UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☑

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

For the quarterly period ended

~~September 30, 2020~~March 31, 2021

☐

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

For the transition period from ~~_________~~

to ~~_________~~

Commission file number 000-55428

STEADFAST APARTMENT REIT, INC.

(Exact Name of Registrant as Specified in Its Charter)



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



18100 Von Karman Avenue, Suite 200
Irvine,	California	92612
(Address of Principal Executive Offices) ~~(Zip Code)~~
~~18100 Von Karman Avenue, Suite 500~~
~~Irvine, California 92612~~
(~~Former name, former address and formal fiscal year, if changed since last report)~~Zip Code)

(949) 569-9700

(Registrant’s Telephone Number, Including Area Code)

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


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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

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

Large Accelerated filer

☐

Accelerated filer

☐

Non-Accelerated filer

☑

Smaller reporting company

☐

~~Non-Accelerated filer~~

☑

~~Smaller reporting company~~

☐

Emerging growth company

☐

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

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

As of ~~November 5, 2020,~~May 7, 2021, there were ~~109,931,015~~110,161,467 shares of the Registrant’s common stock issued and outstanding.

Table of Contents

STEADFAST APARTMENT REIT, INC.

INDEX


									Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements									2
Consolidated Balance Sheets as of ~~September~~ ~~30, 2020~~March 31, 2021 (unaudited) and December 31, ~~2019~~2020									2
Consolidated Statements of Operations for the three ~~and~~ ~~nine~~months ended ~~September~~ ~~30,~~March 31, 2021 and 2020 ~~and 2019~~ (unaudited)									3
Consolidated Statements of Stockholders’ Equity for the three ~~and~~ ~~nine~~months ended ~~September~~ ~~30,~~March 31, 2021 and 2020 ~~and 2019~~ (unaudited)									4
Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September~~ ~~30,~~March 31, 2021 and 2020 ~~and 2019~~ (unaudited)									6
Condensed Notes to Consolidated Financial Statements as of ~~September 30, 2020~~March 31, 2021 (unaudited)									98
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations									6055
Item 3. Quantitative and Qualitative Disclosures About Market Risk									9279
Item 4. Controls and Procedures									9380

PART II — OTHER INFORMATION
Item 1. Legal Proceedings									9481
Item 1A. Risk Factors									9481
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds									9681
Item 3. Defaults Upon Senior Securities									9781
Item 4. Mine Safety Disclosures									9781
Item 5. Other Information									9782
Item 6. Exhibits									9882
Signatures									~~100~~84

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED BALANCE SHEETS


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Assets:	Assets:					Assets:
Real Estate:	Real Estate:					Real Estate:
Land	Land	$	332,223,332	$	151,294,208	Land	$	337,896,051	$	337,322,234
Building and improvements	Building and improvements	2,822,838,232		1,369,256,465		Building and improvements	2,877,749,041		2,882,411,683
Tenant origination and absorption costs	Tenant origination and absorption costs	1,976,514		0		Tenant origination and absorption costs	1,752,793		1,752,793
Total real estate held for investment, cost	Total real estate held for investment, cost	3,157,038,078		1,520,550,673		Total real estate held for investment, cost	3,217,397,885		3,221,486,710
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization	(365,906,596)		(277,033,046)		Less accumulated depreciation and amortization	(429,867,083)		(397,744,677)
Total real estate held for investment, net	Total real estate held for investment, net	2,791,131,482		1,243,517,627		Total real estate held for investment, net	2,787,530,802		2,823,742,033
Real estate held for development	Real estate held for development	35,183,272		5,687,977		Real estate held for development	39,326,042		39,891,218
Real estate held for sale, net		32,425,732		21,665,762

Total real estate, net	Total real estate, net	2,858,740,486		1,270,871,366		Total real estate, net	2,826,856,844		2,863,633,251
Cash and cash equivalents	Cash and cash equivalents	311,515,756		74,806,649		Cash and cash equivalents	242,291,317		258,198,326
Restricted cash	Restricted cash	42,531,779		73,614,452		Restricted cash	29,333,777		38,998,980

Goodwill	Goodwill	125,220,448		0		Goodwill	125,220,448		125,220,448
Due from affiliates	Due from affiliates	390,099		0		Due from affiliates	266,400		377,218
Rents and other receivables	Rents and other receivables	4,840,839		2,032,774		Rents and other receivables	32,142,297		5,385,108
Assets related to real estate held for sale		91,450		118,570

Other assets	Other