apartment Manager III may subcontract with an affiliate or third party to provide day-to-day property management, construction management or other property specific functions, as applicable, for the properties it manages.
        Our sponsor, Resource Real Estate, and its team of real estate professionals, including Alan F. Feldman and George E. Carleton acting through our advisor, will make most of the decisions regarding the selection, negotiation, financing and disposition of real estate investments. A majority of our board of directors and a majority of the conflicts committee will approve significant proposed real estate property investments and real estate-related debt investments.

 
 

What is the experience of your sponsor?
       We believe Resource Real Estate and its affiliates have a significant amount of experience in buying, managing, operating and disposing of real estate investments and a number of relationships in the real estate and financial services markets that together we believe put our advisor in an excellent position to operate and manage our company. Specifically, our advisor believes that the following entities and factors highlight the resources that it may use to compete in the real estate asset marketplace:
Resource Real Estate manages a portfolio of multifamily rental properties and other real estate assets valued at approximately $4.1 billion as of December 31, 2016, of which approximately $107.5 million represents value add multifamily rental properties. “Value add” multifamily properties generally consist of Class B properties built in the 1970s and 1980s that are in need of strong management and capital and located in cities with demonstrable job growth. Resource Real Estate and its affiliates have been acquiring and managing these types of assets for over ten years. Our advisor uses Resource Real Estate’s knowledge and experience in the industry to assist us in meeting our investment objectives of locating, acquiring and renovating underperforming properties to turn them into stable cash flowing assets.
Resource Real Estate and its affiliates have been active in the real estate asset market since 1991, acquiring and disposing of assets representing approximately $3.4 billion in value as of December 31, 2016. Historically, Resource Real Estate’s affiliates focused on the purchase of non-performing commercial real estate loans at discounts to their outstanding loan balances and the appraised value of their underlying properties. As a result of many programs and products, Resource Real Estate has a breadth of experience in the acquisition, ownership, management and resolution of real estate assets. Our advisor uses Resource Real Estate’s knowledge and experience in the real estate asset marketplace to assist us in meeting our investment objectives.

 
 
 
 

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Resource Real Estate manages a portfolio of over $1.5 billion in aggregate principal amount of mortgage assets, mortgage loans and related property interests as of December 31, 2016.
Resource Financial Institution Group, Inc. (“Resource Financial”), an affiliate of our sponsor, is a specialized asset management company that invests in banks, thrifts and other financial services companies. As of December 31, 2016, Resource Financial and its affiliates manage $2.6 billion in bank investments.
Resource Financial provides our advisor with contacts in the financial services industry, including investment banks, brokerage firms, commercial banks and loan originators, that may be sources of real estate investments for us.
Resource Property Management, LLC, d/b/a “Resource Residential,” an affiliate of our sponsor, is a property management company. Resource Residential is a subsidiary of US Residential Group LLC (“USRG”), a Dallas-based property manager that is a wholly owned subsidiary of C-III Capital Partners LLC (“C-III”), the indirect parent of our sponsor. As of December 31, 2016, Resource Residential and USRG collectively manage approximately over 250 multifamily rental properties in 30 states with over 57,000 units. The senior managers and employees of Resource Residential, acting through Resource Apartment Manager III, will assist in providing property management as well as construction management services to us.
In order to more closely align our investment objectives and goals with those of our advisor, prior to the termination of our initial public offering, our advisor and its affiliates have invested over $2,000,000 in this offering.

 
 

Who is the parent of your sponsor?
        Resource America is the parent corporation of our sponsor. Resource America is wholly-owned by C-III. C-III is a commercial real estate services company engaged in a broad range of activities, including primary and special loan servicing, loan origination, fund management, CDO management, principal investment, investment sales and multifamily property management.
        Resource America had previously sponsored a New York Stock Exchange publicly-traded REIT, Resource Capital Corp. (“Resource Capital”) in 2005 and three non-traded REITs, Resource Real Estate Opportunity REIT, Inc. (“Resource Opportunity REIT”), Resource Real Estate Opportunity REIT II, Inc. (“Resource Opportunity REIT II”) and Resource Income & Opportunity REIT, Inc. (formerly known as Resource Innovation Office REIT, Inc.) (“Resource Income & Opportunity REIT”) in 2009, 2012 and 2015, respectively. As of March 31, 2017, Resource America managed approximately $7.0 billion in assets.

 
 

Will you use leverage?
       We may use leverage for our assets and may obtain such leverage in one of three ways: (1) REIT-level financing, (2) individual investment financing and (3) seller financing. Although there is no limit on the amount we can borrow to acquire a single real estate investment, we may not leverage our assets with debt financing such that our borrowings would be in excess of 300% of our net assets unless a majority of our conflicts committee finds justification for borrowing a greater amount. Examples of such a justification include obtaining funds for the following: (i) to repay existing obligations, (ii) to pay sufficient distributions to maintain REIT status, or (iii) to buy an asset where an exceptional acquisition opportunity presents itself and the terms of the debt agreement and the nature of the asset are such that the debt does not increase the risk that we would become unable to meet our financial obligations as they became due. Based on current lending market conditions, we expect to leverage our assets in an amount equal to 55% to 60% of the cost of our assets.

 
 
 
 

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How will you structure the ownership and operation of your assets?
         We plan to own substantially all of our assets and conduct our operations through Resource Apartment OP III, LP, which we refer to as our Operating Partnership in this prospectus. We are the sole general partner of our Operating Partnership and, as of the date of this prospectus, our wholly owned subsidiary, Resource Apartment Holdings III, LLC, is the sole limited partner of our Operating Partnership. We will present our financial statements, operating partnership income, expenses, and depreciation on a consolidated basis with Resource Apartment Holdings III, LLC and our Operating Partnership. Neither subsidiary will file a federal income tax return. All items of income, gain, deduction (including depreciation), loss and credit will flow through our Operating Partnership and Resource Apartment Holdings III, LLC to us as each of these subsidiary entities will be disregarded for federal tax purposes. These tax items will not generally flow through us to our investors however. Rather, our net income and net capital gain effectively will flow through us to the stockholders as and when dividends are paid to our stockholders. Because we plan to conduct substantially all of our operations through our Operating Partnership, we are considered an UPREIT.

 
 

What is an “UPREIT”?
          UPREIT stands for “Umbrella Partnership Real Estate Investment Trust.” An UPREIT is a REIT that holds all or substantially all of its properties through a partnership in which the REIT holds a general partner or limited partner interest, approximately equal to the value of capital raised by the REIT through sales of its capital stock. Using an UPREIT structure may give us an advantage in acquiring properties from persons who may not otherwise sell their properties because of unfavorable tax results. Generally, a sale of property directly to a REIT is a taxable transaction to the selling property owner. In an UPREIT structure, a seller of a property who desires to defer taxable gain on the sale of his property may transfer the property to the UPREIT in exchange for limited partnership units in the partnership and defer taxation of gain until the seller later exchanges his limited partnership units on a one-for-one basis for REIT shares or for cash pursuant to the terms of the limited partnership agreement.

 
 

What is the impact of being an “emerging growth company”?
        We do not believe that being an “emerging growth company,” as defined by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), will have a significant impact on our business or this offering. We have elected to opt out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. This election is irrevocable. Also, because we are not a large accelerated filer or an accelerated filer under Section 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”), and will not be for so long as our shares of common stock are not traded on a securities exchange, we are not subject to auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. In addition, so long as we are externally managed by our advisor, we do not expect to be required to seek stockholder approval of executive compensation and “golden parachute” compensation arrangements pursuant to Section 14A(a) and (b) of the Exchange Act. We will remain an “emerging growth company” for up to five years, although we will lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period or if the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30.

 
 
What conflicts of interest will your advisor face?
        Our advisor and its affiliates will experience conflicts of interest in connection with the management of our business. All of our executive officers, our non-independent directors and our key real estate professionals will face these conflicts because of their affiliation with our advisor and other Resource Real Estate-sponsored programs or with programs sponsored by C-III.

 
 
 
 

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Some of the material conflicts that our advisor and its affiliates will face include the following:
Our sponsor and its team of real estate professionals at our advisor must determine which investment opportunities to recommend to us or another Resource Real Estate-sponsored program or joint venture or affiliate of our sponsor;
The real estate professionals employed by our sponsor, Resource America and C-III provide services for those companies and Resource Capital as well as our company;
Our sponsor and its team of real estate professionals at our advisor may structure the terms of joint ventures between us and other Resource Real Estate-sponsored or C-III-sponsored programs;
Our advisor and its affiliates must determine which property and leasing managers to retain and may retain Resource Apartment Manager III, an affiliate, to manage and lease some or all of our properties and to manage our real estate-related debt investments;
Our sponsor and its team of real estate professionals at our advisor and its affiliates (including our dealer manager, Resource Securities) have to allocate their time between us and other real estate programs and activities in which they are involved;
Our advisor and its affiliates receive fees in connection with transactions involving the purchase, management and sale of our assets regardless of the quality of the asset acquired or the services provided to us;
Our advisor and its affiliates, including our dealer manager, Resource Securities, also receive fees in connection with our offerings of equity securities;
The negotiations of the advisory agreement, the dealer manager agreement and the management agreement (including the substantial fees our advisor and its affiliates will receive thereunder) were not at arm’s length;
Companies affiliated with our sponsor or C-III may provide services to us; and
We may internalize our management by acquiring assets and the key real estate professionals at our advisor and its affiliates. We cannot be sure of the terms relating to any such acquisition. Additionally, in an internalization transaction, the real estate professionals at our advisor that become our employees may receive more compensation than they receive from our advisor or its affiliates. These possibilities may provide incentives to our advisor or these individuals to pursue an internalization transaction rather than an alternative strategy, even if such alternative strategy might otherwise be in our stockholders’ best interests.
See the “Conflicts of Interest” section of this prospectus for a detailed discussion of the various conflicts of interest relating to your investment, as well as the procedures that we have established to mitigate a number of these potential conflicts.

 
 
 
 

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What is the ownership structure of the company and the Resource Real Estate entities that perform service for you?
            The following chart shows the ownership structure of the various Resource Real Estate entities that perform or are likely to perform important services for us as of the date of this prospectus.

 
 
                                                 capturea08.gif                
 
 

What are the fees that you will pay to the advisor and its affiliates?
        Our advisor and its affiliates receive compensation and reimbursement for services relating to this offering and the investment and management of our assets. The most significant items of compensation are

 
 
 
 

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included in the table below. Selling commissions, dealer manager fees and distribution and shareholder servicing fees vary for each class of shares offered and selling commissions and dealer manager fees may vary for different categories of purchasers. The table below assumes that (a) 90% and 10% of the remaining amount of common stock to be sold in the primary offering is Class R common stock and Class I common stock, respectively, and includes the actual sale of approximately $5.8 million and $9.9 million of Class A and Class T common stock, respectively, prior to July 3, 2017, (b) we do not reallocate shares being offered between our primary offering and distribution reinvestment plan, (c) based on this allocation, we sell all $1,000,000,000 of shares being offered at the highest possible selling commissions and dealer manager fees with respect to our primary offering (with no discounts to any categories of purchasers). The compensation set forth below may only be increased if approved by a majority of the members of our Conflicts Committee. The increase of such compensation does not require approval by stockholders.

 
 
Form of Compensation
 
Recipient
 
Determination of Amount
 
Estimated Amount for Maximum Primary Offering
 
 
 
 
 
 
Organization and Offering Stage
 
 
 
 
Selling Commissions
 
Resource Securities
 
We will pay selling commissions to our dealer manager of up to 3% of the gross offering proceeds before reallowance of commissions earned by participating broker-dealers from the sale of Class R common stock; provided, however, that the aggregate amount of selling commissions and dealer manager fees paid in connection with the sale of Class R common stock is no more than 5.5% of the gross offering proceeds from the sale of such Class R shares. We paid selling commissions to our dealer manager of up to 7% of the gross offering proceeds before reallowance of commissions earned by participating broker-dealers from the sale of Class A common stock and up to 2% of gross offering proceeds before reallowance of commissions earned by participating broker-dealers from the sale of Class T common stock. No selling commissions are payable on Class I shares or shares of any class sold under the distribution reinvestment plan. Resource Securities, our dealer manager, will reallow 100% of commissions earned to participating broker-dealers.

 
$22,750,712 ($22,145,740 for Class R shares, $406,103 for Class A shares and $198,869 for Class T shares)

 
 
 
 
 
 
We will also pay our dealer manager an annual distribution and shareholder servicing fee in connection with the sale of Class R and Class T shares. Please refer to “Operational Stage” below for more information about such fee.

 
 
 
 
Dealer Manager Fee
 
Resource Securities
 
We will pay dealer manager fees to our dealer manager of up to 3.5% of the gross offering proceeds from the sale of Class R common stock; provided, however, that the aggregate amount of selling commissions and dealer manager fees paid in connection with the sale of Class R common stock is no more than 5.5% of the gross offering proceeds from the sale of such Class R shares. We will pay

 
$28,523,619 ($26,574,888 for Class R shares, $1,476,383 for Class I shares, $174,044 for Class A shares and $298,304 for Class T shares)

 
 
 
 
 
 
 
 
 
 

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Form of Compensation
 
Recipient
 
Determination of Amount
 

Estimated Amount for Maximum Primary Offering
 
 
 
 
 
 
dealer manager fees to our dealer manager of up to 1.5% of the gross offering proceeds from the sale of Class I common stock. We paid dealer manager fees of up to 3% of the gross offering proceeds from the sale of Class A and Class T common stock. No dealer manager fee is payable on shares of any class sold under the distribution reinvestment plan. Resource Securities may reallow to any participating broker-dealer a portion of the dealer manager fee attributable to that participating broker-dealer as a marketing fee. See “Plan of Distribution.”

 
 
 
 
Other Organization and Offering Expenses
 
Resource REIT Advisor or its affiliates
 
Pursuant to the terms of our advisory agreement, we will reimburse our advisor for organization and offering expenses it may incur on our behalf, but only to the extent that such reimbursement does not cause organization and offering expenses (other than selling commissions, the dealer manager fee and the distribution and shareholder servicing fee) to exceed 4% of gross offering proceeds as of the termination of this offering if we raise less than $500 million in the primary offering, and 2.5% of gross offering proceeds as of the termination of this offering if we raise $500 million or more in the primary offering. However, if we raise the maximum offering amount in the primary offering, we expect organization and offering expenses (other than selling commissions, the dealer manager fee and the distribution and shareholder servicing fee) to be $10,000,000 or 1% of gross offering proceeds. These organization and offering expenses include all actual expenses (other than selling commissions, the dealer manager fee and the distribution and shareholder servicing fee), including reimbursements to our advisor for the portion of named executive officer salaries allocable to activities related to this offering, to be incurred on our behalf and paid by us in connection with the offering.

 
$10,000,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition and Development Stage
 
 
 
 
Acquisition Fees
 
Resource REIT Advisor or its affiliates
 
2% of the cost of investments acquired by us, or the amount funded by us to acquire or originate loans, including acquisition expenses and any debt attributable to such investments. The computation of acquisition fees paid to the advisor also will include amounts incurred or reserved for capital expenditures that will be used to provide funds for capital

 
$18,219,039 (maximum offering and no debt)/
$43,207,594 (maximum offering and leverage of 60%


 
 
 
 
 
 
 
 
 
 

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Form of Compensation
 
Recipient
 
Determination of Amount
 

Estimated Amount for Maximum Primary Offering
 
 
 
 
 
 
improvements and repairs that may be serviced by affiliates of Resource REIT Advisor, applied to any real property investment acquired where we plan to add value.

 
of the cost of our investments)
 
 
Acquisition Expenses
 
Resource REIT Advisor or its affiliates
 
Subject to the limitations contained in our charter, reimbursement for all out-of-pocket expenses incurred in connection with the selection and acquisition of properties or other real estate-related debt investments, whether or not we ultimately acquire the property or other real estate-related debt investment. We estimate these expenses will be approximately 0.5% of the contract purchase price of each property.

 
$4,522,760 (maximum offering and no debt)/
$10,564,200 (maximum offering and leverage of 60% of the cost of our investments)

 
 
Debt Financing Fee
 
Resource REIT Advisor or its affiliates
 
0.5% of the amount of any debt financing obtained or assumed; provided, however, that the sum of the debt financing fee, the construction management fee paid to our property manager and its affiliates and the acquisition fees and expenses described above may not exceed 6.0% of the contract price of the property unless a majority of the board of directors (including a majority of the members of the conflicts committee) not otherwise interested in the transaction determines that such fee is commercially competitive, fair and reasonable to us. In no event will the debt financing fee be paid more than once in respect of the same debt. For example, upon refinancing, our advisor would only receive 0.5% of the incremental amount of additional debt financing obtained in the refinancing.

 
Actual amounts are dependent upon the amount of any debt financed and upon many other factors, such as whether the debt is incurred in connection with the acquisition of a property or subsequent to the acquisition and therefore cannot be determined at the present time.

 
 
Construction Management Fee
 
Resource Apartment Manager III or its affiliates
 
If requested to provide construction management services for new capital improvements (and not maintenance or repairs), a construction management fee shall be paid in an amount equal to 5.0% of actual aggregate cost of the redevelopment construction; provided, however, that the sum of the construction management fee paid to our property manager and its affiliates, the debt financing fee and the acquisition fee described above, and acquisition expenses may not exceed 6.0% of the contract price of the property unless a majority of the board of directors (including a majority of the members of the conflicts committee) not otherwise interested in the transaction determines that such fee is commercially competitive, fair and reasonable to us.
 
Actual amounts are dependent upon usual and customary construction management fees for particular projects and therefore the amount cannot be determined at the present time.
 
 
 
 
 
 
 
 
 
 

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Form of Compensation
 
Recipient
 
Determination of Amount
 

Estimated Amount for Maximum Primary Offering
 
 
 
 
 
 
Operational Stage
 
 
 
 
Distribution and Shareholder Servicing Fee
 
Resource Securities
 
We pay our dealer manager an annual fee of 1% of the purchase price (or, once reported, the amount of our estimated net asset value, or NAV) per share of Class T common stock sold in the primary offering for five years from the date on which each share is issued. In the event that payment of the distribution and shareholder servicing fee does not cease in connection with one of the events discussed below, the total distribution and shareholder servicing fees paid with respect to a Class T share will be equal to 5% of the purchase price per share (or, once reported, the amount of our estimated NAV) of such share.

 
$8,957,731 annually ($99,435 for Class T shares and $8,858,296 for Class R shares), and $27,072,063 in total ($497,175 for Class T shares and $26,574,888 for Class R shares).
 
 
 
 
 
 
We will also pay our dealer manager an annual fee of 1% of the purchase price (or, once reported, the amount of our estimated net asset value, or NAV) per share of Class R common stock sold in the primary offering.

 
 
 
 
 
 
 
 
The distribution and shareholder servicing fee will accrue daily based on the number of outstanding Class T and Class R shares on each day that were sold in the primary offering and the purchase price (or then-current NAV, once reported) of such shares. We will not pay distribution and shareholder servicing fees to the dealer manager with respect to shares sold under our distribution reinvestment plan, although the expense of the distribution and shareholder servicing fee payable with respect to Class T and Class R shares sold in our primary offering will be allocated among all Class T and Class R shares, respectively, including those sold under our distribution reinvestment plan. We pay the distribution and shareholder servicing fees monthly in arrears. Our dealer manager may reallow the distribution and shareholder servicing fee to participating broker-dealers or other broker-dealers that are servicing investors’ accounts except as described in the plan of distribution.

 
 
 
 
 
 
 
 
We will cease paying the distribution and shareholder servicing fee on each Class T share prior to the fifth anniversary of its issuance on the earliest of the following, should any of these events occur: (i) the date after the termination of the primary offering at which, in the aggregate, underwriting compensation from all sources equals 10% of the gross proceeds from our primary offering; (ii) the date on which we list our common stock on a national securities
 
 
 
 
 
 
 
 
 
 
 
 

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Form of Compensation
 
Recipient
 
Determination of Amount
 

Estimated Amount for Maximum Primary Offering
 
 
 
 
 
 
exchange; and (iii) the date of a merger or other extraordinary transaction in which we are a party
and in which our common stock is exchanged for cash or other securities, as well as upon our dissolution, liquidation or the winding up of our affairs.

 
 
 
 
 
 
 
 
We will cease paying the distribution and shareholder servicing fee with respect to Class R shares held in any particular account, and those Class R shares will convert into a number of Class I shares determined by multiplying each Class R share to be converted by the applicable “Conversion Rate” described herein, on the earlier of (i) the date after the termination of the primary offering at which, in the aggregate, underwriting compensation from all sources equals 10% of the gross proceeds from our primary offering; (ii) a listing of the Class I shares on a national securities exchange; (iii) a merger or consolidation of the company with or into another entity, or the sale or other disposition of all or substantially all of our assets; and (iv) the end of the month in which the total underwriting compensation (which consists of selling commissions, dealer manager fees and distribution and shareholder servicing fees) paid with respect to such Class R shares purchased in a primary offering is not less than 8.5% (or a lower limit described below) of the gross offering price of those Class R shares purchased in such primary offering (excluding shares purchased through our distribution reinvestment plan). If we redeem a portion, but not all of the Class R shares held in a stockholder’s account, the underwriting compensation limit and amount of underwriting compensation previously paid will be prorated between the Class R shares that were redeemed and those Class R shares that were retained in the account. Likewise, if a portion of the Class R shares in a stockholder’s account is sold or otherwise transferred in a secondary transaction, the total underwriting compensation limit and amount of underwriting compensation previously paid will be prorated between the Class R shares that were transferred and the Class R shares that were retained in the account.

 
 
 
 
 
 
 
 
With respect to item (iv) above, all of the Class R shares held in a stockholder’s account will automatically convert into Class I shares as of the last calendar day of the month in which the 8.5% limit on underwriting compensation (or a lower limit,
 
 
 
 
 
 
 
 
 
 
 
 

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Form of Compensation
 
Recipient
 
Determination of Amount
 

Estimated Amount for Maximum Primary Offering
 
 
 
 
 
 
provided that, in the case of a lower limit, the agreement between our dealer manager and the broker-dealer in effect at the time Class R shares were first issued to such account sets forth the lower limit and our dealer manager advises our transfer agent of the lower limit in writing) in a particular account is reached.

 
 
 
 
 
 
 
 
We will further cease paying the distribution and shareholder servicing fee on any Class T or Class R share that is redeemed or repurchased.

 
 
 
 
 
 
 
 
If we liquidate (voluntarily or otherwise), dissolve or wind up our affairs, then, immediately before such liquidation, dissolution or winding up, our Class R shares will automatically convert to Class I shares at the applicable Conversion Rate and our net assets, or the proceeds therefrom, will be distributed to the holders of Class I shares, which will include all converted Class R shares, in accordance with their proportionate interests.

 
 
 
 
 
 
 
 
With respect to the conversion of Class R shares into Class I shares described above, each Class R share will convert into an equivalent amount of Class I shares based on the respective NAV per share for each class. We currently expect that the conversion will be on a one-for-one basis, as we expect the NAV per share of each Class R share and Class I share to be effectively the same. Following the conversion of their Class R shares into Class I shares, those stockholders continuing to participate in our distribution reinvestment plan will receive Class I shares going forward at the then-current distribution reinvestment price per Class I share.

 
 
 
 
Property Management/ Debt Servicing Fees
 
Resource Apartment Manager III or its affiliates
 
With respect to real property investments, 4.5% of the actual gross cash receipts from the operation of the property; provided that for properties that are less than 75% occupied upon taking possession or if our business plan includes reducing occupancy to less than 75% during the first year thereafter, the property manager will receive a minimum property management fee for the first 12 months of ownership in an amount equal to $40 per unit per month for multifamily rental properties or $0.05 per square foot per month for other types of properties.
 
Actual amounts are dependent upon gross revenues of specific properties and actual management fees or property management fees or will be dependent upon the total equity and debt capital we raise and the results of our

 
 
 
 
 
 
 
 
 
 

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Form of Compensation
 
Recipient
 
Determination of Amount
 

Estimated Amount for Maximum Primary Offering
 
 
 
 
 
 
With respect to real estate-related debt investments managed by our property manager or its affiliates, 2.75% of gross income received from these investments. The fee attributable on our real estate-related debt investments will cover our property manager’s services in monitoring the performance of our real estate-related debt investments, including (i) collecting amounts owed to us, (ii) reviewing on an as-needed basis the properties serving, directly or indirectly, as collateral for the real estate-related debt investments, the owners of those properties and the markets in general and (iii) maintaining escrow accounts, monitoring advances, monitoring loan covenants and reviewing insurance compliance.

 
operations and therefore cannot be determined at the present time.
 
 
 
 
 
 
For properties or debt investments managed by third parties, the property manager will receive the property management fee or debt servicing fee and pay the third party directly from that fee an amount for managing the property or debt investment. If we or our Operating Partnership foreclose or otherwise take title to the real property underlying our real estate-related debt investments, our property manager or its affiliates will thereafter be entitled to receive a property management fee instead of a debt servicing fee. Our property manager may, in its discretion, from time to time defer payment of and accrue all or any portion of these property management and debt servicing fees.

 
 
 
 
Asset Management Fee
 
Resource REIT Advisor or its affiliates
 
Prior to the reporting of our estimated NAV, the monthly asset management fee will be equal to one-twelfth of 1.0% of the cost of our assets, without deduction for depreciation, bad debts or other non-cash reserves. For purposes of this calculation, “cost” will equal the amount actually paid (including acquisition fees and expenses) to purchase each asset we acquire, including any debt attributable to the asset, provided that, with respect to any properties we develop, construct or improve, cost will include the amount budgeted or expended by us for the development, construction or improvement of an asset. The asset management fee will be based only on the portion of the cost attributable to our investment in an asset if we do not own all or a majority of an asset and do not control the asset. After we report our estimated NAV, the monthly asset management fee will be equal to one-twelfth of 1.0% of the most recently determined value of our assets.
 
The actual amounts are dependent upon the total equity and debt capital we raise and the results of our operations; we cannot determine these amounts at the present time.
 
 
 
 
 
 
 
 
 
 

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Form of Compensation
 
Recipient
 
Determination of Amount
 

Estimated Amount for Maximum Primary Offering
 
 
 
 
 
 
The portion of the asset management fee payable to our advisor for any investment acquired or disposed of in a given month will be prorated by using a numerator equal to the number of days such investment is owned during the month (including the full day of closing for investments acquired), divided by a denominator equal to the total number of days in such month. The asset management fee for each month will be due and payable to our advisor on or about the last day of such month.

 
 
 
 
Other Operating Expenses
 
Resource REIT Advisor or its affiliates
 
We reimburse the expenses incurred by our advisor and its affiliates in connection with its provision of services to us, including our allocable share of costs for their personnel and overhead, including allocable personnel salaries and other employment expenses. However, we will not reimburse our advisor or its affiliates for employee costs in connection with services for which our advisor earns acquisition fees or disposition fees. Such reimbursements may include reimbursements for our allocable share of the salaries and benefits paid to our executive officers as employees of our advisor.

 
Actual amounts are dependent upon the results of our operations; we cannot determine these amounts at the present time.

 
 
Disposition Fees
 
Resource REIT Advisor or its affiliates
 
For substantial assistance in connection with the sale of investments, we will pay our advisor or its affiliates the lesser of (i) one-half of the aggregate brokerage commission paid or, if none is paid, the amount that customarily would be paid at market rate or (ii) 2.0% of the consideration received for the sale of each real estate investment, loan, debt-related security, or other investment sold (including mortgage-backed securities or collateralized debt obligations issued by a subsidiary of ours as part of a securitization transaction); however, no disposition fee will be payable for any sale of all or substantially all of our assets in one or more transactions designed to effectuate a business combination transaction. The conflicts committee will determine whether the advisor or its affiliate has provided substantial assistance to us in connection with the sale of an asset. We will not pay a disposition fee upon the maturity, prepayment or workout of a loan or other real estate-related debt investment; however, if we take ownership of a property as a result of a workout or foreclosure of a loan or we provide substantial assistance during the course of a workout, we will pay a disposition fee upon the sale of such property or disposition of such loan or other real estate-related debt investment.
 
Actual amounts are dependent upon aggregate asset value and therefore cannot be determined at the present time.
 
 
 
 
 
 
 
 
 
 

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Form of Compensation
 
Recipient
 
Determination of Amount
 

Estimated Amount for Maximum Primary Offering
 
 
Common Stock Issuable Upon Conversion of Convertible Stock
 
Resource REIT Advisor
 
Our convertible stock will be of no value unless our common stockholders realize or have an opportunity to realize a stated minimum return as a result of our cumulative distributions or the trading price of our shares on a national securities exchange. As a result, our convertible stock is economically similar to a back-end incentive fee, which many other non-traded REITs have agreed to pay to their external advisors.

 
Actual amounts depend on the value of our company at the time the convertible stock converts or becomes convertible and therefore cannot be determined at the present time.

 
 
 
 
 
 
Our convertible stock will convert into shares of Class A common stock on the earlier of one of two events. First, it will convert if we have paid distributions to common stockholders such that aggregate distributions are equal to 100% of the price at which we sold our outstanding shares of common stock plus an amount sufficient to produce a 6% cumulative, non-compounded, annual return at that price. Alternatively, the convertible stock will convert 31 trading days after the date on which we list our shares of common stock on a national securities exchange or consummate a merger in which the consideration received by our common stockholders is securities of another issuer that are listed on a national securities exchange. Each of these two events is a “Triggering Event.” For more information, see “Description of Shares—Convertible Stock.”

 
 
 
 

How many real estate investments do you currently own?
        As of the date of this prospectus, we owned one apartment property located in Alexandria, Virginia. Because we have a limited portfolio and, except as disclosed in a supplement to this prospectus, we have not yet identified any additional assets to acquire, we are considered to be a “blind pool.” As acquisitions become probable, we will supplement this prospectus to provide information regarding the likely acquisition to the extent material to an investment decision with respect to our common stock. We will also describe material changes to our portfolio, including the closing of property acquisitions, by means of a supplement to this prospectus.

 
 

Will you acquire properties or other assets in joint ventures?
         Probably. Among other reasons, joint venture investments permit us to own interests in large assets without unduly restricting the diversity of our portfolio. We may also want to acquire properties and other investments through joint ventures in order to diversify our portfolio by investment size, investment type or investment risk. In determining whether to invest in a particular joint venture, our advisor will evaluate the real estate assets that such joint venture owns or is being formed to own under the same criteria as our other investments. We may enter into joint ventures with affiliates of our advisor or with third parties.

 
 
 
 
 
 
 
 
 
 

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What steps will you take to make sure you purchase environmentally compliant properties?
        We intend to obtain a Phase I environmental assessment of each property we acquire. In addition, we will attempt to obtain a representation from the seller that, to its knowledge, the property is not contaminated with hazardous materials. We will not close the purchase of any property unless we are generally satisfied with the environmental status of the property.

 
 

If I buy shares, will I receive distributions and how often?
        Our board of directors has declared cash distributions on the outstanding shares of Class A and Class T common stock based on daily record dates for the periods from October 10, 2016 through July 30, 2017, which distributions were paid or will be paid on a monthly basis. Distributions for these periods were or will be calculated based on stockholders of record each day during these periods at a rate of (i) $0.000547945 per share per day less (ii) the applicable daily distribution and shareholder servicing fees accrued for and allocable to any class of common stock, divided by the number of shares of common stock of such class outstanding as of the close of business on each respective record date.
        We expect our board of directors to continue to authorize and declare distributions based on daily record dates, and we expect to pay these distributions on a monthly basis. Thus, you will begin accruing distributions immediately upon our acceptance of your subscription. We have not established a minimum distribution level. Unless our board of directors determines that it is not in our best interest to qualify as a REIT, our board of directors shall endeavor to declare and pay such dividends and other distributions as shall be necessary for us to qualify as a REIT under the Internal Revenue Code. Our charter does not require that we make distributions to our stockholders. We may also make stock dividends. The timing and amount of distributions will be determined by our board of directors in its sole discretion and may vary from time to time. No distributions will be made with respect to shares of convertible stock.
        To maintain our qualification as a REIT, we will be required to make aggregate annual distributions to our common stockholders of at least 90% of our REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain). Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant.
        Our board of directors considers many factors before authorizing a cash distribution, including current and projected cash flow from operations, capital expenditure needs, general financial conditions and REIT qualification requirements. We expect to have little, if any, cash flow from operations available for cash distributions until we make substantial investments. It is therefore likely that, at least during the early stages of our development, and from time to time during our operational stage, our board will declare cash distributions that will be paid in advance of our receipt of cash flow that we expect to receive during a later period. In these instances, where we do not have sufficient cash flow to cover our distributions, we expect to use the proceeds from this offering, the proceeds from the issuance of securities in the future or proceeds from borrowings to pay distributions. We may borrow funds, issue new securities or sell assets to make and cover our declared distributions, all or a portion of which could be deemed a return of capital. We may also fund such distributions from third-party borrowings or from advances from our advisor or sponsor or from our advisor’s deferral of its asset management fee, although we have no present intent to do so. If we fund cash distributions from borrowings, sales of assets or the net proceeds from this offering, we will have less funds available for the acquisition of real estate and real estate-related assets and your overall return may be reduced. Further, to the extent cash distributions exceed cash flow from operations, a stockholder’s basis in our stock will be reduced and, to the extent distributions exceed a stockholder’s basis, the stockholder may recognize capital gain. Our organizational documents do not limit the amount of distributions we can fund from sources other than from cash flows from operations.
        In addition to cash distributions, our board of directors has declared and may continue to declare stock dividends. On October 7, 2016, our board of directors authorized a stock dividend for the fourth quarter of
 
 
 
 
 

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2016, in the amount of 0.005 shares of common stock on each outstanding share of common stock to all common stockholders of record as of the close of business on December 31, 2016. On February 22, 2017, our board of directors authorized a stock dividend for the first quarter of 2017, in the amount of 0.01 shares of common stock on each outstanding share of common stock to all common stockholders of record as of the close of business on March 31, 2017. On April 25, 2017, our board of directors authorized a stock dividend for the second quarter of 2017, in the amount of 0.01 shares of common stock on each outstanding share of common stock to all stockholders of record as of the close of business on July 1, 2017. These stock dividends were issued or will be issued on January 13, 2017, April 14, 2017 and July 14, 2017, respectively. Stock dividends are issued in the same class of shares as the shares for which such stockholder received the stock dividend.
        Although there are a number of factors that we will consider in connection with such a declaration, such stock dividends are most likely to be declared if our board of directors believes that (i) our portfolio has appreciated in value from its aggregate acquisition cost or (ii) additional sales of common stock in this offering at the current offering price would dilute the value of a share to our then existing stockholders. Such a stock dividend would be intended to have the same effect as raising the price at which our shares of common stock are offered. We note that some of the investment opportunities that we expect to see in the market at this time are investments that are attractive more so because of their appreciation potential rather than because of their current yield. Especially given the investment opportunities at this time and during an ongoing public offering, distributions in shares of our common stock may be in the long-term best interests of our stockholders.

 
 

May I reinvest my distributions in shares of Resource Apartment REIT III, Inc.?
        Yes. We have adopted a distribution reinvestment plan. You may participate in our distribution reinvestment plan by checking the appropriate box on the subscription agreement or by filling out an enrollment form we will provide to you at your request. The purchase prices for Class A, Class T, Class R and Class I shares purchased under the distribution reinvestment plan will initially be $9.60, $9.09, $9.14 and $8.90, respectively. Once we establish an estimated net asset value (“NAV”) per share, shares issued pursuant to our distribution reinvestment plan will be priced at 96% of the purchase price of shares in the primary portion of this offering, which price will be based on the NAV per share of our common stock, as determined by our advisor or another firm chosen for that purpose. We expect to establish an NAV per share no later than June 30, 2018. No selling commissions, dealer manager fees or distribution and shareholder servicing fees are payable on shares sold under our distribution reinvestment plan. We may amend or terminate the distribution reinvestment plan for any reason at any time upon 10 days’ written notice to the participants. For more information regarding the distribution reinvestment plan, see “Description of Shares—Distribution Reinvestment Plan.”

 
 
Will the cash distributions I receive be taxable as ordinary income?
        Yes and No. Generally, distributions that you receive, including distributions that are reinvested pursuant to our distribution reinvestment plan, will be taxed as ordinary income to the extent they are from current or accumulated earnings and profits. Participants in our distribution reinvestment plan will also be treated for tax purposes as having received an additional distribution to the extent that they purchase shares under the distribution reinvestment plan at a discount to fair market value. As a result, participants in our distribution reinvestment plan may have tax liability with respect to their share of our taxable income, but they will not receive cash distributions to pay such liability.
        As a REIT, we are only required to distribute 90% of our taxable income each year in order to maintain our REIT status. We expect that some portion of your distributions will not be subject to tax in the year in which it is received because depreciation expense reduces the amount of taxable income but does not reduce cash available for distribution. The portion of your distribution that is not subject to tax immediately is

 

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considered a return of capital for tax purposes and will reduce the tax basis of your investment. Distributions that constitute a return of capital, in effect, defer a portion of your tax until your investment is sold or we are liquidated, at which time you will be taxed at capital gains rates. However, because each investor’s tax considerations are different, we suggest that you consult with your tax advisor. You should also review the section of the prospectus entitled “Federal Income Tax Considerations.”

 
 

How will you use the proceeds raised in this offering?
        We intend to use substantially all of the net proceeds from our primary offering of up to $1,000,000,000 of shares of common stock to acquire and renovate a diversified portfolio of multifamily rental properties located throughout the United States as well as acquire loans secured by multifamily rental properties, including first- and second-priority mortgage loans, preferred equity and other loans. Assuming we sell the maximum offering amount in this primary offering and assuming 90% and 10% of the remaining amount of common stock to be sold in the primary offering is Class R common stock and Class I common stock, respectively, which has been reduced to reflect the actual sale of approximately $5.8 million and $9.9 million of Class A and Class T common stock, respectively, prior to July 3, 2017, we estimate that we will use 86.34% of the gross proceeds from the sale of Class A shares, 91.22% of the gross proceeds from the sale of Class T shares, 90.74% of the gross proceeds from the sale of Class R shares and 94.64% of the gross proceeds from the sale of Class I shares in the primary offering, or approximately $8.64 per Class A, Class T, Class R and Class I share, for investments, while the remainder of the gross proceeds from the primary offering will be used to pay organization and offering expenses, including selling commissions and the dealer manager fee, to maintain a working capital reserve and, upon investment in properties and other assets, to pay a fee to our advisor for its services in connection with the selection and acquisition of our real estate investments. For more information regarding the use of proceeds, see “Estimated Use of Proceeds.”

 
 

What kind of offering is this?
        We are offering up to an aggregate of $1,000,000,000 of shares of our common stock in our primary offering. Through June 30, 2017, we offered shares of Class A and Class T common stock at prices of $10.00 per share and $9.47 per share, respectively. As of July 3, 2017, we ceased offering shares of Class A and Class T common stock in our primary offering. Commencing July 3, 2017, we are offering shares of Class R and Class I common stock at prices of $9.52 per share and $9.13 per share, respectively. As of June 30, 2017, we have received gross offering proceeds in our primary offering of approximately $15.7 million from the sale of approximately 0.6 million Class A shares and approximately 1.0 million Class T shares, resulting in approximately $984.3 million in shares remaining in our primary offering as of such date. We are also offering up to an aggregate of $100,000,000 of shares of Class A, Class T, Class R and Class I common stock pursuant to our distribution reinvestment plan at a purchase price initially for Class A, Class T and Class R shares equal to 96% of the maximum per share purchase prices of Class A, Class T and Class R shares in the primary offering and at a purchase price initially for Class I shares of $8.90 per share. The share classes have different selling commissions, dealer manager fees and ongoing distribution and shareholder servicing fees. We are offering to sell any combination of Class R and Class I shares in our primary offering.

 
 

How does a “best efforts” offering work?
        When shares are offered on a “best efforts” basis, the dealer manager will be required to use only its best efforts to sell the shares in the offering and has no firm commitment or obligation to purchase any of the shares. Therefore, we may not sell all of the shares that we are offering.
        We will not sell any shares to Washington or Pennsylvania investors unless we raise a minimum of $20,000,000 and $50,000,000, respectively, in gross offering proceeds (including sales made to residents of other jurisdictions). Pending satisfaction of this condition, all subscription payments by Washington and

 

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investors will be placed in a separate account held by UMB Bank, NA, our escrow agent, in trust for the Washington and Pennsylvania subscribers’ benefit, pending release to us. Pennsylvania residents should also note the special escrow procedures described below under “Plan of Distribution—Special Notice to Pennsylvania Investors.”
        If we have not reached the $50,000,000 threshold for Pennsylvania investors within 120 days of the date that we first accept a subscription payment from a Pennsylvania investor, we will, within 10 days of the end of that 120-day period, notify Pennsylvania investors in writing of their right to receive refunds, with interest. If you request a refund within 10 days of receiving that notice, we will arrange for the escrow agent to promptly return by check your subscription amount with interest. Amounts held in the Pennsylvania escrow account from Pennsylvania investors not requesting a refund will continue to be held for subsequent 120-day periods until we raise at least $50,000,000 or until the end of the subsequent escrow periods. At the end of each subsequent escrow period, we will again notify you of your right to receive a refund of your subscription amount with interest. In the event we do not raise gross offering proceeds of $50,000,000 before the termination of this primary offering, we will promptly return all funds held in escrow for the benefit of Pennsylvania investors (in which case, Pennsylvania investors will not be required to request a refund of their investment). Purchases by persons affiliated with us or our advisor will not count toward the Pennsylvania minimum.

 
 

How long will this offering last?
        The termination date of our primary offering will be April 28, 2018, unless extended by one year to April 28, 2019. Under rules promulgated by the SEC, if we have filed a registration statement relating to a follow-on offering we could continue our primary offering until such follow-on offering registration statement has been declared effective. If we continue our primary offering beyond two years from the date of this prospectus, we will provide that information in a prospectus supplement. We may continue to offer shares under our distribution reinvestment plan beyond two years from the date of this prospectus until we have sold $100,000,000 of shares through the reinvestment of distributions. In many states, we will need to renew the registration statement or file a new registration statement to continue the offering beyond one year from the date of this prospectus. We may terminate this offering at any time.
        If our board of directors determines that it is in our best interest, we may conduct additional offerings upon the termination of this offering. Our charter does not restrict our ability to conduct offerings in the future.

 
 

Who can buy shares?
        An investment in our shares is only suitable for persons who have adequate financial means and who will not need immediate liquidity from their investment. Residents of many states can buy shares in this offering provided that they have either (1) a net worth of at least $70,000 and an annual gross income of at least $70,000 or (2) a net worth of at least $250,000. For the purpose of determining suitability, net worth does not include an investor’s home, home furnishings or personal automobiles. The minimum suitability standards are more stringent for investors in certain other states. See “Suitability Standards.”

 
 

Who might benefit from an investment in our shares?
        An investment in our shares may be beneficial for you if you meet the minimum suitability standards described in this prospectus, seek to diversify your personal portfolio with a real estate-based investment, seek to preserve capital, seek to obtain the benefits of potential long-term capital appreciation, seek to receive current income and are able to hold your investment for a time period consistent with our liquidity strategy. On the other hand, we caution persons who require immediate liquidity or guaranteed income, or who seek a short-term investment, that an investment in our shares will not meet those needs.

 

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Who can invest in each class of our common stock and what are the differences among the classes?
         Class R shares are available to all investors. Class I shares are only available to investors who: (i) purchase shares through fee-based programs, also known as wrap accounts, (ii) purchase shares through participating broker-dealers that have alternative fee arrangements with their clients, (iii) purchase shares through certain registered investment advisers, (iv) purchase shares through bank trust departments or any other organization or person authorized to act in a fiduciary capacity for its clients or customers, (v) are an endowment, foundation, pension fund or other institutional investor and (vi) purchase shares through our “friends and family” program. We may also sell Class I shares to participating broker-dealers, their retirement plans, their representatives and the family members, IRAs and the qualified plans of their representatives.
          The following summarizes the differences in fees and selling commissions between the classes of our common stock. None of the fees listed below are payable by us with respect to shares sold under our distribution reinvestment plan.

 
 
 
 
 
 
Class R Shares
 
Class I Shares
 
 
 
 
Price Per Share
 
$
9.52

 
$
9.13

 
 
 
 
Selling Commissions
 
3.0% (1)

 
None

 
 
 
 
Dealer Manager Fees
 
3.5% (1)

 
1.50
%
 
 
 
 
Annual Distribution and Shareholder Servicing Fee
 
1.0% (2)

 
None

 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
We will pay selling commissions to our dealer manager of up to 3% of the gross offering proceeds and dealer manager fees of up to 3.5% of the gross offering proceeds from the sale of Class R common stock; provided, however, that the aggregate amount of selling commissions and dealer manager fees paid in connection with the sale of Class R common stock is no more than 5.5% of the gross offering proceeds from the sale of such Class R shares.
 
 
(2)
We will pay the dealer manager an annual distribution and shareholder servicing fee of 1.0% of the purchase price (or, once reported, the amount of our estimated net asset value, or NAV) per share of Class R common stock sold in the primary offering. The distribution and shareholder servicing fee will accrue daily based on the number of outstanding Class R shares on each day that were sold in our primary offering and the purchase price (or then-current NAV, once reported) of such shares. We will not pay distribution and shareholder servicing fees to the dealer manager with respect to shares sold under our distribution reinvestment plan, although the expense of the distribution and shareholder servicing fee payable with respect to Class R shares sold in our primary offering will be allocated among all Class R shares, including those sold under our distribution reinvestment plan. We will cease paying the distribution and shareholder servicing fee with respect to Class R shares held in any particular account, and those Class R shares will convert into a number of Class I shares determined by multiplying each Class R share to be converted by the applicable “Conversion Rate” described herein, on the earlier of (i) the date after the termination of the primary offering at which, in the aggregate, underwriting compensation from all sources equals 10% of the gross proceeds from our primary offering; (ii) a listing of the Class I shares on a national securities exchange; (iii) a merger or consolidation of the company with or into another entity, or the sale or other disposition of all or substantially all of our assets; and (iv) the end of the month in which the total underwriting compensation (which consists of selling commissions, dealer manager fees and distribution and shareholder servicing fees) paid with respect to such Class R shares purchased in a primary offering is not less than 8.5% (or a lower limit described below) of the gross offering price of those Class T shares purchased in such primary offering (excluding shares purchased through our distribution reinvestment plan).

 
 
 
With respect to item (iv) above, all of the Class R shares held in a stockholder’s account will automatically convert into Class I shares as of the last calendar day of the month in which the 8.5% limit on underwriting compensation (or a lower limit, provided that, in the case of a lower limit, the agreement between our dealer manager and the broker-dealer in effect at the time Class R shares were first issued to such account sets
 
 
 
 
 
 
 
 
 
 
 

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forth the lower limit and our dealer manager advises our transfer agent of the lower limit in writing) in a particular account is reached.
 
 
 
In the case of a Class R share purchased in the primary offering at a price equal to $9.52, the maximum distribution and shareholder servicing fee that may be accrued on that Class R share will equal approximately $0.29.
 
 
 
Assuming a constant gross offering price or estimated per share value of $9.52, assuming the aggregate selling commissions and dealer manager fees paid in connection with the sale of such shares was equal to 5.5% of the purchase price of such shares and assuming none of the shares purchased were redeemed or otherwise disposed of, we expect that with respect to a one-time $10,000 investment in Class R shares, a maximum of $300 in distribution and shareholder servicing fees will be paid to the dealer manager. For further clarity, if an investor purchased one Class R share, assuming a constant gross offering price or estimated per share value of $9.52, we would pay approximately $0.29 in distribution and shareholder servicing fees to the dealer manager with respect to such share.
 
 
 
For additional information regarding the distribution and shareholder servicing fee, please refer to the section entitled “Plan of Distribution” in this prospectus.
 
 
               The fees and expenses listed above will be allocated on a class-specific basis. The distribution and shareholder servicing fee is a class-specific expense that is allocated among all outstanding Class R shares and is not paid from the amounts paid by each individual Class R stockholder to purchase his or her Class R shares. The payment of class-specific expenses is expected to result in a different amount of distributions being paid as between share classes. Specifically, we expect to reduce the amount of distributions that would otherwise be paid on all Class R shares (including those sold under our distribution reinvestment plan) to account for the ongoing distribution and shareholder servicing fees payable on Class R shares. In addition, if the distribution and shareholder servicing fee paid with respect to Class R shares exceeds the amount distributed to holders of Class I shares in a particular period (such excess amount is referred to herein as the “Excess Class R Fee”), the NAV per Class R share would be permanently reduced by an amount equal to the Excess Class R Fee for the applicable period divided by the number of Class R shares outstanding at the end of the applicable period, reducing both the NAV of the Class R shares used for conversion purposes and the applicable Conversion Rate described herein. To calculate the NAV for our Class A, Class T, Class R and Class I shares, we would first determine the NAV of our entire company and then use such aggregate NAV to determine the NAV for each of our Class A, Class T, Class R and Class I shares by making any necessary adjustments applicable to each class of shares. If the NAV of our classes are different, then changes to our assets and liabilities that are allocable based on NAV may also be different for each class. Generally, we do not expect the respective NAVs of our Class A, Class T, Class R and Class I shares to differ for any reason other than for possible adjustments to the NAV of our Class T and Class R shares to account for the distribution and shareholder servicing fee.
 
 
                If we liquidate (voluntarily or otherwise), dissolve or wind up our affairs, then, immediately before such liquidation, dissolution or winding up of our company, our Class R shares will automatically convert to Class I shares at the applicable Conversion Rate (discussed herein) and our assets, or the proceeds therefrom, will be distributed between the holders of Class A shares, Class T shares and Class I shares ratably in proportion to the respective NAV for each class. Each holder of shares of a particular class of common stock will be entitled to receive, ratably with each other holder of shares of such class, that portion of such aggregate assets available for distribution as the number of outstanding shares of such class held by such holder bears to the total number of outstanding shares of such class then outstanding. In the event that we have not previously calculated an NAV for our Class A, Class T and Class I shares prior to a liquidation, we will calculate the NAV for our Class A, Class T and Class I shares, after the conversion of all Class R shares into Class I shares, in connection with such a liquidation specifically to facilitate the equitable distribution of assets or proceeds to the share classes. To calculate the NAV for our Class A, Class T and Class I shares, we would first determine the NAV of our entire company and then use such aggregate NAV to determine the NAV for each of our Class A, Class T and Class I shares by making any necessary adjustments applicable to each class of shares.
 

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How did you determine the offering prices of the Class R and Class I shares?
        We set the $9.52 primary offering price of our Class R shares arbitrarily, and based on that price, set the $9.13 primary offering price of our Class T shares to account for the differing sales commissions and dealer manager fees. These prices are unrelated to the value of our assets and to our expected operating income.
        With respect to our distribution reinvestment plan, we set the initial offering price of the Class A, Class T and Class R shares sold through the distribution reinvestment plan at a level equal to 96% of the primary offering prices of Class A, Class T and Class R I shares, respectively. We set the initial offering price of the Class I shares sold through the distribution reinvestment plan at $8.90 per share, which is the net investment amount of our Class I shares based on the “amount available for investment/net investment amount” percentage shown in our estimated use of proceeds table. No selling commissions, dealer manager fees, or distribution and shareholder servicing fees will be paid with respect to such shares.

 
 

Is there any minimum investment required?
        Yes. We require a minimum investment of at least $2,500. After you have satisfied the minimum investment requirement, any additional purchases must be in increments of at least $100. The investment minimum for subsequent purchases does not apply to shares purchased pursuant to our distribution reinvestment plan.

 
 

Are there any special restrictions on the ownership or transfer of shares?
        Yes. Our charter contains restrictions on the ownership of our shares that prevent any one person from owning more than 9.8% of our aggregate outstanding shares unless exempted by our board of directors (subject to the satisfaction of certain conditions precedent). These restrictions are designed to enable us to comply with ownership restrictions imposed on REITs by the Internal Revenue Code. Our charter also limits your ability to sell your shares unless (i) the prospective purchaser meets the suitability standards in our charter regarding income and/or net worth and (ii) unless you are transferring all of your shares and the transfer complies with the minimum purchase requirements.

 
 

Are there any special considerations that apply to employee benefit plans subject to ERISA or other retirement plans that are investing in shares?
        Yes. The section of this prospectus entitled “ERISA Considerations” describes the effect the purchase of shares will have on individual retirement accounts and retirement plans subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or the Internal Revenue Code. ERISA is a federal law that regulates the operation of certain tax-advantaged retirement plans. Any retirement plan trustee or individual considering purchasing shares for a retirement plan or an individual retirement account should carefully read this section of the prospectus.
        We may make some investments that generate “excess inclusion income” which, when passed through to our tax-exempt stockholders, can be taxed as unrelated business taxable income (“UBTI”) or, in certain circumstances, can result in a tax being imposed on us. Although we do not expect the amount of such income to be significant, there can be no assurance in this regard.

 
 
 
 

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May I make an investment through my IRA, SEP or other tax-deferred account?
        Yes. You may make an investment through your individual retirement account (“IRA”), a simplified employee pension (“SEP”) plan or other tax-deferred account. In making these investment decisions, you should consider, at a minimum, (1) whether the investment is in accordance with the documents and instruments governing your IRA, plan or other account, (2) whether the investment satisfies the fiduciary requirements associated with your IRA, plan or other account, (3) whether the investment will generate UBTI to your IRA, plan or other account, (4) whether there is sufficient liquidity for such investment under your IRA, plan or other account, (5) the need to value the assets of your IRA, plan or other account annually or more frequently, and (6) whether the investment would constitute a prohibited transaction under applicable law.

 
 

How do I subscribe for shares?
        If you choose to purchase shares in this offering, you will need to complete and sign a subscription agreement (in the form attached to this prospectus as Appendix A) for a specific number of shares and pay for the shares at the time of your subscription.

 
 

If I buy shares in this offering, how may I later sell them?
        Our board of directors has adopted a share redemption program that may enable you to sell your shares to us after you have held them for at least one year, subject to the significant conditions and limitations of the program. In its sole discretion, our board of directors could choose to amend, suspend or terminate the program upon 30 days’ notice without stockholder approval. Except for redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility, the purchase price for shares redeemed under the redemption program will be as follows.
        Prior to the time we establish an NAV per share of our common stock, the price at which we will redeem the shares is as follows:
For those shares held by the redeeming stockholder for at least one year, 92.5% of the price paid to acquire the shares from us; and
For those shares held by the redeeming stockholder for at least two years, 95.0% of the price paid to acquire the shares from us.
        Notwithstanding the foregoing, until we establish an NAV per share, shares received as a stock dividend will be redeemed at a purchase price of $0.00. In addition, the purchase price per share will be adjusted for any stock combinations, splits, recapitalizations and the like with respect to the shares of common stock and reduced by the aggregate amount of net sale or refinance proceeds per share, if any, distributed to the redeeming stockholder prior to the redemption date.
        After we establish an NAV per share of our common stock, the price at which we will redeem the shares is as follows:
For those shares held by the redeeming stockholder for at least one year, 92.5% of our most recent applicable NAV per share as of the applicable redemption date;
For those shares held by the redeeming stockholder for at least two years, 95.0% of our most recent applicable NAV per share as of the applicable redemption date;
For those shares held by the redeeming stockholder for at least three years, 97.5% of our most recent applicable NAV per share as of the applicable redemption date; and
For those shares held by the redeeming stockholder for at least four years, 100% of our most recent applicable NAV per share as of the applicable redemption date.

 

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        For purposes of determining the time period a redeeming stockholder has held each share, the time period begins as of the date the stockholder acquired the shares; provided, that shares purchased by the redeeming stockholder pursuant to our distribution reinvestment plan will be deemed to have been acquired on the same date as the initial share to which the distribution reinvestment plan shares relate. The date of the share’s original issuance by us is not determinative. In addition, as described above, the shares owned by a stockholder may be redeemed at different prices depending on how long the stockholder has held each share submitted for redemption. After we establish an NAV per share, shares received as a stock dividend will be redeemed at a purchase price to be determined based on the number of years the shares have been held as described above. We expect to establish an NAV per share no later than June 30, 2018.
        We intend to redeem shares quarterly under the program. We will not redeem in excess of 5% of the weighted-average number of Class A, Class T, Class R and Class I shares outstanding during the 12-month period immediately prior to the effective date of redemption. Generally, the cash available for redemption will be limited to proceeds from our distribution reinvestment plan plus, if we had positive operating cash flow from the previous fiscal year, 1% of all operating cash flow from the previous fiscal year. These limitations apply to all redemptions, including redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility. You will have no right to request redemption of your shares if the shares are listed for trading on a national securities exchange. For a complete discussion of our share redemption program, please see “Description of Shares—Share Redemption Program.”

 
 

Will you register as an investment company?
        Neither we nor any of our subsidiaries intend to register as investment companies under the Investment Company Act of 1940, as amended (the “Investment Company Act”). If we or our subsidiaries were obligated to register as investment companies, we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things:
limitations on capital structure;
restrictions on specified investments;
prohibitions on transactions with affiliates; and
compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.
      Under the relevant provisions of Section 3(a)(1) of the Investment Company Act, an investment company is any issuer that:
pursuant to Section 3(a)(1)(A), is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities (the “primarily engaged test”); or
pursuant to Section 3(a)(1)(C), is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis (the “40% test”). “Investment securities” excludes U.S. government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) (relating to private investment companies).
       We believe that we and our Operating Partnership will not be required to register as an investment company under either of the tests above. With respect to the 40% test, most of the entities through which we and our Operating Partnership will own our assets will be majority-owned subsidiaries that will not themselves be investment companies and will not be relying on the exceptions from the definition of investment company under Section 3(c)(1) or Section 3(c)(7).

 

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        With respect to the primarily engaged test, we and our Operating Partnership will be holding companies and do not intend to invest or trade in securities ourselves. Rather, through the majority-owned subsidiaries of our Operating Partnership, we and our Operating Partnership will be primarily engaged in the non-investment company businesses of these subsidiaries, namely the business of purchasing or otherwise acquiring real estate and real estate-related assets.
         If any of the subsidiaries of our Operating Partnership fail to meet the 40% test, we believe they will usually, if not always, be able to rely on Section 3(c)(5)(C) of the Investment Company Act for an exception from the definition of an investment company. (Otherwise, they should be able to rely on the exceptions for private investment companies pursuant to Section 3(c)(1) and Section 3(c)(7) of the Investment Company Act.) As reflected in no-action letters, the SEC staff’s position on Section 3(c)(5)(C) generally requires that an issuer maintain at least 55% of its assets in “mortgages and other liens on and interests in real estate,” or qualifying assets; at least 80% of its assets in qualifying assets plus real estate-related assets; and no more than 20% of the value of its assets in other than qualifying assets and real estate-related assets, which we refer to as miscellaneous assets. To constitute a qualifying asset under this 55% requirement, a real estate interest must meet various criteria based on no-action letters. We expect that any of the subsidiaries of our Operating Partnership relying on Section 3(c)(5)(C) will invest at least 55% of its assets in qualifying assets, and approximately an additional 25% of its assets in other types of real estate-related assets. If any subsidiary relies on Section 3(c)(5)(C), we expect to rely on guidance published by the SEC staff or on our analyses of guidance published with respect to types of assets to determine which assets are qualifying real estate assets and real estate-related assets.
        To maintain compliance with the Investment Company Act, our subsidiaries may be unable to sell assets we would otherwise want them to sell and may need to sell assets we would otherwise wish them to retain. In addition, our subsidiaries may have to acquire additional assets that they might not otherwise have acquired or may have to forego opportunities to make investments that we would otherwise want them to make and would be important to our investment strategy. Moreover, the SEC or its staff may issue interpretations with respect to various types of assets that are contrary to our views and current SEC staff interpretations are subject to change, which increases the risk of non-compliance and the risk that we may be forced to make adverse changes to our portfolio. In this regard, we note that in 2011 the SEC issued a concept release indicating that the SEC and its staff were reviewing interpretive issues relating to Section 3(c)(5)(C) and soliciting views on the application of Section 3(c)(5)(C) to companies engaged in the business of acquiring mortgages and mortgage-related instruments. If we were required to register as an investment company but failed to do so, we would be prohibited from engaging in our business and criminal and civil actions could be brought against us. In addition, our contracts would be unenforceable unless a court required enforcement and a court could appoint a receiver to take control of us and liquidate our business. For more information related to compliance with the Investment Company Act, see “Investment Objectives and Policies—Investment Limitations Under the Investment Company Act of 1940.”

 
 

When will the company seek to provide its stockholders with a liquidity event?
        We may provide our stockholders with a liquidity event or events by some combination of the following: (i) liquidating all, or substantially all, of our assets and distributing the net proceeds to our stockholders; or (ii) listing our shares for trading on an exchange. In addition to such liquidity events, our board may also consider pursuing various liquidity strategies, including adopting a more expansive share redemption program (subject to the applicable federal securities laws) or engaging in a tender offer, to accommodate those stockholders who desire to liquidate their investment in us. Our board anticipates evaluating such events within three to six years after we terminate this primary offering, subject to then prevailing market conditions. We are not, however, required to provide our stockholders a liquidity event by a specified date or at all.

 
 
 
 

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        If we do not begin the process of liquidating our assets or listing our shares within six years of the termination of this primary offering and a majority of our board of directors and a majority of our independent directors have not voted to defer the meeting beyond the sixth anniversary of the termination of this offering, upon the request of stockholders holding 10% or more of our outstanding shares of common stock, our charter requires that we hold a stockholder meeting to vote on a proposal for our orderly liquidation. Prior to any stockholder meeting, our directors would evaluate whether to recommend the proposal to our stockholders and, if they so determine, would recommend the proposal and their reasons for doing so. The proposal would include information regarding appraisals of our portfolio. If our stockholders did not approve the proposal, we would obtain new appraisals and resubmit the proposal to our stockholders up to once every two years upon the written request of stockholders owning 10% of our outstanding common stock.
        Once we commence liquidation, we would begin an orderly sale of our properties and other assets. The precise timing of such sales will depend on the prevailing real estate and financial markets, the economic conditions in the areas where our properties are located and the federal income tax consequences to our stockholders. In making the decision to liquidate, apply for listing of our shares or pursue other liquidity strategies, our directors will try to determine which option will result in greater value for stockholders as well as satisfy the liquidity needs of our stockholders.

 
 

Will I be notified of how my investment is doing?
        Yes, we will provide you with periodic updates on the performance of your investment in us, including:
detailed quarterly dividend reports;
an annual report;
supplements to the prospectus, provided periodically; and
three quarterly financial reports.

        We will provide this information to you via one or more of the following methods, in our discretion and with your consent, if necessary:
U.S. mail or other courier;
facsimile;
electronic delivery; or
posting on our web site at www.resourcereit3.com.

        To assist FINRA members and their associated persons that participate in this offering in meeting their customer account statement reporting obligations pursuant to applicable FINRA and NASD Conduct Rules, we disclose in each annual report distributed to stockholders a per share estimated value of our shares, the method by which it was developed, and the date of the estimated valuation.
        Initially, we will report the net investment amount of our Class A, Class T, Class R and Class I shares, which will be based on the “amount available for investment/net investment amount” percentage shown in our estimated use of proceeds table. This estimated per share value will be accompanied by any disclosures required under the FINRA and NASD Conduct Rules. No later than June 30, 2018, we will provide an NAV per Class A, Class T, Class R and Class I share. In determining our NAV per share, we intend to follow the prescribed methodologies of Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the Investment Program Associate (“IPA”) in April 2013 (the “IPA Guidelines”).

 
 
 
 

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        As such, our NAV per share will be based upon the fair value of our assets less our liabilities under market conditions existing at the time of the valuation. We will obtain independent third-party appraisals for our real estate investments and certain real-estate related investments as appropriate. With respect to our cash, real estate loans receivable, other assets, mortgage debt and other liabilities, we will obtain valuations from our advisor as we expect these will equal GAAP fair value as reported in our publicly filed financial statements. Theses valuations will be reviewed by the independent third-party engaged to assist in the determination of our NAV per share. We will value our other assets in a manner we deem most suitable under the circumstances consistent with the IPA Guidelines. Once we announce an NAV per share, we generally expect to update the NAV per share every 12 months.
        Our conflicts committee, composed of all our independent directors, will be responsible for oversight of the valuation process, including approving the engagement of one or more third-party valuation experts (as determined by the board of directors) to assist in determining our NAV per share and to provide appraisals of our real estate assets. The appraiser selected will be a member of the Appraisal Institute with an MAI (Member of the Appraisal Institute) designation. After the initial appraisals, appraisals will be done annually. All appraisals will be made available to participating broker-dealers conducting due diligence on our products who have signed confidentiality agreements.
        Until we report an NAV, the initial reported value based on the offering prices as adjusted for selling commissions, the dealer manager fee and our organization and offering expenses will likely differ from the price that a stockholder would receive in the near term upon a resale of his or her shares or upon a liquidation of our company because (i) there is no public trading market for the shares at this time; (ii) the estimated value will not reflect, and will not be derived from, the fair market value of our assets, nor will it represent the amount of net proceeds that would result from an immediate liquidation of our assets; (iii) the estimated value will not take into account how market fluctuations affect the value of our investments; and (iv) the estimated value will not take into account how developments related to individual assets may increase or decrease the value of our portfolio.

 
 

When will I get my detailed tax information?
        Your Form 1099-DIV tax information, if required, will be mailed by January 31 of each year.

 
 

Who can help answer my questions about the offering?
        If you have more questions about the offering, or if you would like additional copies of this prospectus, you should contact your registered representative or contact:
Resource Securities, Inc.
1845 Walnut Street, 18th Floor
Philadelphia, Pennsylvania 19103
Telephone: (866) 469-0129
Fax: (866) 545-7693

 
 
 
 



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RISK FACTORS

An investment in our common stock involves various risks and uncertainties. You should carefully consider the following risk factors in conjunction with the other information contained in this prospectus before purchasing our common stock. The risks discussed in this prospectus could adversely affect our business, operating results, prospects and financial condition. This could cause the value of our common stock to decline and could cause you to lose all or part of your investment. The risks and uncertainties described below are not the only ones we face but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business.


Risks Related to an Investment in Us
There is no public trading market for your shares; therefore, it will be difficult for you to sell your shares.
There is no current public market for our shares and our charter does not require our directors to seek stockholder approval to liquidate our assets by a specified date nor list our shares on an exchange by a specified date. Our charter limits your ability to transfer or sell your shares unless the prospective stockholder meets the applicable suitability and minimum purchase standards. Our charter also prohibits the ownership of more than 9.8% of our stock, unless exempted by our board of directors, which may inhibit large investors from desiring to purchase your shares. Moreover, our share redemption program includes numerous restrictions that limit your ability to sell your shares to us, and our board of directors may amend, suspend or terminate our share redemption program upon 30 days’ notice without stockholder approval. We describe these restrictions in detail under “Description of Shares—Share Redemption Program.” Therefore, it will be difficult for you to sell your shares promptly or at all. If you are able to sell your shares, you would likely have to sell them at a substantial discount to their public offering price. It is also likely that your shares would not be accepted as the primary collateral for a loan. You should purchase our shares only as a long-term investment because of the illiquid nature of the shares.
If we are unable to find suitable investments, we may not be able to achieve our investment objectives or pay distributions.
Our ability to achieve our investment objectives and to pay distributions depends upon the performance of our advisor in the acquisition of our investments, including the determination of any financing arrangements. Competition from competing entities may reduce the number of suitable investment opportunities offered to us or increase the bargaining power of property owners seeking to sell. Additionally, disruptions and dislocations in the credit markets have materially impacted the cost and availability of debt to finance real estate acquisitions, which is a key component of our acquisition strategy. This lack of available debt could result in a further reduction of suitable investment opportunities and create a competitive advantage to other entities that have greater financial resources than we do. We are also subject to competition in seeking to acquire real estate-related debt investments. We can give no assurance that our advisor will be successful in obtaining suitable investments on financially attractive terms or that, if our advisor makes investments on our behalf, our objectives will be achieved. If we, through our advisor, are unable to find suitable investments promptly upon receipt of our offering proceeds, we will hold the proceeds from this offering in an interest-bearing account or invest the proceeds in short-term assets. If we would continue to be unsuccessful in locating suitable investments, we may ultimately decide to liquidate. In the event we are unable to timely locate suitable investments, we may be unable or limited in our ability to pay distributions and we may not be able to meet our investment objectives.
Disruptions in the financial markets and sluggish economic conditions nationally and globally could adversely impact our ability to implement our business strategy and generate returns to you.
Our business and operations will be dependent on the commercial real estate finance industry generally,

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which in turn is dependent upon broad economic conditions in the United States and abroad. Despite some recent improvements in the U.S. economy, ongoing economic weakness in Europe and Asia may eventually hinder future growth in the U.S. economy. Further, continued political instability in the European Union, as well as open hostilities in certain Middle Eastern countries and along the Russian-Ukrainian border could negatively impact the U.S. economy should those conflicts deepen.
The single family residential real estate markets have been experiencing an uneven recovery in the U.S. Insufficient equity and ongoing uncertainty about the economy’s strength have forced potential sellers to stay in their homes. A survey of the National Association of Home Builders showed homeowners on average staying in their homes for 13.3 years instead of the typical seven years, causing a relatively low level of housing supply in the single family residential market. While housing starts in 2016 hit their highest level in nine years since 2017, construction levels are still at recessionary levels. Factors holding back builders range from a shortage of labor, difficulty finding land in desirable locations, a challenging construction lending environment, and regulatory barriers that drive up the cost of a new home beyond what most consumers can afford. A 2016 study co-authored by Wharton and USC highlighted that consistently having insufficient wealth for a substantial down payment is found to have a larger negative effect on the propensity to own rather than income. Young households and minority households are particularly subject to the effect of borrowing constraints, consistent with the lower homeownership rate observed among these groups. In addition to income and wealth, a third constraint, credit quality is also found to have a significant and negative effect on homeownership.
Central bank interventions in the banking system and the persistence of a highly expansionary monetary policy by a number of government entities have introduced additional complexity and uncertainty to the markets. These conditions, which are expected to continue and, combined with a challenging macro-economic environment and numerous regions of political instability, may interfere with the implementation of our business strategy and/or force us to modify it.
We intend to acquire a diversified portfolio of real estate and real estate-related assets. Worsening economic conditions could greatly increase the risks of these investments. For instance, the sluggish employment market could contribute to increased rent delinquencies at our rental properties. Further, declining real estate values could significantly increase the likelihood that we will incur losses on our loans in the event of a default because the value of our collateral may be insufficient to cover our cost on the loan. In addition, revenues on the properties and other assets underlying any loan investments we may make could decrease, making it more difficult for borrowers to meet their payment obligations to us. More generally, the risks arising from a deterioration in the financial markets and economic conditions are applicable to all of the investments we may make, including commercial real estate-related debt.
A protracted economic downturn could have a negative impact on our portfolio. Borrowers often use increases in the value of their existing properties to support the purchase of or investment in additional properties. Although our value-add investment strategies do not rely on precisely the same concepts, if real property or other real estate-related asset values continue to decline after we acquire them, we may have a difficult time making new acquisitions or generating returns on your investment.
We expect to finance some of our investments in part with debt. If access to the credit markets is limited, we may not be able to obtain debt financing on attractive terms. As such, we may be forced to use a greater proportion of our offering proceeds to finance our acquisitions, reducing the number of investments we would otherwise make. If the debt market environment is unfavorable, we may modify our investment strategy in order to optimize our portfolio performance. Our options would include limiting or eliminating the use of debt and focusing on those investments that do not require the use of leverage to meet our portfolio goals.
All of the factors described above could adversely impact our ability to implement our business strategy and make distributions to our investors and could decrease the value of an investment in us.


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If we raise substantial offering proceeds in a short period of time, we may not be able to invest all of the net offering proceeds promptly, which may cause our distributions and your investment returns to be lower than they otherwise would.
We could suffer from delays in locating suitable investments. The more money we raise in this offering, the more difficult it will be to invest the net offering proceeds promptly. Therefore, the large size of this offering increases the risk of delays in investing our net offering proceeds. Our reliance on our advisor to locate suitable investments for us at times when the management of our advisor is simultaneously seeking to locate suitable investments for other affiliated programs could also delay the investment of the proceeds of this offering. Delays we encounter in the selection, acquisition and development of income-producing properties would likely limit our ability to pay distributions to our stockholders and reduce our stockholders’ overall returns.
Because this is a blind-pool offering, you will not have the opportunity to evaluate our investments before we make them, which makes your investment more speculative.
We will seek to invest substantially all of the offering proceeds available for investment from the primary offering, after the payment of fees and expenses, in the acquisition of or investment in interests in real estate properties and real estate-related assets. However, because you will be unable to evaluate the economic merit of specific real estate projects before we invest in them, you will have to rely entirely on the ability of our advisor and board of directors to select suitable and successful investment opportunities and to implement policies regarding tenant or mortgagor creditworthiness. These factors increase the risk that your investment may not generate returns comparable to our competitors.
If we do not raise substantial funds, we will be limited in the number and type of investments we may make, and the value of your investment in us will fluctuate with the performance of the specific properties we acquire.
This offering is being made on a “best efforts” basis and no individual or firm has agreed to purchase any of our stock. The amount of proceeds we raise in this offering may be substantially less than the amount we would need to achieve a broadly diversified property portfolio. If we are unable to raise substantial offering proceeds, we will make fewer investments resulting in less diversification in terms of the type, location, number and size of investments that we make. In that case, the likelihood that any single asset’s performance would materially reduce our overall profitability will increase. We are not limited in the number or size of our investments or the percentage of net proceeds we may dedicate to a single investment. In addition, any inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, and our net income and the distributions we make to stockholders would be reduced.
We have a limited operating history, which makes our future performance difficult to predict.
We were incorporated in the State of Maryland on July 15, 2015. As of the date of this prospectus, we owned only one apartment property located in Alexandria, Virginia. You should not assume that our performance will be similar to the past performance of other real estate investment programs sponsored by affiliates of our advisor. Our lack of an operating history increases the risk and uncertainty you face in making an investment in our shares.
Because we are dependent upon our advisor and its affiliates to conduct our operations, any adverse changes in the financial health of our advisor or its affiliates or our relationship with them could hinder our operating performance and the return on our stockholders’ investment.
We are dependent on our advisor to manage our operations and our portfolio of real estate assets. Our advisor has no prior operating history and it will depend largely upon the fees and other compensation that it will receive from us in connection with the purchase, management and sale of assets to conduct its operations. Any adverse changes in the financial condition of our advisor or our relationship with our advisor could hinder its ability to successfully manage our operations and our portfolio of investments.

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Our ability to achieve our investment objectives and to conduct our operations is dependent upon the performance of our advisor, which is a subsidiary of our sponsor and its parent company, Resource America. Our sponsor’s business is sensitive to trends in the general economy, as well as the commercial real estate and credit markets. To the extent that any decline in our sponsor’s revenues and operating results impacts the performance of our advisor, our results of operations, and financial condition could also suffer.
The loss of or the inability to hire additional or replacement key real estate and debt finance professionals at Resource Real Estate could delay or hinder implementation of our investment strategies, which could limit our ability to make distributions and decrease the value of your investment.
Our success depends to a significant degree upon the contributions of Messrs. Feldman and Carleton, each of whom would be difficult to replace. Neither we nor our advisor have employment agreements with these individuals. Messrs. Feldman and Carleton may not remain associated with Resource Real Estate or its affiliates. If either of these persons were to cease their association with us, our operating results could suffer. We do not intend to maintain key person life insurance on any person.
We believe that our future success depends, in large part, upon Resource Real Estate and its affiliates’ ability to retain highly skilled managerial, operational and marketing professionals. Competition for such professionals is intense, and Resource Real Estate and its affiliates may be unsuccessful in attracting and retaining such skilled individuals. If Resource Real Estate loses or is unable to obtain the services of highly skilled professionals, our ability to implement our investment strategies could be delayed or hindered and the value of your investment may decline.
Our ability to implement our investment strategy is dependent, in part, upon the ability of Resource Securities, our dealer manager, to successfully conduct this offering, which makes an investment in us more speculative and may result in a partial or complete loss of your investment.
We have retained Resource Securities, Inc., an affiliate of our advisor, to conduct this offering. The success of this offering, and our ability to implement our business strategy, is dependent upon the ability of Resource Securities to build and maintain a network of broker-dealers to sell our shares to their clients. If Resource Securities is not successful in establishing, operating and managing this network of broker-dealers, our ability to raise proceeds through this offering will be limited and we may not have adequate capital to implement our investment strategy. If we are unsuccessful in implementing our investment strategy, you could lose all or a part of your investment.
If we make distributions from sources other than our cash flow from operations, we will have less funds available for the acquisition of properties, your overall return may be reduced and the value of a share of our common stock may be diluted.
Our organizational documents permit us to make distributions from any source. If our cash flow from operations is insufficient to cover our distributions, we expect to use the proceeds from this offering, the proceeds from the issuance of securities in the future or proceeds from borrowings to pay distributions. If we fund distributions from borrowings, sales of properties or the net proceeds from this offering, we will have less funds available for the acquisition of real estate and real estate-related assets resulting in potentially fewer investments, less diversification of our portfolio and a reduced overall return to you. In addition the value of your investment in shares of our common stock may be diluted because funds that would otherwise be available to make investments would be diverted to fund distributions. Further, to the extent distributions exceed cash flow from operations, a stockholder’s basis in our stock will be reduced and, to the extent distributions exceed a stockholder’s basis, the stockholder may recognize capital gain. There is no limit on the amount we can fund distributions from sources other than from cash flows from operations. Through the first quarter of 2017, all of our distributions were funded by proceeds from this offering.


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 The value of a share of our common stock may be diluted if we pay a stock dividend.
Our board of directors has declared and may continue to declare stock dividends. Although there are a number of factors that would be considered in connection with such a declaration, we expect such stock dividends are most likely to be declared if our board of directors believes that (i) our portfolio has appreciated in value from its aggregate acquisition cost or (ii) additional sales of common stock in our offering at the current offering price would dilute the value of a share to our then existing stockholders.
While our objective is to acquire assets that appreciate in value, there can be no assurance that assets we acquire will appreciate in value. If our board declares a stock dividend for investors who purchase our shares early in this offering, as compared with later investors, those investors who received the stock dividend will receive more shares for the same cash investment as a result of any stock dividends. Because they own more shares, upon a sale or liquidation of the company, these early investors will receive more sales proceeds or liquidating distributions relative to their invested capital compared to later investors. Furthermore, unless our assets appreciate in an amount sufficient to offset the dilutive effect of the prior stock dividends, the value per share for later investors purchasing our stock will be below the value per share of earlier investors.
Future interest rate increases in response to inflation may inhibit our ability to conduct our business and acquire or dispose of real property or real estate-related debt investments at attractive prices and your overall return may be reduced.
We will be exposed to inflation risk with respect to income from any long-term leases on real property and from related real estate debt investments as these may constitute a source of our cash flows from operations. High inflation may in the future tighten credit and increase prices. Further, if interest rates rise, such as during an inflationary period, the cost of acquisition capital to purchasers may also rise, which could adversely impact our ability to dispose of our assets at attractive sales prices. Should we be required to acquire, hold or dispose of our assets during a period of inflation, our overall return may be reduced.
Our rights and the rights of our stockholders to recover claims against our directors and officers are limited, which could reduce your and our recovery against them if they negligently cause us to incur losses.
Maryland law provides that a director has no liability in that capacity if he performs his duties in good faith, in a manner he reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our charter provides that our directors and officers will not be liable to us or our stockholders for monetary damages and that we will generally indemnify them for losses unless our directors are negligent or engage in misconduct or our independent directors are grossly negligent or engage in willful misconduct. As a result, you and we may have more limited rights against our directors and officers than might otherwise exist under common law, which could reduce our and your recovery from these persons if they act in a negligent manner. Our charter also requires us, to the maximum extent permitted by Maryland law, to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of the final disposition of a proceeding to any individual who is a present or former director or officer and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity or any individual who, while a director and at our request, serves or has served as a director, officer, partner, member, manager or trustee of another corporation, partnership, limited liability company, joint venture, trust, employment benefit plan or other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity. See “Management—Limited Liability and Indemnification of Directors, Officers, Employees and Other Agents” for a detailed discussion of the limited liability of our directors, officers, employees and other agents.
We may change our targeted investments, our policies and our operations without stockholder consent.
We expect to invest in apartment properties, which include student housing and senior residential, condominiums and debt or securities secured by apartment properties, but we may also invest a relatively small

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portion of our proceeds in other real estate asset classes throughout the United States. Also, except as described in this prospectus, we are not restricted as to the following:
 where we may acquire real estate investments in the United States;
the percentage of our proceeds that may be invested in properties as compared with the percentage of our proceeds that we may invest in real estate-related debt investments or mortgage loans, each of which may be leveraged and will have differing risks and profit potential; or
the percentage of our proceeds that may be invested in any one real estate investment (the greater the percentage of our subscription proceeds invested in one asset, the greater the potential adverse effect on us if that asset is unprofitable).
Though this is our current target portfolio, we may make adjustments to our target portfolio based on real estate market conditions and investment opportunities, and we may change our targeted investments and investment guidelines at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the investments described in this prospectus. A change in our targeted investments or investment guidelines could adversely affect the value of our common stock and our ability to make distributions to you.
Our board of directors determines our major policies, including our policies regarding financing, growth, debt capitalization, REIT qualification, NAV methodologies and distributions. Our board of directors may amend or revise these and other policies without a vote of the stockholders. Under Maryland General Corporation Law and our charter, our stockholders have a right to vote only on limited matters. Our board’s broad discretion in setting policies and our stockholders’ inability to exert control over those policies increases the uncertainty and risks you face as a stockholder.
Negative publicity regarding us, Resource Real Estate or Resource America may negatively impact our ability to attract and retain tenants at our properties, which may decrease the value of our investments and weaken our operating results.
Negative publicity with respect to our business or the business of Resource Real Estate or Resource America may make it more difficult for us to attract and retain tenants at the real estate properties we may acquire. Our inability to attract and retain tenants at our properties may adversely affect the income produced by our properties and, consequently, may decrease the value of our investments and weaken our operating results. Such events may decrease the amount of cash available to us to distribute to you and could negatively affect your return on investment.
Investing in mezzanine debt, B-Notes or other subordinated debt involves greater risks of loss than senior loans secured by the same properties.
We may invest in mezzanine debt, B-Notes and other subordinated debt. These types of investments carry a higher degree of risk of loss than senior secured debt investments, because in the event of default and foreclosure, holders of senior liens will be paid in full before subordinated investors and, depending on the value of the underlying collateral, there may not be sufficient assets to pay all or any part of amounts owed to subordinated investors. Moreover, mezzanine debt, B-Notes and other subordinated debt investments may have higher loan-to-valueratios than conventional senior lien financing, resulting in less equity in the collateral and increasing the risk of loss of principal. If a borrower defaults or declares bankruptcy, we may be subject to agreements restricting or eliminating our rights as a creditor, including rights to call a default, foreclose on collateral, accelerate maturity or control decisions made in bankruptcy proceedings. In addition, the prices of lower credit quality securities are generally less sensitive to interest rate changes than more highly rated investments, but more sensitive to economic downturns or individual issuer developments. An economic downturn, for example, could cause a decline in the price of lower credit quality securities because the ability of obligors of instruments underlying the securities to make principal and interest payments may be impaired.

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We may experience adverse business developments or conditions similar to those affecting certain programs sponsored by our sponsor, which could limit our ability to make distributions and decrease the value of your investment.
Certain programs sponsored by our sponsor or its affiliates have experienced lower than originally expected cash flows from operations. The recession that occurred during 2008 through 2011 made it significantly more difficult for multifamily property owners, including the multifamily real estate funds sponsored by our sponsor or its affiliates, to increase rental rates to planned levels and maintain occupancy rates during periods of unprecedented nationwide job losses. During 2007, Resource Real Estate Investors, L.P. had negative cash flow from operations of $206,885. During 2007, and 2008, Resource Real Estate Investors, L.P. utilized $541,776, and $148,246, respectively, from reserves to supplement cash flow from operations. During 2007 and 2008, Resource Real Estate Investors II, L.P. utilized $250,704 and $207,219, respectively, from reserves to supplement cash flow from operations. For Resource Real Estate Investors III, L.P., cash flow deficiencies occurred at one of the fund properties due to third-party property management issues and the delay in receiving tax refunds from tax appeals on two fund properties located in Texas during 2007 and 2008. During 2007 and 2008, Resource Real Estate Investors III, L.P. utilized $723,343 and $157,192, respectively, from reserves to supplement cash flow from operations. For Resource Real Estate Investors IV, L.P., cash flow deficiencies occurred at some of the fund properties during 2008 and 2009. During 2008, Resource Real Estate Investors IV, L.P. utilized $11,370 from reserves to supplement cash flow from operations. For Resource Real Estate Investors V, L.P., cash flow deficiencies have occurred at some of the properties in the fund due to third party property management issues. For Resource Real Estate Investors 6, L.P., cash flow deficiencies occurred during 2008 through 2011 due to a drop in occupancy at one of the fund properties due to sizable layoffs at a large employer located across the street from that property. During 2008 through 2011, Resource Real Estate Investors 6, L.P. utilized $272,241, $1,996,456, $634,752 and $513,627, respectively, from reserves to supplement cash flow from operations. During 2009 through 2011, Resource Real Estate Investors 7, L.P. utilized $237,731, $545,099, and $257,892, respectively, from reserves to supplement cash flow from operations. Unforeseen circumstances described in Supplement No. 1 to this prospectus under “Prior Performance Summary—Adverse Business Developments or Conditions” have caused different programs to experience temporary cash flow deficiencies at various times. Similarly, unforeseen adverse business conditions may affect us and, as a result, your overall return may be reduced.
Risks Related to Conflicts of Interest
Because we rely on affiliates of Resource Real Estate for the provision of advisory, property management and dealer manager services, if Resource Real Estate and its affiliates are unable to meet their obligations we may be required to find alternative providers of these services, which could result in a significant and costly disruption of our business.
Resource Real Estate, through one or more of its subsidiaries, owns and controls our advisor and our property manager and is affiliated with our dealer manager. The operations of our advisor, our property manager and our dealer manager rely substantially on Resource Real Estate. In the event that Resource Real Estate and/or its affiliates become unable to meet their obligations as they become due, we might be required to find alternative service providers, which could result in a significant disruption of our business and would likely adversely affect the value of your investment in us. Further, given the non-solicitation agreement we have with our advisor, it would be difficult for us to utilize any current employees that provide services to us.
Resource REIT Advisor and its affiliates, including all of our executive officers, some of our directors and other key real estate professionals will face conflicts of interest caused by their compensation arrangements with us, which could result in actions that are not in the long-term best interests of our stockholders.
All of our executive officers and some of our directors are also officers, directors, managers or key professionals of our advisor, our dealer manager and other affiliated Resource Real Estate or C-III entities. Our advisor and its affiliates receive substantial fees from us. These fees could influence our advisor’s advice to us as

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well as the judgment of affiliates of our advisor. Among other matters, these compensation arrangements could affect their judgment with respect to:
the continuation, renewal or enforcement of our agreements with our advisor and its affiliates, including the advisory agreement, the dealer manager agreement and the management agreement;
offerings of equity by us, which entitle Resource Securities to dealer manager fees and stockholder and distribution servicing fees and will likely entitle our advisor to increased acquisition and asset management fees;
acquisitions of properties and investments in loans, which entitle our advisor to acquisition and asset management fees and, in the case of acquisitions or investments from other Resource Real Estate- or C-III-sponsored programs, might entitle affiliates of our advisor to disposition fees in connection with its services for the seller;
borrowings to acquire properties and other investments, which borrowings will increase the acquisition and asset management fees payable to our advisor;
whether and when we seek to list our common stock on a national securities exchange, which listing could entitle our advisor to the issuance of shares of our Class A common stock through the conversion of our convertible stock; and
whether and when we seek to sell the company or its assets, which sale could entitle our advisor to disposition fees and to the issuance of shares of our Class A common stock through the conversion of our convertible stock and terminate the asset management fee.
The fees our advisor receives in connection with the acquisition and management of assets are initially based on the cost of the investment, and not based on the quality of the investment or the quality of the services rendered to us. Additionally, the cost of assets on which the asset management fee is initially based is inclusive of acquisition fees and expenses paid in connection with the acquisition of assets. This may influence our advisor to recommend riskier transactions to us and to recommend acquisitions at greater purchase prices.
Resource REIT Advisor will face conflicts of interest relating to the acquisition of assets and such conflicts may not be resolved in our favor, which could limit our ability to make distributions and reduce your overall investment return.
We rely on our sponsor, C-III and other key real estate professionals at our advisor to identify suitable investment opportunities for us. The executive officers and several of the other key real estate professionals at our advisor are also the key real estate professionals at the advisors to other Resource Real Estate-sponsored programs and joint ventures or programs sponsored by C-III (“Affiliated Programs”). As such, Affiliated Programs rely on many of the same real estate professionals as will future programs. Many investment opportunities that are suitable for us may also be suitable for other Affiliated Programs. When these real estate professionals direct an investment opportunity to any Affiliated Program, they, in their sole discretion, will offer the opportunity to the program or joint venture for which the investment opportunity is most suitable based on the investment objectives, portfolio and criteria of each program or joint venture and subject to conflict resolution procedures if an investment is suitable for more than one program. For so long as we are externally advised, it shall not be a proper purpose of the corporation for us to purchase real estate or any significant asset related to real estate unless our advisor has recommended the investment to us. Thus, the real estate professionals of Resource REIT Advisor could direct attractive investment opportunities to other entities. Such events could result in us investing in properties that provide less attractive returns, which may reduce our ability to make distributions to you. For a detailed description of the conflicts of interest that our advisor will face, see generally “Conflicts of Interest” and “Conflicts of Interest—Certain Conflict Resolution Measures.”


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Resource REIT Advisor will face conflicts of interest relating to joint ventures that we may form with affiliates of Resource REIT Advisor or C-III, which conflicts could result in a disproportionate benefit to the other venture partners at our expense.
If approved by our conflicts committee, we may enter into joint venture agreements with other Resource Real Estate- or C-III-sponsored programs or affiliated entities for the acquisition, development or improvement of properties or other investments. Our advisor and the advisors to the other Affiliated Programs have the many of same executive officers and key employees; and these persons will face conflicts of interest in determining which Affiliated Program or investor should enter into any particular joint venture agreement. These persons may also face a conflict in structuring the terms of the relationship between our interests and the interests of the Affiliated Program and in managing the joint venture. Any joint venture agreement or transaction between us and an Affiliated Program will not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers. The Affiliated Program may have economic or business interests or goals that are or may become inconsistent with our business interests or goals. These co-venturers may thus be either to our and your benefit or detriment.
Resource REIT Advisor, the real estate professionals assembled by our advisor, their affiliates and our officers will face competing demands relating to their time, and this may cause our operations and your investment to suffer.
We rely on Resource REIT Advisor, the real estate professionals our advisor has assembled and their affiliates and officers for the day-to-day operation of our business. Resource REIT Advisor, its real estate professionals and affiliates, including our officers and employees, have interests in other Affiliated Programs and engage in other business activities. As a result of their interests in other Affiliated Programs and the fact that they have engaged in and they will continue to engage in other business activities, they will face conflicts of interest in allocating their time among us, Resource REIT Advisor and other Affiliated Programs and other business activities in which they are involved. Should our advisor breach its fiduciary duty to us by inappropriately devoting insufficient time or resources to our business, the returns on our investments may suffer.
Our executive officers and some of our directors face conflicts of interest related to their positions in Resource REIT Advisor and its affiliates, including our dealer manager, which could hinder our ability to implement our business strategy and to generate returns to you.
Our executive officers and some of our directors are also executive officers, directors, managers and key professionals of our advisor, our dealer manager and other affiliated Resource Real Estate entities. Their loyalties to these other entities could result in actions or inactions that may conflict with their fiduciary duties to us and are detrimental to our business, which could harm the implementation of our business strategy and our investment and leasing opportunities. If we do not successfully implement our business strategy, we may be unable to generate the cash needed to make distributions to you and to maintain or increase the value of our assets.
Resource REIT Advisor may assign its obligations under the advisory agreement to its affiliates, who may not have the same expertise or provide the same level of service as our advisor.
Under the advisory agreement, our advisor may assign its responsibilities under the agreement to any of its affiliates with the approval of the conflicts committee. If there is such an assignment or transfer, the assignee may not have comparable operational expertise, have sufficient personnel, or manage our company as well as our advisor.
Resource Apartment Manager III, LLC may subcontract some of its property management duties to affiliates which manage properties for other programs sponsored by our sponsor and for third party property owners which could cause us to face competition for tenants.
We rely on our property manager, Resource Apartment Manager III, LLC, to manage our multifamily rental

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properties. Our property manager may subcontract some of its property management duties to Resource Residential. Resource Residential is a wholly owned subsidiary of USRG, which is an affiliate of our sponsor. Resource Residential and USRG manage multifamily rental properties for other programs sponsored by our sponsor and USRG manages multifamily rental properties for third party property owners which may compete with us. If Resource Residential or USRG manages a property for us in the same geographic area where it also manages a property for another program sponsored by our sponsor or for a third party, we may compete with such other properties for tenants.
Risks Related to This Offering and Our Corporate Structure
Our charter limits the number of shares a person may own, which may discourage a takeover that could otherwise result in a premium price to our stockholders.
Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. To help us comply with the REIT ownership requirements of the Internal Revenue Code, our charter prohibits a person from directly or constructively owning more than 9.8% of our outstanding shares, unless exempted by our board of directors. This restriction may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all, or substantially all, of our assets) that might provide a premium price for holders of our common stock.
Our charter permits our board of directors to issue stock with terms that may subordinate the rights of our common stockholders or discourage a third party from acquiring us in a manner that could result in a premium price to our stockholders.
Our board of directors may increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we have authority to issue and classify or reclassify any unissued common stock or preferred stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms or conditions of redemption of any such stock. Our board of directors could authorize the issuance of preferred stock with terms and conditions that could have priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Such preferred stock could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all, or substantially all, of our assets) that might provide a premium price to holders of our common stock.
Your investment return may be reduced if we are required to register as an investment company under the Investment Company Act; if we or our subsidiaries become an unregistered investment company, we could not continue our business.
Neither we nor any of our subsidiaries intend to register as investment companies under the Investment Company Act. If we or our subsidiaries were obligated to register as investment companies, we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things:
limitations on capital structure;
restrictions on specified investments;
prohibitions on transactions with affiliates; and
compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.
     Under the relevant provisions of Section 3(a)(1) of the Investment Company Act, an investment company is

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any issuer that:
pursuant to Section 3(a)(1)(A), is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities (the “primarily engaged test”); or
pursuant to Section 3(a)(1)(C), is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis (the “40% test”). “Investment securities” excludes U.S. government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) (relating to private investment companies).
We believe that we and our Operating Partnership will not be required to register as an investment company under either of the tests above. With respect to the 40% test, most of the entities through which we and our Operating Partnership will own our assets will be majority-owned subsidiaries that will not themselves be investment companies and will not be relying on the exceptions from the definition of investment company under Section 3(c)(1) or Section 3(c)(7).
With respect to the primarily engaged test, we and our Operating Partnership will be holding companies and do not intend to invest or trade in securities ourselves. Rather, through the majority-owned subsidiaries of our Operating Partnership, we and our Operating Partnership will be primarily engaged in the non-investment company businesses of these subsidiaries, namely the business of purchasing or otherwise acquiring real estate and real estate-related assets.
If any of the subsidiaries of our Operating Partnership fail to meet the 40% test, we believe they will usually, if not always, be able to rely on Section 3(c)(5)(C) of the Investment Company Act for an exception from the definition of an investment company. (Otherwise, they should be able to rely on the exceptions for private investment companies pursuant to Section 3(c)(1) and Section 3(c)(7) of the Investment Company Act.) As reflected in no-action letters, the SEC staff’s position on Section 3(c)(5)(C) generally requires that an issuer maintain at least 55% of its assets in “mortgages and other liens on and interests in real estate,” or qualifying assets; at least 80% of its assets in qualifying assets plus real estate-related assets; and no more than 20% of the value of its assets in other than qualifying assets and real estate-related assets, which we refer to as miscellaneous assets. To constitute a qualifying asset under this 55% requirement, a real estate interest must meet various criteria based on no-action letters. We expect that any of the subsidiaries of our Operating Partnership relying on Section 3(c)(5)(C) will invest at least 55% of its assets in qualifying assets, and approximately an additional 25% of its assets in other types of real estate-related assets. If any subsidiary relies on Section 3(c)(5)(C) we expect to rely on guidance published by the SEC staff or on our analyses of guidance published with respect to types of assets to determine which assets are qualifying real estate assets and real estate-related assets.
To maintain compliance with the Investment Company Act, our subsidiaries may be unable to sell assets we would otherwise want them to sell and may need to sell assets we would otherwise wish them to retain. In addition, our subsidiaries may have to acquire additional assets that they might not otherwise have acquired or may have to forego opportunities to make investments that we would otherwise want them to make and would be important to our investment strategy. Moreover, the SEC or its staff may issue interpretations with respect to various types of assets that are contrary to our views and current SEC staff interpretations are subject to change, which increases the risk of non-compliance and the risk that we may be forced to make adverse changes to our portfolio. In this regard, we note that in 2011 the SEC issued a concept release indicating that the SEC and its staff were reviewing interpretive issues relating to Section 3(c)(5)(C) and soliciting views on the application of Section 3(c)(5)(C) to companies engaged in the business of acquiring mortgages and mortgage-related instruments. If we were required to register as an investment company but failed to do so, we would be prohibited from engaging in our business and criminal and civil actions could be brought against us. In addition, our contracts would be unenforceable unless a court required enforcement and a court could appoint a receiver to take control of us and liquidate our business. For more information related to compliance with the Investment Company Act, see “Investment Objectives and Policies

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—Investment Limitations Under the Investment Company Act of 1940.”
Rapid changes in the values of our assets may make it more difficult for us to maintain our qualification as a REIT or our exception from the definition of an investment company under the Investment Company Act.
If the market value or income potential of our qualifying real estate assets changes as compared to the market value or income potential of our non-qualifying assets, or if the market value or income potential of our assets that are considered “real estate-related assets” under the Investment Company Act or REIT qualification tests changes as compared to the market value or income potential of our assets that are not considered “real estate-related assets” under the Investment Company Act or REIT qualification tests, whether as a result of increased interest rates, prepayment rates or other factors, we may need to modify our investment portfolio in order to maintain our REIT qualification or exception from the definition of an investment company. If the decline in asset values or income occurs quickly, this may be especially difficult, if not impossible, to accomplish. This difficulty may be exacerbated by the illiquid nature of many of the assets that we may own. We may have to make investment decisions that we otherwise would not make absent REIT and Investment Company Act considerations.
You may not be able to sell your shares under our share redemption program and, if you are able to sell your shares under the program, you may not be able to recover the amount of your investment in our shares.
Our board of directors has approved the share redemption program, but may amend, suspend or terminate our share redemption program upon 30 days’ notice without stockholder approval. Our board of directors may reject any request for redemption of shares. Further, there are many limitations on your ability to sell your shares pursuant to the share redemption program. Any stockholder requesting repurchase of their shares pursuant to our share redemption program will be required to certify to us that such stockholder acquired the shares by either (1) a purchase directly from us or (2) a transfer from the original investor by way of (i) a bona fide gift not for value to, or for the benefit of, a member of the stockholder’s immediate or extended family, (ii) a transfer to a custodian, trustee or other fiduciary for the account of the stockholder or his or her immediate or extended family in connection with an estate planning transaction, including by bequest or inheritance upon death or (iii) operation of law.
In addition, our share redemption program contains other restrictions and limitations. We expect to redeem shares on a quarterly basis. Shares will be redeemed pro rata among all stockholders requesting redemption in such quarter, with a priority given to redemptions upon the death, qualifying disability, or confinement to a long-term care facility of a stockholder; next, to stockholders who demonstrate, in the discretion of our board of directors, another involuntary, exigent circumstance, such as bankruptcy; next, to stockholders subject to a mandatory distribution requirement under such stockholder’s IRA; and, finally, to other redemption requests. We will generally redeem shares on a “first in, first out” basis, subject to the following exceptions. For stockholders that own more than one class of shares and/or that own Class T or Class R shares purchased in both the primary offering and pursuant to the distribution reinvestment plan, we will redeem their shares in the following order: all Class A, Class T, Class R and Class I shares purchased pursuant to the distribution reinvestment plan, Class A and Class I shares purchased in the primary offering, Class R shares purchased in the primary offering and Class T shares purchased in the primary offering. In the event that only a portion of your shares are redeemed, we will redeem the portion of your shares received as stock dividends that are attributable to the portion of your shares acquired through the primary offering or the distribution reinvestment plan that are redeemed at a given time.
You must hold your shares for at least one year prior to seeking redemption under the share redemption program, except that our board of directors may waive this one-year holding requirement with respect to redemptions sought upon the death, qualifying disability, or confinement to a long-term care facility of a stockholder or for other exigent circumstances, and that if a stockholder is redeeming all of his or her shares the board of directors may waive the one-year holding requirement with respect to shares purchased pursuant to the distribution reinvestment plan. We will not redeem more than 5% of the weighted average number of shares outstanding during the 12-month period immediately prior to the date of redemption. Our board of directors will

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 determine from time to time, and at least quarterly, whether we have sufficient excess cash to repurchase shares. Generally, the cash available for redemption will be limited to proceeds from our distribution reinvestment plan plus 1% of the operating cash flow from the previous fiscal year (to the extent positive).
Other than redemptions following the death, qualifying disability or confinement to a long-term care facility of a stockholder, the purchase price for such shares we repurchase under our redemption program will be as follows.
Prior to the time we establish an NAV per share of our common stock, the price at which we will redeem the shares is as follows:
For those shares held by the redeeming stockholder for at least one year, 92.5% of the price paid to acquire the shares from us; and
For those shares held by the redeeming stockholder for at least two years, 95.0% of the price paid to acquire the shares from us.
Notwithstanding the foregoing, until we establish an NAV per share, shares received as a stock dividend will be redeemed at a purchase price of $0.00. In addition, the purchase price per share will be adjusted for any stock combinations, splits, recapitalizations and the like with respect to the shares of common stock and reduced by the aggregate amount of net sale or refinance proceeds per share, if any, distributed to the redeeming stockholder prior to the redemption date.
After we establish an NAV per share of our common stock, the price at which we will redeem the shares is as follows:
For those shares held by the redeeming stockholder for at least one year, 92.5% of our most recent applicable NAV per share as of the applicable redemption date;
For those shares held by the redeeming stockholder for at least two years, 95.0% of our most recent applicable NAV per share as of the applicable redemption date;
For those shares held by the redeeming stockholder for at least three years, 97.5% of our most recent applicable NAV per share as of the applicable redemption date; and
For those shares held by the redeeming stockholder for at least four years, 100% of our most recent applicable NAV per share as of the applicable redemption date. 
Accordingly, you may receive less by selling your shares back to us than you would receive if our investments were sold for their estimated values and such proceeds were distributed in our liquidation.
Therefore, in making a decision to purchase shares of our common stock, you should not assume that you will be able to sell any of your shares back to us pursuant to our share redemption program. For a more detailed description of the share redemption program, see “Description of Shares—Share Redemption Program.”
The offering prices of our shares in this offering were not established in reliance on a valuation of our assets and liabilities; the actual value of an investment in us may be substantially less than the purchase price of our shares. Even when we begin to use other valuation methods to estimate the value of our shares, the value of our shares will be based upon a number of assumptions that may not be accurate or complete.
We set the $9.52 primary offering price of our Class R shares arbitrarily, and based on that price, set the $9.13 primary offering price of our Class I shares to account for differing selling commissions and dealer manager fees. The primary offering prices of our shares bear no relationship to our book or asset values or to any other established criteria for valuing shares. Because the offering prices are not based upon any independent valuation, the offering prices are likely to be higher than the proceeds that our stockholders would receive upon liquidation or a resale of their shares if they were to be listed on an exchange or actively traded by broker-dealers, especially in light

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of the upfront fees that we pay in connection with the issuance of our shares.
To assist FINRA members and their associated persons that participate in this offering, we intend to disclose in each annual report distributed to stockholders a per share estimated value of our shares, the method by which it was developed, and the date of the estimated valuation.
Initially, we will report the net investment amount of our shares, which will be based on the “amount available for investment/net investment amount” percentage shown in our estimated use of proceeds table. These initial estimated per share values will be $8.90 for Class A, Class T, Class R and Class I shares. These estimated per share values will be accompanied by any disclosures required under the FINRA and NASD Conduct Rules. No later than June 30, 2018, we will provide an NAV per share. Once we announce an NAV per share, we generally expect to update the NAV per share every 12 months.
Until we report an NAV, the initial reported values based on the offering price as adjusted for selling commission, the dealer manager fee, and additional underwriting compensation and our organization and offering expenses will likely differ from the price that a stockholder would receive in the near term upon a resale of his or her shares or upon a liquidation of our company because (1) there is no public trading market for the shares at this time; (2) the estimated value will not reflect, and will not be derived from, the fair market value of our assets, nor will it represent the amount of net proceeds that would result from an immediate liquidation of our assets; (3) the estimated value will not take into account how market fluctuations affect the value of our investments; and (4) the estimated value will not take into account how developments related to individual assets may increase or decrease the value of our portfolio.
The different purchase prices and net proceeds received from the sale of Class A and Class T shares in our distribution reinvestment plan will not be reflected in the respective estimated NAV per share of Class A and Class T shares.
We are offering Class A, Class T and Class R shares in our distribution reinvestment plan at per share purchase prices equal to 96% of the respective maximum primary offering per share purchase prices for each class of shares, which is $9.60 per Class A share, $9.09 per Class T share and $9.14 per Class R share. We are offering Class I shares in our distribution reinvestment plan at a purchase price of $8.90 per share there are no selling commissions, dealer manager fees or distribution and shareholder servicing fees paid on shares sold pursuant to the distribution reinvestment plan. As a result, the net proceeds to us from the sale of Class A and Class R shares in the distribution reinvestment plan will be greater than the net proceeds from the sale of Class T and Class I shares in the distribution reinvestment plan. Although we intend to adjust the distributions paid to Class T and Class R stockholders to account for the distribution and shareholder servicing fees, such adjustments may be made incorrectly by our advisor or our transfer agent. When we calculate an estimated NAV per share of our Class A, Class T, Class R and Class I common stock, we generally expect the per share NAV of each class to be equal, subject to any adjustments to the NAV of Class T and Class R shares for any of the company’s accrued distribution and shareholder servicing fees that have not already been allocated to the Class T and Class R shares through distribution adjustments as discussed above. Therefore, the greater amount of net proceeds received from Class A and Class R shares sold in the distribution reinvestment plan as compared to the amount of net proceeds received from Class T and Class I shares sold in the distribution reinvestment plan will not be reflected in the respective estimated per share NAVs of each share class.
The actual value of shares that we repurchase under our share redemption program may be substantially less than what we pay.
Under our share redemption program, shares may be repurchased at varying prices depending on (a) the number of years the shares have been held, (b) the purchase price paid for the shares, and (c) whether the redemptions are sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility. The maximum price that may be paid under the program is $10.00 per share, which was the offering price of our Class A shares of common stock in the primary portion of this offering (ignoring purchase price discounts for

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certain categories of purchasers). Although this purchase price represents the price at which most investors were willing to purchase Class A shares in this offering, this value is likely to differ from the price at which a stockholder could resell his or her shares for the reasons discussed in the risk factor above. Thus, when we repurchase shares of our Class A common stock at $10.00 per share, the actual value of the shares that we repurchase is likely to be less, and the repurchase is likely to be dilutive to our remaining stockholders. Even at lower repurchase prices, the actual value of the shares may be substantially less than what we pay and the repurchase may be dilutive to our remaining stockholders.
Because the dealer manager is one of our affiliates, you will not have the benefit of an independent review of us or the prospectus customarily undertaken in underwritten offerings; the absence of an independent due diligence review increases the risks and uncertainty you face as a stockholder.
The dealer manager, Resource Securities, is one of our affiliates and will not make an independent review of us or this offering. Accordingly, you do not have the benefit of an independent review of the terms of this offering. Further, the due diligence investigation of us by the dealer manager cannot be considered to be an independent review and, therefore, may not be as meaningful as a review conducted by an unaffiliated broker-dealer.
Your interest in us will be diluted if we issue additional shares, which could reduce the overall value of your investment.
Potential investors in this offering do not have preemptive rights to any shares we issue in the future. Our charter authorizes us to issue 1,010,050,000 shares of capital stock, of which 1,000,000,000 shares are designated as common stock, 50,000 shares are designated as convertible stock and 10,000,000 are designated as preferred stock. Our board of directors may increase the number of authorized shares of capital stock without stockholder approval. After you purchase shares in this offering, our board may elect to (1) sell additional equity securities in future public or private offerings; (2) issue shares of our common stock upon the exercise of the options we may grant to our independent directors or to employees of our advisor or property manager; (3) issue shares to our advisor, its successors or assigns, in payment of an outstanding obligation or as consideration in a related-party transaction; (4) issue shares of common stock upon the conversion of our convertible stock; or (5) issue shares of our common stock to sellers of properties we acquire in connection with an exchange of limited partnership interests of our Operating Partnership. To the extent we issue additional equity interests after you purchase shares in this offering, your percentage ownership interest in us will be diluted. Further, depending upon the terms of such transactions, most notably the offering price per share, which may be less than the price paid per share in any offering under this prospectus, and the value of our properties, existing stockholders may also experience a dilution in the book value of their investment in us.
Payment of substantial fees and expenses to Resource REIT Advisor and its affiliates will reduce cash available for investment and distribution and increases the risk that you will not be able to recover the amount of your investment in our shares.
Resource REIT Advisor and its affiliates will perform services for us in connection with the offer and sale of our shares, the selection and acquisition of our investments, the management and leasing of our properties and the administration of our other investments. We will pay them substantial fees for these services, which will result in immediate dilution to the value of your investment and will reduce the amount of cash available for investment or distribution to stockholders. Assuming we sell the maximum offering amount in this primary offering and assuming 90% and 10% of the remaining amount of common stock to be sold in the primary offering is Class R common stock and Class I common stock, respectively, which has been reduced to reflect the actual sale of approximately $5.8 million and $9.9 million of Class A and Class T common stock, respectively, prior to July 3, 2017, we estimate that we will use 86.34% of the gross proceeds from the sale of Class A shares, 91.22% of the gross proceeds from the sale of Class T shares, 90.74% of the gross proceeds from the sale of Class R shares and 94.64% of the gross proceeds from the sale of Class I shares in the primary offering, or approximately $8.64 per Class A, Class T, Class R and Class I share, for investments.

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We also pay significant fees to our advisor and its affiliates during our operational stage. Those fees include property management and debt servicing fees, asset management fees and obligations to reimburse our advisor and its affiliates for expenses they incur in connection with their providing services to us, including certain personnel services.
We may also pay significant fees during our listing/liquidation stage. The subordinated incentive fee that we will pay to our advisor upon our investors receiving an agreed upon return on their investment is structured in the form of convertible stock. On August 5, 2016, our advisor exchanged 5,000 shares of common stock for 50,000 shares of our convertible stock. Under limited circumstances, these shares may be converted into shares of our Class A common stock satisfying our obligation to pay our advisor an incentive fee and diluting our stockholders’ interest in us. Our convertible stock will convert into shares of Class A common stock on one of two events. First, it will convert if we have paid distributions to common stockholders such that aggregate distributions are equal to 100% of the price at which we sold our outstanding shares of common stock plus an amount sufficient to produce a 6% cumulative, non-compounded, annual return at that price. We expect that we will need to sell a portion of our assets in order to be able to pay distributions to our stockholders equal to the aggregate issue price of our then-outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of these outstanding shares. Alternatively, the convertible stock will convert if we list our shares of common stock on a national securities exchange and, on the 31st trading day after listing, the value of our company based on the average trading price of our shares of common stock since the listing, plus prior distributions, combine to meet the same 6% return threshold for our common stockholders. Each of these two events is a “Triggering Event.”
Upon a Triggering Event, our convertible stock will, unless our advisory agreement with our advisor has been terminated or not renewed on account of a material breach by our advisor, generally be converted into a number of shares of Class A common stock equal to 1/50,000 of the quotient of:
(A) 15% of the amount, if any, by which
(1) the value of the company as of the date of the event triggering the conversion plus the total distributions paid to our stockholders through such date on the then outstanding shares of our common stock exceeds
(2) the sum of the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, divided by
(B) the value of the company divided by the number of outstanding shares of common stock, in each case, as of the date of the event triggering the conversion.
However, if our advisory agreement with our advisor expires without renewal or is terminated (other than because of a material breach by our advisor) prior to a Triggering Event, then upon a Triggering Event the holder of the convertible stock will be entitled to a prorated portion of the number of Class A shares of common stock determined by the foregoing calculation, where such proration is based on the percentage of time we were advised by our advisor. As a result, following conversion, the holder of the convertible stock will be entitled to a portion of amounts distributable to our stockholders, which such amounts distributable to the holder could be significant. See “Description of Shares—Convertible Stock.”
Our advisor can influence whether our common stock is listed for trading on a national securities exchange. Accordingly, our advisor can influence the conversion of the convertible stock issued to it and the resulting dilution of other stockholders’ interests.
These fees and other potential payments increase the risk that the amount available for distribution to common stockholders upon a liquidation of our portfolio would be less than the purchase price of the shares in this offering. Substantial consideration paid to our advisor and its affiliates also increases the risk that you will not be able to resell your shares at a profit, even if our shares are listed on a national securities exchange. See

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“Management Compensation.”
If we are unable to obtain funding for future capital needs, cash distributions to our stockholders could be reduced and the value of our investments could decline.
If we need additional capital in the future to improve or maintain our properties or for any other reason, we may have to obtain financing from sources beyond our cash flow from operations, such as borrowings, sales of assets or future equity offerings. These sources of funding may not be available on attractive terms or at all. If we cannot procure additional funding for capital improvements, our investments may generate lower cash flows or decline in value, or both, which would limit our ability to make distributions to you and could reduce the value of your investment.
Our board of directors could opt into certain provisions of the Maryland General Corporation Law in the future, which may discourage others from trying to acquire control of us and may prevent our stockholders from receiving a premium price for their stock in connection with a business combination.
Under Maryland law, “business combinations” between a Maryland corporation and certain interested stockholders or affiliates of interested stockholders are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. Also under Maryland law, control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquirer, an officer of the corporation or an employee of the corporation who is also a director of the corporation are excluded from the vote on whether to accord voting rights to the control shares. Should our board opt into these provisions of Maryland law, it may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer. For more information about the business combination and control share acquisition provisions of Maryland law, see “Description of Shares—Business Combinations” and “Description of Shares—Control Share Acquisitions.”
Because Maryland law permits our board to adopt certain anti-takeover measures without stockholder approval, investors may be less likely to receive a “control premium” for their shares.
In 1999, the State of Maryland enacted legislation that enhances the power of Maryland corporations to protect themselves from unsolicited takeovers. Among other things, the legislation permits our board, without stockholder approval, to amend our charter to:
stagger our board of directors into three classes;
require a two-thirds stockholder vote for removal of directors;
provide that only the board can fix the size of the board;
provide that all vacancies on the board, however created, may be filled only by the affirmative vote of a majority of the remaining directors in office; and
require that special stockholder meetings may only be called by holders of a majority of the voting shares entitled to be cast at the meeting.
     Under Maryland law, a corporation can opt to be governed by some or all of these provisions if it has a class of equity securities registered under the Exchange Act, and has at least three independent directors. Our charter does not prohibit our board from opting into any of the above provisions permitted under Maryland law. Becoming governed by any of these provisions could discourage an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our securities. For more information about Subtitle 8 provisions of Maryland law discussed here, see “Description of Shares—Subtitle

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8.”
If we internalize our management functions, we could incur significant costs associated with being self-managed and may not be able to retain or replace key personnel; and we may have increased exposure to litigation as a result of internalizing our management functions.
We may internalize management functions provided by our advisor, our property manager and their respective affiliates by acquiring assets and personnel from our advisor, our property manager or their affiliates. In the event we were to acquire our advisor or our property manager, we cannot be sure of the terms relating to any such acquisition.
If we internalize, we would no longer bear the costs of the various fees and expenses we expect to pay to our advisor and to our property manager under their respective agreements; however, our direct expenses would increase due to the inclusion of general and administrative costs, including legal, accounting, and other expenses related to corporate governance, SEC reporting and compliance. We would also incur the compensation and benefits costs of our officers and other employees and consultants that are now paid by our advisor, our property manager or their affiliates. We cannot reasonably estimate the amount of fees to our advisor, property manager and other affiliates we would save, and the costs we would incur, if we acquired these entities. If the expenses we assume as a result of an internalization are higher than the expenses we avoid paying to our advisor, our property manager and their affiliates, our net income per share and funds from operations per share would be lower than they otherwise would have been had we not acquired these entities, potentially decreasing the amount of funds available for distribution.
Additionally, if we internalize our management functions, we would employ personnel and would be subject to potential liabilities commonly faced by employers, such as workers’ disability and compensation claims, potential labor disputes and other employee-related liabilities and grievances. Also, there can be no assurances that we will be successful in retaining key personnel at our advisor or property manager in the event of an internalization transaction. In addition, we could have difficulty integrating the functions currently performed by our advisor, our property manager and their affiliates. Currently, the officers and employees of our advisor, our property manager, and their affiliates perform asset management, property management, and general and administrative functions, including accounting and financial reporting, for multiple entities. We may fail to properly identify the appropriate mix of personnel and capital needs to operate as a stand-alone entity. An inability to manage an internalization transaction effectively could result in our incurring additional costs and/or experiencing deficiencies in our disclosures controls and procedures or our internal control over financial reporting. Such deficiencies could cause us to incur additional costs and our management’s attention could be diverted from effectively managing our properties and overseeing other real estate-related assets.
In addition, in recent years, internalization transactions have been the subject of stockholder litigation. Stockholder litigation can be costly and time-consuming, and there can be no assurance that any litigation expenses we might incur would not be significant or that the outcome of litigation would be favorable to us. Any amounts we are required to expend defending any such litigation will reduce the amount of funds available for investment by us in properties or other investments.
Risks Related to Investments in Real Estate
Economic and regulatory changes that impact the real estate market generally may decrease the value of our investments and weaken our operating results.
The properties we acquire and their performance are subject to the risks typically associated with real estate, including:
downturns in national, regional and local economic conditions;

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competition;
adverse local conditions, such as oversupply or reduction in demand and changes in real estate zoning laws that may reduce the desirability of real estate in an area;
vacancies, changes in market rental rates and the need to periodically repair, renovate and re-let space;
changes in the supply of or the demand for similar or competing properties in an area;
changes in interest rates and the availability of permanent mortgage financing, which may render the sale of a property or loan difficult or unattractive;
changes in governmental regulations, including those involving tax, real estate usage, environmental and zoning laws; and
periods of high interest rates and tight money supply.
     Any of the above factors, or a combination thereof, could result in a decrease in the value of our investments, which would have an adverse effect on our results of operations, reduce the cash available for distributions and the return on your investment.
We will be subject to the risks associated with acquiring discounted real estate assets.
We will be subject to the risks generally incident to the ownership of discounted real estate assets. Such assets may be purchased at a discount from historical cost due to substantial deferred maintenance, abandonment, undesirable locations or markets, or poorly structured financing of the real estate or debt instruments underlying the assets, which has since lowered their value. Further, instability in the financial markets may limit the availability of lines of credit and the degree to which people and entities have access to cash to pay rents or debt service on the underlying assets. Such illiquidity could have the effect of increasing vacancies, increasing bankruptcies and weakening interest rates commercial entities can charge consumers, which can all decrease the value of already discounted real estate assets. Should conditions worsen, the continued inability of the underlying real estate assets to produce income may weaken our return on our investments, which in turn, may weaken your return on investment.
Further, irrespective of the instability the financial markets may have on the return produced by discounted real estate assets, efforts to correct the instability could make the valuation of such assets highly unpredictable. Fluctuations in market conditions make judging the future performance of such assets difficult. There is a risk that we may not purchase real estate assets at absolute discounted rates and that such assets may continue to decline in value.
Residents of apartment properties or tenants of other property classes we may acquire who have experienced personal financial problems or a downturn in their business may delay enforcement of our rights, and we may incur substantial costs attempting to protect our investment.
The real estate assets that we acquire may involve investments in commercial leases with residents or tenants who have experienced a downturn in their residential or business leases and with residents or tenants who have experienced difficulties with their personal financial situations such as a job loss, bankruptcy or bad credit rating, resulting in their failure to make timely rental payments or their default under their leases or debt instruments. In the event of any default by residents or tenants at our properties, we may experience delays in enforcing our rights and may incur substantial costs attempting to protect our investment.
The bankruptcy or insolvency of any resident or tenant also may adversely affect the income produced by our properties. If any resident or tenant becomes a debtor in a case under the U.S. Bankruptcy Code, our actions may be restricted by the bankruptcy court and our financial condition and results of operations could be adversely affected.

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The operating costs of our properties will not necessarily decrease if our income decreases.
Certain expenses associated with ownership and operation of a property may be intentionally increased to enhance the short- and long-term success of the property in the form of capital gain and current income, such as:
 increased staffing levels;
enhanced technology applications; and
increased marketing efforts.
Certain expenses associated with the ownership and operation of a property are not necessarily reduced by events that adversely affect the income from the property, such as:
real estate taxes;
insurance costs; and
maintenance costs.
For example, if the leased property loses tenants or rents are reduced, then those costs described in the preceding sentence are not necessarily reduced. As a result, our cost of owning and operating leased properties may, in the future, exceed the income the property generates even though the property’s income exceeded its costs at the time it was acquired. This would decrease the amount of cash available to us to distribute to you and could negatively affect your return on investment.
We will compete with third parties in acquiring, managing and selling properties and other investments, which could reduce our profitability and the return on your investment.
We believe that the current market for properties that meet our investment objectives is extremely competitive and many of our competitors have greater resources than we do. We will compete with numerous other entities engaged in real estate investment activities, including individuals, corporations, banks and insurance company investment accounts, other REITs, real estate limited partnerships, the U.S. Government and other entities, to acquire, manage and sell real estate and real estate-related assets. Many of our expected competitors enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. In addition, the number of entities and the amount of funds competing for suitable investments may increase.
Competition with these entities may result in the following:
greater demand for the acquisition of real estate and real estate-related assets, which results in increased prices we must pay for our real estate and real estate-related assets;
delayed investment of our capital;
decreased availability of financing to us; or
reductions in the size or desirability of the potential tenant base for one or more properties that we lease.
     If such events occur, you may experience a lower return on your investment.



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Our joint venture partners could take actions that decrease the value of an investment to us and lower our stockholders’ overall return.
We may enter into joint ventures to acquire properties and other assets. We may also purchase and renovate properties in joint ventures or in partnerships, co-tenancies or other co-ownership arrangements. Such investments may involve risks not otherwise present with other methods of investment, including, for example, the following risks:
that our co-venturer, co-tenant or partner in an investment could become insolvent or bankrupt;
that such co-venturer, co-tenant or partner may at any time have economic or business interests or goals that are or that become inconsistent with our business interests or goals;
that such co-venturer, co-tenant or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives; or
that such co-venturer, co-tenant or partner may grant us a right of first refusal or buy/sell right to buy out such co-venturer or partner, and that we may be unable to finance such a buy-out if it becomes exercisable or we are required to purchase such interest at a time when it would not otherwise be in our best interest to do so. If our interest is subject to a buy/sell right, we may not have sufficient cash, available borrowing capacity or other capital resources to allow us to elect to purchase an interest of a co-venturer subject to the buy/sell right, in which case we may be forced to sell our interest as the result of the exercise of such right when we would otherwise prefer to keep our interest.
Any of the above might subject a property to liabilities in excess of those contemplated and thus reduce our returns on that investment and therefore your return on investment.
Properties that have significant vacancies, especially discounted real estate assets, may experience delays in leasing up or could be difficult to sell, which could diminish our return on these properties.
A property may incur vacancies either by the expiration of tenant leases or the continued default of tenants under their leases. Further, our potential investments in underperforming apartment properties or other types of discounted properties may have significant vacancies at the time of acquisition. If vacancies continue for a prolonged period of time beyond the expected lease-up stage that we anticipate will follow any redevelopment or repositioning efforts, we may suffer reduced revenues resulting in less cash available for distributions. In addition, the resale value of the property could be diminished because the market value of a particular property depends principally upon the value of the cash flow generated by the leases associated with that property. Such a reduction on the resale value of a property could also reduce your return on investment.
We may have difficulty re-leasing underperforming properties because of the location or reputation of the property.
Underperforming real estate assets may be located in areas of slow, stagnant, or declining economic growth. Such areas may experience high levels of crime and unemployment. In addition to the risks these conditions impose on the current tenants and owners of properties underlying the real estate investments, these conditions may harm the reputation of the property making it difficult to attract future more productive tenants and owners to the areas where the properties are located. The inability to re-lease or re-sell properties purchased in these areas may result in an unproductive use of our resources and could negatively affect our performance and your return on investment.
Because we will rely on Resource Apartment Manager III, its affiliates and third parties to manage the day-to-day affairs of any properties we may acquire, should the staff of a particular property perform poorly, our operating results for that property will similarly be hindered and our net income may be reduced.
We will depend upon the performance of our property managers to effectively manage our properties and

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real estate-related assets. Rising vacancies across real estate properties have resulted in increased pressure on real estate investors and their property managers to maintain adequate occupancy levels. In order to do so, we may have to offer inducements, such as free rent and resident amenities, to compete for residents. Poor performance by those sales, leasing and other management staff members operating a particular property will necessarily translate into poor results of operations for that particular property. Should Resource Apartment Manager III, its affiliates or third parties fail to identify problems in the day-to-day management of a particular property or fail to take the appropriate corrective action in a timely manner, our operating results may be hindered and our net income reduced.
 If we are unable to sell a property for the price, on the terms, or within the time frame we desire, it could limit our ability to pay cash distributions to you.
Many factors that are beyond our control affect the real estate market and could affect our ability to sell properties for the price, on the terms, or within the time frame that we desire. These factors include general economic conditions, the availability of financing, interest rates and other factors, including supply and demand. Because real estate investments are relatively illiquid, we have a limited ability to vary our portfolio in response to changes in economic or other conditions. Further, before we can sell a property on the terms we want, it may be necessary to expend funds to correct defects or to make improvements. However, we can give no assurance that we will have the funds available to correct such defects or to make such improvements. We may be unable to sell our properties at a profit. Our inability to sell properties at the time and on the terms we want could reduce our cash flow and limit our ability to make distributions to you and could reduce the value of your investment.
Government entities, community associations and contractors may cause unforeseen delays and increase costs to redevelop and reposition underperforming properties that we may acquire, which may reduce our net income and cash available for distributions to you.
We may seek to or be required to incur substantial capital obligations to redevelop or reposition existing properties that we acquire at a discount as a result of neglect of the previous owners or tenants of the properties and to sell the properties. Our advisor and its key real estate professionals will do their best to acquire properties that do not require excessive redevelopment or modifications and that do not contain hidden defects or problems. There could, however, be unknown and excessive costs, expenses and delays associated with a property’s redevelopment, repositioning or interior and exterior upgrades. We will be subject to risks relating to the uncertainties associated with rezoning for redevelopment and other concerns of governmental entities, community associations and our construction manager’s ability to control costs and to build in conformity with plans and the established timeframe. We will pay a construction management fee to a construction manager, which may be Resource Apartment Manager III or its affiliates, if new capital improvements are required.
If we are unable to increase rental rates or sell the redeveloped property at a price consistent with our underwritten projections due to local market or economic conditions to offset the cost of the redevelopment or repositioning the property, the return on your investment may suffer. To the extent we acquire properties in major metropolitan areas where the local government has imposed rent controls, we may be prohibited from increasing the rental rates to a level sufficient to cover the particular property’s redevelopment costs and expenses.
Costs of responding to both known and previously undetected environmental contamination and hazardous conditions may decrease our cash flows and limit our ability to make distributions.
Real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to protection of the environment and human health. We could be subject to liability in the form of fines, penalties or damages for noncompliance with these laws and regulations. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, the remediation of contamination associated with the release or disposal of solid and hazardous materials, the presence of toxic building materials, and other health and safety-related concerns.

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Some of these laws and regulations may impose joint and several liability on the tenants, current or previous owners or operators of real property for the costs to investigate or remediate contaminated properties, whether the contamination occurred prior to purchase, or whether the acts causing the contamination were legal. These costs could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Our tenants’ operations, the condition of properties at the time we buy them, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our properties.
     Environmental laws also may impose liens on a property or restrictions on the manner in which a property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for the release of and exposure to hazardous substances, including asbestos-containing materials and lead-based paint. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances.
The presence of hazardous substances, or the failure to properly manage or remediate these substances, may hinder our ability to sell, rent or pledge such property as collateral for future borrowings. Any material expenditures, fines, penalties, or damages we must pay will reduce our ability to make distributions and may reduce the value of your investment.
Properties acquired by us may have toxic mold that could result in substantial liabilities to us.
Litigation and concern about indoor exposure to certain types of toxic molds has been increasing as the public becomes aware that exposure to mold can cause a variety of health effects and symptoms, including allergic reactions. It is impossible to eliminate all mold and mold spores in the indoor environment. There can be no assurance that the properties acquired by us will not contain toxic mold. The difficulty in discovering indoor toxic mold growth could lead to an increased risk of lawsuits by affected persons and the risk that the cost to remediate toxic mold will exceed the value of the property. There is a risk that we may acquire properties that contain toxic mold and such properties may negatively affect our performance and your return on investment.
Uninsured losses relating to real property or excessively expensive premiums for insurance coverage could reduce our cash flows and the return on your investment.
There are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Insurance risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. Additionally, mortgage lenders in some cases have begun to insist that commercial property owners purchase coverage against terrorism as a condition for providing mortgage loans. Such insurance policies may not be available at reasonable costs, if at all, which could inhibit our ability to finance or refinance our properties. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We may not have adequate coverage for such losses. If any of our properties incurs a casualty loss that is not fully insured, the value of our assets will be reduced by any such uninsured loss. In addition, other than any working capital reserve or other reserves we may establish, we have no source of funding to repair or reconstruct any uninsured property. Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings that would result in lower distributions.
Our costs associated with and the risk of failing to comply with the Americans with Disabilities Act, the Fair Housing Act and other tax credit programs may adversely affect cash available for distributions.
Our properties are generally expected to be subject to the Americans with Disabilities Act of 1990, as

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amended. Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The Disabilities Act has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities. The Disabilities Act’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. We cannot assure you that we will be able to acquire properties that comply with the Disabilities Act or place the burden on the seller or other third party to ensure compliance with such laws. If we cannot, our funds used for compliance with these laws may affect cash available for distributions and the amount of distributions to you.
The multifamily rental properties we acquire must comply with Title III of the Disabilities Act, to the extent that such properties are “public accommodations” or “commercial facilities” as defined by the Disabilities Act. Compliance with the Disabilities Act could require removal of structural barriers to handicapped access in certain public areas of our apartment communities where such removal is readily achievable. The Disabilities Act does not, however, consider residential properties, such as multifamily rental properties, to be public accommodations or commercial facilities, except to the extent portions of such facilities, such as the leasing office, are open to the public.
We also must comply with the Fair Housing Amendment Act of 1988 (“FHAA”), which requires that multifamily rental properties first occupied after March 13, 1991 be accessible to handicapped residents and visitors. Compliance with the FHAA could require removal of structural barriers to handicapped access in a community, including the interiors of apartment units covered under the FHAA. Recently there has been heightened scrutiny of multifamily rental properties for compliance with the requirements of the FHAA and the Disabilities Act and an increasing number of substantial enforcement actions and private lawsuits have been brought against multifamily rental properties to ensure compliance with these requirements. Noncompliance with the FHAA and the Disabilities Act could result in the imposition of fines, awards of damages to private litigants, payment of attorneys’ fees and other costs to plaintiffs, substantial litigation costs and substantial costs of remediation.
Certain of our properties may be subject to the low income housing tax credits, historic preservation tax credits or other similar tax credit rules at the federal, state or municipal level. The application of these tax credit rules is extremely complicated and noncompliance with these rules may have adverse consequences for us. Noncompliance with applicable tax regulations may result in the loss of future or other tax credits and the fractional recapture of these tax credits already taken. Accordingly, noncompliance with these tax credit rules and related restrictions may adversely affect our ability to distribute any cash to our investors.
Our properties may be dispersed geographically and across various markets and sectors.
We may acquire and operate properties in different locations throughout the United States and in different markets and sectors. The success of our properties will depend largely on our ability to hire various managers and service providers in each area, market and sector where the properties are located or situated. It may be more challenging to manage a diverse portfolio. Failure to meet such challenges could reduce the value of your investment. See “Investment Objectives and Policies—Real Estate Asset Management Strategy.”
A high concentration of our properties in a particular geographic area would magnify the effects of downturns in that geographic area.
In the event that we have a concentration of properties in any particular geographic area, any adverse situation that disproportionately affects that geographic area would have a magnified adverse effect on our portfolio.



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Newly constructed and existing multifamily rental properties or other properties that compete with any properties we may acquire in any particular location could adversely affect the operating results of our properties and our cash available for distribution.
We may acquire properties in locations that experience increases in construction of multifamily rental or other properties that compete with our properties. This increased competition and construction could:
make it more difficult for us to find residents to lease units in our apartment communities;
force us to lower our rental prices in order to lease units in our apartment communities; or
substantially reduce our revenues and cash available for distribution.
Our efforts to upgrade multifamily rental properties to increase occupancy and raise rental rates through redevelopment and repositioning may fail, which may reduce our net income and the cash available for distributions to you.
The success of our ability to upgrade any multifamily rental properties that we may acquire and realize capital gains and current income for you on these investments materially depends upon the status of the economy where the multifamily rental property is located. Our revenues will be lower if the rental market cannot bear the higher rental rate that accompanies the upgraded multifamily rental property due to job losses or other economic hardships. Should the local market be unable to support a higher rental rate for a multifamily rental property that we upgraded, we may not realize the premium rental we had assumed by a given upgrade and we may realize reduced rental income or a reduced gain or even loss upon the sale of the property. These events could cause us to reduce the cash available for distributions.
Renovation risks could affect our profitability.
A component of our strategy is to renovate multifamily communities in order to effect long-term growth. Our renovation activities generally entail certain risks, including the following:
funds may be expended and management’s time devoted to projects that may not be completed due to a variety of factors, including without limitation, the inability to obtain necessary governmental approvals;
construction costs of a renovation project may exceed original estimates, possibly making the project economically unfeasible or the economic return on a renovated property less than anticipated;
increased material and labor costs, problems with subcontractors, or other costs due to errors and omissions which occur in the renovation process;
projects may be delayed due to required governmental approvals, adverse weather conditions, labor shortages or other unforeseen complications;
occupancy rates and rents at a renovated property may be less than anticipated; and
the operating expenses at a renovated property may be higher than anticipated.
     These risks may reduce the funds available for distribution to our stockholders. Further, the renovation of properties is also subject to the general risks associated with real estate investments.
A concentration of our investments in any one property sector may leave our profitability vulnerable to a downturn or slowdown in such sector.
We expect a majority of our investments to be in the multifamily sector. Vacancy rates in multifamily rental properties and other commercial real estate properties may be related to jobless rates. As a result, we will be subject

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to risks inherent in investments in a single type of property. If our investments are substantially in any one property sector, then the potential effects on our revenues, and as a result, on cash available for distribution, resulting from increased jobless rates as well as a general downturn or slowdown in such property sector could be more pronounced than if we had more fully diversified our investments.
Increased competition and the increased affordability of single-family and multifamily homes and condominiums for sale or rent could limit our ability to retain residents, lease apartment units or increase or maintain rents.
Any multifamily rental property that we may acquire will most likely compete with numerous housing alternatives in attracting residents, including single-family and multifamily homes and condominiums. Due to the
 current economic conditions, competitive housing in a particular area and the increasing affordability of single-family and multifamily homes and condominiums to buy caused by relatively low mortgage interest rates and generous federal and state government programs to promote home ownership could adversely affect our ability to fully occupy any multifamily rental properties we may acquire. Further, single-family homes and condominiums available for rent could also adversely affect our ability to retain our residents, lease apartment units and increase or maintain rental rates.
Short-term multifamily leases expose us to the effects of declining market rent, which could adversely impact our ability to make cash distributions.
We expect that substantially all of our apartment leases will be for a term of one year or less. Because these leases generally permit the residents to leave at the end of the lease term or earlier in certain situations, such as when a resident loses his/her job, without penalty, our rental revenues may be impacted by declines in market rents more quickly than if our leases were for longer terms.
If we acquire student housing properties, these properties would be subject to an annual leasing cycle, short lease-up period, seasonal cash flows, changing university admission and housing policies and other risks inherent in the student housing industry.
Similar to multifamily rental properties, if we acquire student housing, we expect to generally lease such properties under short-term, 12-month leases, and in certain cases, under nine-month or shorter-term semester leases. As a result, we may experience significantly reduced cash flows during the summer months at properties leased under leases having terms shorter than 12 months. Student housing properties are also typically leased during a limited leasing season that usually begins in January and ends in August of each year. We are therefore highly dependent on the effectiveness of our marketing and leasing efforts and personnel during this season.
Changes in university admission policies or overall student enrollment levels could also adversely affect the investment return on student housing properties. For example, if a university reduces the number of student admissions or requires that a certain class of students, such as freshman, live in a university-owned facility, the demand for beds at our properties may be reduced and our occupancy rates may decline. We will also be required to form relationships directly or through third parties with colleges and universities for referrals of prospective student-residents or for mailing lists of prospective student-residents and their parents. Any failure to maintain good relationships with these colleges and universities could therefore have a material adverse effect on us. Federal and state laws require colleges to publish and distribute reports of on-campus crime statistics, which may result in negative publicity and media coverage associated with crimes occurring on or in the vicinity of our on-campus properties.



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If we acquire student housing properties, we may face significant competition from university-owned on-campus student housing, from other off-campus student housing properties and from traditional multifamily housing located within close proximity to universities.
On-campus student housing has certain inherent advantages over off-campus student housing in terms of physical proximity to the university campus and integration of on-campus facilities into the academic community. Colleges and universities can generally avoid real estate taxes and borrow funds at lower interest rates than us and other private sector operators. Competition from university-owned on-campus housing could adversely affect the performance of any student housing properties we may acquire.
If we invest in senior residential properties, we may incur liability for failing to comply with the FHAA and the Housing for Older Persons Act or certain state regulations.
Any senior residential properties we acquire will be required to qualify as housing for older persons and will be required to comply with the appropriate federal and state laws governing age and owner occupancy. Noncompliance with the FHAA and the Housing for Older Persons Act and certain state registration requirements could result in fines, awards of damages to private litigants, payment of attorneys’ fees and other substantial costs of remediation.
The condominium industry is subject to extensive regulation and other unique risks.
We may invest in condominium properties to convert the condominiums into multifamily rental units or market and sell the condominium units at discounted prices. These activities are subject to extensive laws and regulations of local, state and federal governments. These laws and regulations vary by municipality and state and their requirements can be burdensome and costly.
Further, condominium associations often serve as mini-governments in the form and manner by which they govern the activities and services impacting the residents of the condominium building. Our lack of control over any condominium association, where we own the building, could raise additional risks of undue delay or unexpected costs to sell the discounted condominium units or convert them into multifamily rental units. In addition, condominium buildings and their associations may also be subject to litigation from contractors, other condominium owners or other third parties and may be subject to other unknown liabilities not readily discoverable upon initial due diligence.
Changing market conditions, especially in the greater metropolitan areas may adversely impact our ability to sell condominium units at expected prices, or at all, which could hinder our results of operations and reduce our net income.
If we acquire a condominium building for conversion or to sell units at a discount, there could be a significant amount of time before we can redevelop or reposition the condominium units available for conversion or sale. The market value of a condominium unit being redeveloped or repositioned can vary significantly during this time due to changing market conditions. If we acquire condominiums or attempt to convert multifamily or hotel properties into condominiums, lower prices of condominium units and sales activities in major metropolitan markets or other markets where these properties may be located could adversely affect our results of operations and net income. Although demand in major metropolitan geographic areas historically has been strong, increased purchase price appreciation may reduce the likelihood of consumers seeking to purchase new residences, which would likely harm our ability to sell units in residential condominium buildings. If the prices of condominium units or sales activity decline in the key markets in which we may operate, our costs may not decline at all or at the same rate and, as a result, our business, results of operations and financial condition would be adversely affected.



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Condominium purchasers may be unwilling or unable to purchase condominium units at times when mortgage-financing costs are high or as credit quality declines.
The majority of our potential purchasers for discounted condominium units will finance their purchases through third-party lenders. In general, housing demand is adversely affected by increases in interest rates, demand for increased down payments and by decreases in the availability of mortgage financing as a result of declining customer credit quality or other issues. Further, there are additional constraints on certain government-sponsored entities, such as Fannie Mae and Freddie Mac, for potential condominium purchasers in projects where a substantial number of units remain unsold in a particular condominium project. Even though we closely monitor the mortgage market for prospective buyers for condominium units, if mortgage interest rates increase or the average down payment requirement increases, the ability or willingness of prospective buyers to finance condominium unit purchases may be adversely affected.
If we acquire condominium properties or mixed-use properties that combine hotel, multifamily or condominiums, a fire or other accident could occur in a single unit that causes the entire building to be uninhabitable.
We may experience greater risks in the condominium and mixed-use property investments because there could be a higher likelihood of an accident occurring in a building containing numerous individuals where we do not have the same ability to monitor or review the building as other property classes. A fire or other accident in a single unit could in turn cause the entire building to be uninhabitable. Even if there is insurance on the building, it may not be enough to cover all of the losses as a result of a fire or other accident.
Risks Related to Investments in Real Estate-Related Debt Assets
Our investments in real estate-related debt investments are subject to the risks typically associated with real estate.
Our investments in mortgage, mezzanine or other real estate loans will generally be directly or indirectly secured by a lien on real property (or the equity interests in an entity that owns real property) that, upon the occurrence of a default on the loan, could result in our acquiring ownership of the property. We will not know whether the values of the properties ultimately securing our loans will remain at the levels existing on the dates of origination of those loans. If the values of the underlying properties drop, our risk will increase because of the lower value of the security associated with such loans. In this manner, real estate values could impact the values of our loan investments. Our investments in other real estate-related debt investments may be similarly affected by real estate property values. Therefore, our real estate-related debt investments will be subject to the risks typically associated with real estate, which are described above under the heading “— Risks Related to Investments in Real Estate.”
If we make or invest in mortgage, mezzanine, bridge or other real estate loans, our loans will be subject to interest rate fluctuations that will affect our returns as compared to market interest rates; accordingly, the value of our stockholders’ investment would be subject to fluctuations in interest rates.
If we make or invest in fixed rate, long-term loans and interest rates rise, the loans could yield a return that is lower than then-current market rates. If interest rates decrease, we will be adversely affected to the extent that loans are prepaid because we may not be able to reinvest the proceeds at as high of an interest rate. If we invest in variable-rate loans and interest rates decrease, our revenues will also decrease. For these reasons, if we invest in mortgage, mezzanine, bridge or other real estate loans, our returns on those loans and the value of our stockholders’ investment will be subject to fluctuations in interest rates.
Delays in liquidating defaulted mortgage loans could reduce our investment returns.
If we make or invest in mortgage loans and there are defaults under those mortgage loans, we may not be

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able to repossess and sell the underlying properties quickly. The resulting time delay could reduce the value of our investment in the defaulted mortgage loans. An action to foreclose on a property securing a mortgage loan is regulated by state statutes and regulations and is subject to many of the delays and expenses of other lawsuits if the defendant raises defenses or counterclaims. In the event of default by a mortgagor, these restrictions, among other things, may impede our ability to foreclose on or sell the mortgaged property or to obtain proceeds sufficient to repay all amounts due to us on the mortgage loan.
Government action may reduce recoveries on defaulted loans.
Legislative or regulatory initiatives by federal, state or local legislative bodies or administrative agencies, if enacted or adopted, could delay foreclosure, provide new defenses to foreclosure or otherwise impair our ability to foreclose on real estate-related debt investments in default. Various jurisdictions have considered or are currently considering such actions, and the nature or extent of the limitation on foreclosure that may be enacted cannot be predicted. Bankruptcy courts could, if this legislation is enacted, reduce the amount of the principal balance on a mortgage loan that is secured by a lien on the mortgaged property, reduce the interest rate, extend the term to maturity or otherwise modify the terms of a bankrupt borrower’s mortgage loan.
Property owners filing for bankruptcy may adversely affect us.
The filing of a petition in bankruptcy automatically stops or “stays” any actions to enforce the terms of all debt of the debtor, including a mortgage loan. The length of the stay and the costs associated with it will generally have an adverse impact on our profitability. Further, the bankruptcy court may take other actions that prevent us from foreclosing on the property. Any bankruptcy proceeding will, at a minimum, delay us in achieving our investment objectives and may adversely affect our profitability.
The B-Notes in which we may invest may be subject to additional risks relating to the privately negotiated structure and terms of the transaction, which may result in losses to us.
We may invest in B-Notes. A B-Note is a mortgage loan typically (i) secured by a first mortgage on a single large commercial property or group of related properties and (ii) subordinated to an A-Note secured by the same first mortgage on the same collateral. As a result, if a borrower defaults, there may not be sufficient funds remaining for B-Note holders after payment to the A-Note holders. Since each transaction is privately negotiated, B-Notes can vary in their structural characteristics and risks. For example, the rights of holders of B-Notes to control the process following a borrower default may be limited in certain investments. We cannot predict the terms of each B-Note investment. Further, B-Notes typically are secured by a single property, and so reflect the increased risks associated with a single property compared to a pool of properties.
Our potential ownership of a B-Note with controlling class rights may, if the financing fails to perform according to its terms, cause us to pursue remedies, which may include foreclosure on, or modification of, the note. In some cases, however, the owner of the A-Note may be able to foreclose or modify the note against our wishes as owner of the B-Note. As a result, our economic and business interests may diverge from the interests of the owner of the A-Note. In this regard, B-Notes share certain credit characteristics with second mortgages, because both are subject to greater credit risk with respect to the underlying mortgage collateral than the first mortgage or A-Note.
Investment in non-conforming and non-investment-grade loans may involve increased risk of loss.
Loans we may acquire may not conform to conventional loan criteria applied by traditional lenders and may not be rated or may be rated as non-investment grade. Non-investment-grade ratings for these loans typically result from the overall leverage of the loans, the lack of a strong operating history for the properties underlying the loans, the borrowers’ credit history, the properties’ underlying cash flow or other factors. As a result, loans we acquire may have a higher risk of default and loss than conventional loans. Any loss we incur may reduce distributions to stockholders and adversely affect the value of our common stock.

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Our investments in subordinated loans may be subject to losses.
We may acquire subordinated loans. In the event a borrower defaults on a subordinated loan and lacks sufficient capacity to cure the default, we may suffer a loss of principal or interest. In the event a borrower declares bankruptcy, we may not have full recourse to the assets of the borrower, or the assets of the borrower may not be sufficient to satisfy the loan. If a borrower defaults on our loan or on debt senior to our loan, or in the event of a borrower bankruptcy, our loan will be satisfied only after the senior debt is paid in full. Where debt senior to our loan exists, the presence of intercreditor arrangements may limit our ability to amend our loan documents, assign our loans, accept prepayments, exercise our remedies (through “standstill periods”), and control decisions made in bankruptcy proceedings relating to borrowers.
 To the extent that we make investments in real estate-related securities, a portion of those investments may be illiquid and we may not be able to adjust our portfolio in response to changes in economic and other conditions.
Certain of the real estate-related securities that we may purchase in connection with privately negotiated transactions will not be registered under the relevant securities laws, resulting in a prohibition against their transfer, sale, pledge or other disposition except in a transaction that is exempt from the registration requirements of, or is otherwise in accordance with, those laws. As a result, our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited. The mezzanine and certain of the other loans we may purchase will be particularly illiquid investments due to their short life, their unsuitability for securitization and the greater difficulty of recoupment in the event of a borrower’s default.
Investments in non-performing real estate assets involve greater risks than investments in stabilized, performing assets and make our future performance more difficult to predict.
Traditional performance metrics of real estate assets are generally not as reliable for non-performing real estate assets as they are for performing real estate assets. Non-performing properties, for example, do not have stabilized occupancy rates. Similarly, non-performing loans do not have a consistent stream of loan servicing or interest payments. In addition, for non-performing loans, often there is greater uncertainty that the face amount of the note will be paid in full.
In addition, we may pursue more than one strategy to create value in a non-performing real estate investment. With respect to a property, these strategies may include development, redevelopment, or lease-up of such property. With respect to a loan, these strategies may include negotiating with the borrower for a reduced payoff, restructuring the terms of the loan or enforcing our rights as lender under the loan and foreclosing on the collateral securing the loan.
The factors described above make it challenging to evaluate non-performing investments.
Delays in restructuring or liquidating non-performing real estate securities could reduce the return on our stockholders’ investment.
Real estate securities may become non-performing after acquisition for a wide variety of reasons. Such non-performing real estate investments may require a substantial amount of workout negotiations or restructuring, which may entail, among other things, a substantial reduction in the interest rate and a substantial write-down of such loan or asset. However, even if a restructuring is successfully accomplished, upon maturity of such real estate security, replacement “takeout” financing may not be available. We may find it necessary or desirable to foreclose on some of the collateral securing one or more of our investments. Intercreditor provisions may substantially interfere with our ability to do so. Even if foreclosure is an option, the foreclosure process can be lengthy and expensive. Borrowers often resist foreclosure actions by asserting numerous claims, counterclaims and defenses, including, without limitation, lender liability claims and defenses, in an effort to prolong the foreclosure action. In some states, foreclosure actions can take up to several years or more to litigate. At any time during the foreclosure proceedings, the borrower may file for bankruptcy, which would have the effect of staying the foreclosure action and further

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delaying the foreclosure process. Foreclosure litigation tends to create a negative public image of the collateral property and may result in disrupting ongoing leasing and management of the property. Foreclosure actions by senior lenders may substantially affect the amount that we may earn or recover from an investment.
We will depend on debtors for our revenue, and, accordingly, our revenue and our ability to make distributions to our stockholders will be dependent upon the success and economic viability of such debtors.
The success of our real estate-related debt investments such as loans and debt and derivative securities will materially depend on the financial stability of the debtors underlying such investments. The inability of a single major debtor or a number of smaller debtors to meet their payment obligations could result in reduced revenue or losses. In the event of a debtor default or bankruptcy, we may experience delays in enforcing our rights as a creditor, and such rights may be subordinated to the rights of other creditors. These events could negatively affect the cash available for distribution to our stockholders and the value of our stockholders’ investment.
Prepayments can adversely affect the yields on our investments.
Prepayments on debt instruments, where permitted under the debt documents, are influenced by changes in current interest rates and a variety of economic, geographic and other factors beyond our control, and consequently, such prepayment rates cannot be predicted with certainty. If we are unable to invest the proceeds of such prepayments received, the yield on our portfolio will decline. Under certain interest rate and prepayment scenarios, we may fail to recoup fully our cost of acquisition of certain investments.
Our investments in real estate-related debt securities and preferred and common equity securities will be subject to the specific risks relating to the particular issuer of the securities and may involve greater risk of loss than secured debt financings.
Subject to certain REIT asset and income tests, we may make equity investments in REITs and other real estate companies. We may target a public company that owns commercial real estate or real estate-related assets when we believe its stock is trading at a discount to that company’s intrinsic value. We may eventually seek to acquire or gain a controlling interest in the companies that we target. We do not expect our non-controlling equity investments in other public companies to exceed 10% of the proceeds of this offering, assuming we sell the maximum offering amount, or to represent a substantial portion of our assets at any one time. We may also invest in debt securities and preferred equity securities issued by REITs and other real estate companies. Our investments in debt securities and preferred and common equity securities will involve special risks relating to the particular issuer of the securities, including the financial condition and business outlook of the issuer. Issuers that are REITs and other real estate companies are subject to the inherent risks associated with real estate and real estate-related debt investments. Furthermore, debt securities and preferred and common equity securities may involve greater risk of loss than secured debt financings due to a variety of factors, including that such investments are generally unsecured and may also be subordinated to other obligations of the issuer. As a result, investments in debt securities and preferred and common equity securities are subject to risks of (i) limited liquidity in the secondary trading market, (ii) substantial market price volatility resulting from changes in prevailing interest rates, (iii) subordination to the prior claims of banks and other senior lenders to the issuer, (iv) the operation of mandatory sinking fund or call/redemption provisions during periods of declining interest rates that could cause the issuer to reinvest redemption proceeds in lower yielding assets, (v) the possibility that earnings of the issuer may be insufficient to meet its debt service and distribution obligations and (vi) the declining creditworthiness and potential for insolvency of the issuer during periods of rising interest rates and economic downturn. These risks may adversely affect the value of outstanding debt securities and preferred and common equity securities and the ability of the issuers thereof to make principal, interest or distribution payments to us.
Some of our portfolio investments will be carried at estimated fair value as determined by us and, as a result, there may be uncertainty as to the value of these investments.
Some of our portfolio investments will be in the form of securities that are recorded at fair value but have

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limited liquidity or are not publicly traded. The fair value of securities and other investments that have limited liquidity or are not publicly traded may not be readily determinable. We estimate the fair value of these investments on a quarterly basis. Because such valuations are inherently uncertain, because they may fluctuate over short periods of time, and because they may be based on numerous estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. The value of our common stock could be lower than perceived at the time of your investment if our determinations regarding the fair value of these investments are materially higher than the values that we ultimately realize upon their disposal.
Any credit ratings assigned to our investments will be subject to ongoing evaluations and revisions, and we cannot assure you that those ratings will not be downgraded.
Some of our investments may be rated by Moody’s Investors Service, Fitch Ratings or Standard & Poor’s. Any credit ratings on our investments are subject to ongoing evaluation by credit rating agencies, and we cannot assure you that any such ratings will not be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant. If rating agencies assign a lower-than-expected rating or reduce or withdraw, or indicate that they may reduce or withdraw, their ratings of our investments in the future, the value of these investments could significantly decline, which would adversely affect the value of our investment portfolio and could result in losses upon disposition or the failure of borrowers to satisfy their debt service obligations to us.

Risks Associated with Debt Financing
We may incur mortgage indebtedness and other borrowings, which increases our risk of loss due to foreclosure.
We may obtain lines of credit and long-term financing that may be secured by our properties and other assets. In some instances, we may acquire real properties by financing a portion of the price of the properties and mortgaging or pledging some or all of the properties purchased as security for that debt. We may also incur mortgage debt on properties that we already own in order to obtain funds to acquire additional properties. In addition, we may borrow as necessary or advisable to ensure that we maintain our qualification as a REIT for federal income tax purposes, including borrowings to satisfy the REIT requirement that we distribute at least 90% of our annual REIT taxable income to our stockholders (computed without regard to the dividends paid deduction and excluding net capital gain). We, however, can give you no assurance that we will be able to obtain such borrowings on satisfactory terms.
If we do mortgage a property and there is a shortfall between the cash flow from that property and the cash flow needed to service mortgage debt on that property, then the amount of cash available for distributions to stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss of a property since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, reducing the value of your investment. For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure even though we would not necessarily receive any cash proceeds. We may give full or partial guaranties to lenders of mortgage debt on behalf of the entities that own our properties. When we give a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity. If any mortgages contain cross-collateralization or cross-default provisions, a default on a single property could affect multiple properties.
We may also obtain recourse debt to finance our acquisitions and meet our REIT distribution requirements. If we have insufficient income to service our recourse debt obligations, our lenders could institute proceedings against us to foreclose upon our assets. If a lender successfully forecloses upon any of our assets, our ability to pay cash distributions to our stockholders will be limited and you could lose all or part of your investment.

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High mortgage interest rates may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our net income and the amount of cash distributions we can make.
If mortgage debt is unavailable at reasonable interest rates, we may not be able to finance the purchase of properties. If we place mortgage debt on properties, we run the risk of being unable to refinance the properties when the loans become due, or of being unable to refinance on favorable terms. If interest rates are higher when we refinance the properties, our income could be reduced. If any of these events occur, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to you and may hinder our ability to raise more capital by issuing more stock or by borrowing more money.
We may not be able to access financing sources on attractive terms, which could adversely affect our ability to execute our business plan.
We may finance our assets over the long term through a variety of means, including credit facilities, issuance of commercial mortgage-backed securities, and other structured financings. Our ability to execute this strategy will depend on various conditions in the markets for financing in this manner that are beyond our control, including lack of liquidity and greater credit spreads. We cannot be certain that these markets will remain an efficient source of long-term financing for our assets. If our strategy is not viable, we will have to find alternative forms of long-term financing for our assets. This could subject us to more recourse indebtedness and the risk that debt service on less efficient forms of financing would require a larger portion of our cash flows, thereby reducing cash available for distribution to our stockholders and funds available for operations, as well as for future business opportunities.
Disruptions in the financial and real estate markets could adversely affect the multifamily property sector’s ability to obtain financing from Fannie Mae and Freddie Mac, which could adversely impact us.
Fannie Mae and Freddie Mac are major sources of financing for the multifamily sector. Until recently, Fannie Mae and Freddie Mac had reported substantial losses and required significant amounts of additional capital. These losses coupled with the credit market’s poor perception of Fannie Mae and Freddie Mac, add to the considerable uncertainty surrounding the capital structure of both Fannie Mae and Freddie Mac. In response to the deteriorating financial condition of Fannie Mae and Freddie Mac and the credit market disruption that begin in 2007, the U.S. Congress and Treasury undertook a series of actions to stabilize these government-sponsored enterprises and the financial markets. Pursuant to legislation enacted in 2008, the U.S. government placed both Fannie Mae and Freddie Mac under its conservatorship. Despite additional funding for both government-sponsored entities, the U.S. government has stated that it remains committed to reducing their portfolios. In August 2012, the U.S. Treasury modified its investment in Fannie Mae and Freddie Mac to accelerate the reduction of Fannie Mae’s and Freddie Mac’s investment portfolios and to require a sweep of all quarterly profits generated by Fannie Mae and Freddie Mac. In May 2014, the U.S. Senate Banking Committee approved legislation to wind down Fannie Mae and Freddie Mac and redesign the U.S. mortgage finance system, which legislation has to date not been acted on in the broader Senate. If new U.S. government legislation or regulations (i) heighten Fannie Mae’s and Freddie Mac’s underwriting standards, (ii) adversely affect interest rates and (iii) continue to reduce the amount of capital they can make available to the multifamily sector, it could reduce or remove entirely a vital resource for multifamily financing. Any potential reduction in loans, guarantees and credit enhancement arrangements from Fannie Mae and Freddie Mac could jeopardize the effectiveness of the multifamily sector’s available financing and decrease the amount of available liquidity and credit that could be used to acquire and diversify our portfolio of multifamily assets as well as dispose of our multifamily assets upon our liquidation.
Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders.
When providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. Loan documents we enter into may contain covenants that limit our ability to further mortgage the property, discontinue insurance coverage or replace Resource REIT Advisor as our

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advisor. These or other limitations may limit our flexibility and our ability to achieve our operating plans.
 Increases in interest rates could increase the amount of our debt payments and limit our ability to pay distributions to our stockholders.
We expect that we will incur indebtedness in the future. Increases in interest rates may increase our interest costs, which would reduce our cash flows and our ability to pay distributions. In addition, if we need to repay existing debt during periods of higher interest rates, we might have to sell one or more of our investments in order to repay the debt, which sale at that time might not permit realization of the maximum return on such investments.
We have broad authority to incur debt, and high debt levels could hinder our ability to make distributions and decrease the value of your investment.
Our charter limits our leverage to 300% of our net assets, and we may exceed this limit with the approval of the conflicts committee of our board of directors. High debt levels would cause us to incur higher interest charges and higher debt service payments and may also be accompanied by restrictive covenants. These factors could limit the amount of cash we have available to distribute and could result in a decline in the value of your investment. See “Investment Objectives and Policies—Borrowing Policies.”

Federal Income Tax Risks
Failure to qualify as a REIT would reduce our net earnings available for investment or distribution.
DLA Piper LLP (US) has rendered an opinion to us that we will be organized in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code for our taxable year ending December 31, 2017 and that our proposed method of operations will enable us to meet the requirements for qualification and taxation as a REIT beginning with our taxable year ending December 31, 2017. This opinion is based upon, among other things, our representations as to the manner in which we are and will be owned and the manner in which we will invest in and operate assets. However, our qualification as a REIT will depend upon our ability to meet requirements regarding our organization and ownership, distributions of our income, the nature and diversification of our income and assets and other tests imposed by the Internal Revenue Code. DLA Piper LLP (US) will not review our compliance with the REIT qualification standards on an ongoing basis, and we may fail to satisfy the REIT requirements in the future. Also, this opinion represents the legal judgment of DLA Piper LLP (US) based on the law in effect as of the date of the opinion. The opinion of DLA Piper LLP (US) is not binding on the Internal Revenue Service or the courts. Future legislative, judicial or administrative changes to the federal income tax laws could be applied retroactively, which could result in our disqualification as a REIT.
If we fail to qualify as a REIT for any taxable year after electing REIT status, we will be subject to federal income tax on our taxable income at corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, distributions to stockholders would no longer qualify for the dividends paid deduction and we would no longer be required to make distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax. For a discussion of the REIT qualification tests and other considerations relating to our election to be taxed as REIT, see “Federal Income Tax Considerations.”
You may have current tax liability on distributions you elect to reinvest in our common stock.
If you participate in our distribution reinvestment plan, you will be deemed to have received, and for income tax purposes will be taxed on, the amount reinvested in shares of our common stock to the extent the amount reinvested was not a tax-free return of capital. In addition, you will be treated for tax purposes as having received an additional distribution to the extent the shares are purchased at a discount to fair market value. As a

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result, unless you are a tax-exempt entity, you may have to use funds from other sources to pay your tax liability on the value of the shares of common stock received. See “Description of Shares—Distribution Reinvestment Plan—Tax Consequences of Participation.”
Failure to qualify as a REIT would subject us to federal income tax, which would reduce the cash available for distribution to you.
We expect to operate in a manner that is intended to cause us to qualify as a REIT for federal income tax purposes commencing with our taxable year ending December 31, 2017. However, the federal income tax laws governing REITs are extremely complex, and interpretations of the federal income tax laws governing qualification as a REIT are limited. Qualifying as a REIT requires us to meet various tests regarding the nature of our assets and our income, the ownership of our outstanding stock, and the amount of our distributions on an ongoing basis. While we intend to operate so that we will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, including the tax treatment of certain investments we may make, and the possibility of future changes in our circumstances, no assurance can be given that we will so qualify for any particular year. If we fail to qualify as a REIT in any calendar year and we do not qualify for certain statutory relief provisions, we would be required to pay federal income tax on our taxable income. We might need to borrow money or sell assets to pay that tax. Our payment of income tax would decrease the amount of our income available for distribution to you. Furthermore, if we fail to maintain our qualification as a REIT and we do not qualify for certain statutory relief provisions, we no longer would be required to distribute substantially all of our REIT taxable income to our stockholders. Unless our failure to qualify as a REIT were excused under federal tax laws, we would be disqualified from taxation as a REIT for the four taxable years following the year during which qualification was lost.
Even if we qualify as a REIT for federal income tax purposes, we may be subject to other tax liabilities that reduce our cash flow and our ability to make distributions to you.
Even if we qualify as a REIT for federal income tax purposes, we may be subject to some federal, state and local taxes on our income or property. For example:
In order to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income to our stockholders (which is determined without regard to the dividends paid deduction or net capital gain). To the extent that we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on the undistributed income.
We will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.
If we have net income from the sale of foreclosure property that we hold primarily for sale to customers in the ordinary course of business or other non-qualifying income from foreclosure property, we must pay a tax on that income at the highest corporate income tax rate.
If we sell an asset, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business, our gain would be subject to the 100% “prohibited transaction” tax unless such sale were made by one of our taxable REIT subsidiaries or the sale met certain “safe harbor” requirements under the Internal Revenue Code.
 Our investments in debt instruments may cause us to recognize taxable income for which cash has not been received.
We may acquire debt instruments in the secondary market for less than their face amount. The amount of such discount will generally be treated as “market discount” for federal income tax purposes. In general, we will be required to accrue original issue discount on a debt instrument as taxable income in accordance with applicable

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federal income tax rules even though no cash payments may be received on such debt instrument.
     In the event a borrower with respect to a particular debt instrument encounters financial difficulty rendering it unable to pay stated interest as due, we may nonetheless be required to continue to recognize the unpaid interest as taxable income. Similarly, we may be required to accrue interest income with respect to subordinate mortgage-backed securities at the stated rate regardless of when their corresponding cash payments are received.
As a result of these factors, there is a risk that we may recognize taxable income in excess of cash available for distribution. In that event, we may need to borrow funds or take other action to satisfy the REIT distribution requirements for the taxable year in which this taxable income for which cash has not been received is recognized.
REIT distribution requirements could adversely affect our ability to execute our business plan.
We generally must distribute annually at least 90% of our REIT taxable income, subject to certain adjustments and excluding any net capital gain, in order for federal corporate income tax not to apply to earnings that we distribute. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on our undistributed REIT taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws. We intend to make distributions to our stockholders to comply with the REIT requirements of the Internal Revenue Code.
From time to time, we may generate taxable income greater than our net income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders (for example, where a borrower defers the payment of interest in cash pursuant to a contractual right or otherwise). If we do not have other funds available in these situations we could be required to borrow funds, sell investments at disadvantageous prices or find another alternative source of funds to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.
To maintain our REIT status, we may be forced to forego otherwise attractive opportunities, which may delay or hinder our ability to meet our investment objectives and reduce your overall return.
To qualify as a REIT, we must satisfy certain tests on an ongoing basis concerning, among other things, the sources of our income, nature of our assets and the amounts we distribute to our stockholders. We may be required to make distributions to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution. Compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits and the value of your investment.
The “taxable mortgage pool” rules may increase the taxes that we or our stockholders incur and may limit the manner in which we conduct securitizations.
We may be deemed to be, or we may make investments in entities that own or are themselves deemed to be, taxable mortgage pools. Similarly, certain of our securitizations or other borrowings could be considered to result in the creation of a taxable mortgage pool for federal income tax purposes. As a REIT, provided that we own 100% of the equity interests in a taxable mortgage pool, we generally would not be adversely affected by the characterization of the securitization as a taxable mortgage pool. However, certain categories of stockholders such as foreign stockholders eligible for treaty or other benefits, stockholders with net operating losses, and certain tax-exempt stockholders that are subject to unrelated business income tax, could be subject to increased taxes on a portion of their dividend income from us that is attributable to the taxable mortgage pool. In addition, to the extent that our stock is owned by tax-exempt “disqualified organizations,” such as certain government-related entities that are not subject to tax on unrelated business income, we will incur a corporate-level tax on a portion of our income from the taxable mortgage pool. In that case, we are authorized to reduce and intend to reduce the amount of our

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distributions to any disqualified organization whose stock ownership gave rise to the tax by the amount of such tax paid by us that is attributable to such stockholder’s ownership. Moreover, we would generally be precluded from selling equity interests in these securitizations to outside investors, or selling any debt securities issued in connection with these securitizations that might be considered to be equity interests for federal income tax purposes. These limitations may prevent us from using certain techniques to maximize our returns from securitization transactions or other financing arrangements.
Potential characterization of distributions or gain on sale may be treated as unrelated business taxable income to tax-exempt investors.
If (1) all or a portion of our assets are subject to the rules relating to taxable mortgage pools, (2) we are a “pension-held REIT,” (3) a tax-exempt stockholder has incurred debt to purchase or hold our common stock, or (4) the residual interests in any real estate mortgage investment conduits (“REMICs”), we acquire (if any) generate “excess inclusion income,” then a portion of the distributions to and, in the case of a stockholder described in clause (3), gains realized on the sale of common stock by such tax-exempt stockholder may be subject to federal income tax as unrelated business taxable income under the Internal Revenue Code. See “Federal Income Tax Considerations—Taxation of Resource Apartment REIT III, Inc.—Taxable Mortgage Pools.”
Classification of a securitization or financing arrangement we enter into as a taxable mortgage pool could subject us or certain of you to increased taxation.
We intend to structure our securitization and financing arrangements as to not create a taxable mortgage pool. However, if we have borrowings with two or more maturities and (1) those borrowings are secured by mortgages or mortgage-backed securities and (2) the payments made on the borrowings are related to the payments received on the underlying assets, then the borrowings and the pool of mortgages or mortgage-backed securities to which such borrowings relate may be classified as a taxable mortgage pool under the Internal Revenue Code. If any part of our investments were to be treated as a taxable mortgage pool, then our REIT status would not be impaired, provided we own 100% of such entity, but a portion of the taxable income we recognize may, under regulations to be issued by the Treasury Department, be characterized as “excess inclusion” income and allocated among our stockholders to the extent of and generally in proportion to the distributions we make to each stockholder. Any excess inclusion income would:
not be allowed to be offset by a stockholder’s net operating losses;
be subject to a tax as unrelated business income if a stockholder were a tax-exempt stockholder;
be subject to the application of federal income tax withholding at the maximum rate (without reduction for any otherwise applicable income tax treaty) with respect to amounts allocable to foreign stockholders; and
be taxable (at the highest corporate tax rate) to us, rather than to you, to the extent the excess inclusion income relates to stock held by disqualified organizations (generally, tax-exempt companies not subject to tax on unrelated business income, including governmental organizations).
The tax on prohibited transactions will limit our ability to engage in transactions, including certain methods of securitizing mortgage loans that would be treated as sales for federal income tax purposes.
A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of assets, other than foreclosure property, deemed held primarily for sale to customers in the ordinary course of business where such sales do not qualify for a safe harbor under the Internal Revenue Code. We might be subject to this tax if we were to dispose of or securitize loans in a manner that was treated as a sale of the loans for federal income tax purposes. Therefore, in order to avoid the prohibited transactions tax, we may choose not to engage in certain sales of loans, and may limit the structures we utilize for our securitization transactions, even though the sales or structures might otherwise be beneficial to us.

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It may be possible to reduce the impact of the prohibited transaction tax by conducting certain activities through taxable REIT subsidiaries. However, to the extent that we engage in such activities through taxable REIT subsidiaries, the income associated with such activities may be subject to full corporate income tax.
Complying with REIT requirements may force us to liquidate otherwise attractive investments.
To qualify as a REIT, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets, including certain mortgage loans and mortgage-backed securities. The remainder of our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, and no more than 25% (20% for taxable years after 2017) of the value of our total assets can be represented by securities of one or more taxable REIT subsidiaries. See “Federal Income Tax Considerations—Taxation of Resource Apartment REIT III, Inc.” If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate from our portfolio otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.
Liquidation of assets may jeopardize our REIT qualification.
To qualify as a REIT, we must comply with requirements regarding our assets and our sources of income. If we are compelled to liquidate our investments to repay obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory.
Characterization of any repurchase agreements we enter into to finance our investments as sales for tax purposes rather than as secured lending transactions would adversely affect our ability to qualify as a REIT.
We may enter into repurchase agreements with a variety of counterparties to achieve our desired amount of leverage for the assets in which we invest. When we enter into a repurchase agreement, we generally sell assets to our counterparty to the agreement and receive cash from the counterparty. The counterparty is obligated to resell the assets back to us at the end of the term of the transaction. We believe that for federal income tax purposes we will be treated as the owner of the assets that are the subject of repurchase agreements and that the repurchase agreements will be treated as secured lending transactions notwithstanding that such agreement may transfer record ownership of the assets to the counterparty during the term of the agreement. It is possible, however, that the IRS could successfully assert that we did not own these assets during the term of the repurchase agreements, in which case we could fail to qualify as a REIT if tax ownership of these assets was necessary for us to meet the income or asset tests discussed in “Federal Income Tax Considerations—Taxation of Resource Apartment REIT III, Inc.”
Complying with REIT requirements may limit our ability to hedge effectively.
The REIT provisions of the Internal Revenue Code may limit our ability to hedge our assets and operations. Under these provisions, any income that we generate from transactions intended to hedge our interest rate, inflation or currency risks will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if the instrument hedges (i) interest rate risk on liabilities incurred to carry or acquire real estate, (ii) risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the REIT 75% or 95% gross income tests, or (iii) to manage certain risk with respect to prior hedging transactions described in (i) and/or (ii) above, and such instrument is properly identified under applicable Treasury Regulations. Income from hedging transactions that do not meet these requirements will generally constitute nonqualifying income for purposes of both the REIT 75% and 95% gross income tests. See “Federal Income Tax Considerations—Income

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Tests—Derivatives and Hedging Transactions.” As a result of these rules, we may have to limit our use of hedging techniques that might otherwise be advantageous, which could result in greater risks associated with interest rate or other changes than we would otherwise incur.
Ownership limitations may restrict change of control or business combination opportunities in which you might receive a premium for your shares.
In order for us to qualify as a REIT for each taxable year after 2017, no more than 50% in value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals during the last half of any calendar year. “Individuals” for this purpose include natural persons, and certain other entities including private foundations. To preserve our REIT qualification, our charter generally prohibits any person from directly or indirectly owning more than 9.8% in value or in number of shares, whichever is more restrictive, of any class or series of the outstanding shares of our capital stock. This ownership limitation could have the effect of discouraging a takeover or other transaction in which holders of our common stock might receive a premium for their shares over the then prevailing market price or which holders might believe to be otherwise in their best interests.
Our ownership of and relationship with our taxable REIT subsidiaries will be limited and a failure to comply with the limits would jeopardize our REIT status and may result in the application of a 100% excise tax.
A REIT may own up to 100% of the stock of one or more taxable REIT subsidiaries. A taxable REIT subsidiary may earn income that would not be qualifying income if earned directly by the parent REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a taxable REIT subsidiary. A corporation of which a taxable REIT subsidiary directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a taxable REIT subsidiary. Overall, no more than 25% (20% for taxable years after 2017) of the value of a REIT’s assets may consist of stock or securities of one or more taxable REIT subsidiaries. A domestic taxable REIT subsidiary will pay federal, state and local income tax at regular corporate rates on any income that it earns. In addition, the taxable REIT subsidiary rules limit the deductibility of interest paid or accrued by a taxable REIT subsidiary to its parent REIT to assure that the taxable REIT subsidiary is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a taxable REIT subsidiary and its parent REIT that are not conducted on an arm’s-length basis. We cannot assure you that we will be able to comply with the 25% (or 20%, as applicable) value limitation on ownership of taxable REIT subsidiary stock and securities on an ongoing basis so as to maintain REIT status or to avoid application of the 100% excise tax imposed on certain non-arm’s length transactions.
The IRS may challenge our characterization of certain income from offshore taxable REIT subsidiaries.
We may form offshore corporate entities treated as taxable REIT subsidiaries. If we form such subsidiaries, we may receive certain “income inclusions” with respect to our equity investments in these entities. We intend to treat such income inclusions, to the extent matched by repatriations of cash in the same taxable year, as qualifying income for purposes of the 95% gross income test but not the 75% gross income test. See “Federal Income Tax Considerations—Taxation of Resource Apartment REIT III—Income Tests.” Because there is no clear precedent with respect to the qualification of such income inclusions for purposes of the REIT gross income tests, no assurance can be given that the IRS will not assert a contrary position. If such income does not qualify for the 95% gross income test, we could be subject to a penalty tax or we could fail to qualify as a REIT, in both events only if such inclusions (along with certain other non-qualifying income) exceed 5% of our gross income.
 We may be subject to adverse legislative or regulatory tax changes.
At any time, the federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be amended. According to publicly released statements, a top legislative priority of the new administration may be to enact significant reform of the Internal Revenue Code, including significant changes to taxation of business entities and the deductibility of interest expense and capital investment. There is a substantial lack of clarity around the likelihood, timing and details of any such tax reform and

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the impact of any potential tax reform on the REIT and/or its interest holders. We cannot predict when or if any new federal income tax law, regulation or administrative interpretation, or any amendment to any existing federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation or interpretation may take effect retroactively. We and our stockholders could be adversely affected by any such change in, or any new, federal income tax law, regulation or administrative interpretation.
Dividends payable by REITs do not qualify for the reduced tax rates.
In general, the maximum tax rate for dividends payable to domestic stockholders that are individuals, trusts and estates is 20%. Dividends payable by REITs, however, are generally not eligible for the reduced rates. While this tax treatment does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts and estates, to perceive investments in REITs to be relatively less attractive than investments in stock of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.
Retirement Plan Risks
If you fail to meet the fiduciary and other standards under ERISA or the Internal Revenue Code as a result of an investment in our stock, you could be subject to criminal and civil penalties.
There are special considerations that apply to employee benefit plans subject to ERISA (such as profit-sharing, section 401(k) or pension plans) and other retirement plans or accounts subject to Section 4975 of the Internal Revenue Code (such as an IRA) that are investing in our shares. If you are investing the assets of such a plan or account in our common stock, you should satisfy yourself that:
your investment is consistent with your fiduciary and other obligations under ERISA and the Internal Revenue Code;
your investment is made in accordance with the documents and instruments governing your plan or IRA, including your plan’s or account’s investment policy;
your investment satisfies the prudence and diversification requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA and other applicable provisions of ERISA and the Internal Revenue Code;
your investment in our shares, for which no trading market may exist, is consistent with the liquidity needs of the plan or IRA;
your investment will not produce an unacceptable amount of “unrelated business taxable income” for the plan or IRA;
you will be able to comply with the requirements under ERISA and the Internal Revenue Code to value the assets of the plan or IRA annually; and
your investment will not constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code.
With respect to the annual valuation requirements described above, we expect to provide an estimated value for our shares annually. Initially, we will report the net investment amount of our Class A and Class T shares, which will be based on the “amount available for investment/net investment amount” percentage shown in our estimated use of proceeds table.
     This estimated value is not likely to reflect the proceeds you would receive upon our liquidation or upon the sale of your shares. Accordingly, we can make no claim whether such estimated value will or will not satisfy the applicable annual valuation requirements under ERISA and the Internal Revenue Code. The Department of Labor or

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the Internal Revenue Service may determine that a plan fiduciary or an IRA custodian is required to take further steps to determine the value of our common shares. In the absence of an appropriate determination of value, a plan fiduciary or an IRA custodian may be subject to damages, penalties or other sanctions.
Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA and the Internal Revenue Code may result in the imposition of civil and criminal penalties, and can subject the fiduciary to claims for damages or for equitable remedies, including liability for investment losses. In addition, if an investment in our shares constitutes a prohibited transaction under ERISA or the Internal Revenue Code, the fiduciary or IRA owner who authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested. Additionally, the investment transaction may be undone. In the case of a prohibited transaction involving an IRA owner, the IRA may be disqualified as a tax-exempt account and all of the assets of the IRA may be deemed distributed and subjected to tax. ERISA plan fiduciaries and IRA owners should consult with counsel before making an investment in our common shares.
If and when it becomes applicable, the Department of Labor’s revised fiduciary rule could adversely affect the marketing of our shares.
The Department of Labor recently issued a final regulation that modifies the definition of a “fiduciary” under ERISA. The regulation provides that a routine solicitation directed to an IRA, a benefit plan participant or beneficiary, or to certain smaller plans will be characterized as a “recommendation” that will result in fiduciary status for the person or entity making the solicitation. The Department of Labor also issued new and modified prohibited transaction exemptions that are intended to facilitate the marketing of investments under the final regulation. The final regulation and the related exemptions are complex, but it is possible that the final regulation could have a negative effect on the marketing of investments in our shares to such plans or accounts due to uncertainty and/or restrictions under the regulation and the exemptions.


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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will” and “would” or the negative of these terms or other comparable terminology.
The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us or are within our control. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. Forward-looking statements we make in this prospectus are subject to various risks and uncertainties that could cause actual results to vary from our forward-looking statements, including:
the factors described in this prospectus, including those set forth under the sections captioned “Risk Factors” and “Investment Objectives and Policies;”
our future operating results;
our business prospects;
changes in our business strategy;
availability, terms and deployment of capital;
availability of qualified personnel;
changes in our industry, interest rates, the debt securities market or the general economy;
changes in governmental regulations, tax rates and similar matters;
availability of investment opportunities in real estate and real estate-related assets;
the degree and nature of our competition;
the adequacy of our cash reserves and working capital; and
the timing of cash flows, if any, from our investments.
Except as otherwise required by federal securities laws, we do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


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ESTIMATED USE OF PROCEEDS
The following table sets forth information about how we intend to use the proceeds raised in this primary offering assuming that we sell the mid-point range of $500,000,000 of shares and the maximum of $1,000,000,000 of shares, respectively, of common stock. Many of the amounts set forth below represent management’s best estimate since they cannot be precisely calculated at this time. The following tables assume that (a) 90% and 10% of the remaining amount of common stock to be sold in the primary offering is Class R common stock and Class I common stock, respectively, and includes the actual sale of approximately $5.8 million and $9.9 million of Class A and Class T common stock, respectively, prior to July 3, 2017, (b) we do not reallocate shares being offered between our primary offering and distribution reinvestment plan, (c) based on this allocation we sell all shares at the highest possible selling commissions and dealer manager fees (with no discounts to any categories of purchasers). Raising less than the maximum offering amount or selling a different percentage of Class R and Class I shares will alter the amounts of commissions, fees and expenses set forth below.
Assuming we sell the maximum offering amount in this primary offering and 90% and 10% of the remaining amount of common stock to be sold in the primary offering is Class R common stock and Class I common stock, respectively, which has been reduced to reflect the actual sale of approximately $5.8 million and $9.9 million of Class A and Class T common stock, respectively, prior to July 3, 2017, we estimate that we will use 86.34% of the gross proceeds from the sale of Class A shares, 91.22% of the gross proceeds from the sale of Class T shares, 90.74% of the gross proceeds from the sale of Class R shares and 94.64% of the gross proceeds from the sale of Class I shares in the primary offering, or approximately $8.64 per Class A, Class T, Class R and Class I share, for investments, while the remainder of the gross proceeds from the primary offering will be used to pay organization and offering expenses, including selling commissions and the dealer manager fee, to maintain a working capital reserve and, upon investment in properties and other assets, to pay a fee to our advisor for its services in connection with the selection and acquisition of our real estate investments.
To the extent offering proceeds are used to pay distributions in anticipation of future cash flow from operating activities, the amount available for investment will be correspondingly reduced, your overall return may be reduced, our portfolio may be less diversified and the value of a share of our common stock may be diluted. Our organizational documents do not limit the amount of distributions we can fund from sources other than from cash flows from operations, including from offering proceeds. See “Risks Related to This Offering and Our Corporate Structure.”
The following table presents information regarding the use of proceeds raised in this offering with respect to Class A shares.
 
 
Maximum Sale of
$5,801,476
of Class A Shares
in the Offering (1)
 
Sale of $5,801,476
of Class A Shares
in the Offering
(Half Offering) (1)
 
 
Amount ($)
 
Percent of Public Offering Proceeds
 
Amount ($)
 
Percent of Public Offering Proceeds
Gross Offering Proceeds
 
5,801,476

 
100
%
 
5,801,476

 
100
%
Less Offering Expenses
 
 
 
 
 
 
 
 
Selling Commissions
 
406,103

 
7.00
%
 
406,103

 
7.00
%
Dealer Manager Fee
 
174,044

 
3.00
%
 
174,044

 
3.00
%
Other Organization and Offering Expenses(2)
 
58,015

 
1.00
%
 
101,526

 
1.75
%
Amount Available for Investment/Net Investment Amount
 
5,163,314

 
89.00
%
 
5,119,803

 
88.25
%
Acquisition Fees(3)
 
100,182

 
1.73
%
 
99,333

 
1.71
%
Acquisition Expenses(3)
 
25,045

 
0.43
%
 
24,833

 
0.43
%
Initial Working Capital Reserve(4)
 
29,007

 
0.50
%
 
29,007

 
0.50
%
Targeted Investment Capital(5)
 
5,009,080

 
86.34
%
 
4,966,630

 
85.61
%

75





The following table presents information regarding the use of proceeds raised in this offering with respect to Class T shares.
 
 
Maximum Sale of
$9,943,465
of Class T Shares
in the Offering (1)
 
Sale of $9,943,465
of Class T Shares
in the Offering
(Half Offering) (1)
 
 
Amount ($)
 
Percent of Public Offering Proceeds
 
Amount ($)
 
Percent of Public Offering Proceeds
Gross Offering Proceeds
 
9,943,465

 
100
%
 
9,943,465

 
100
%
Less Offering Expenses
 
 
 
 
 
 
 
 
Selling Commissions(6)
 
198,869

 
2.00
%
 
198,869

 
2.00
%
Dealer Manager Fee(6)
 
298,304

 
3.00
%
 
298,304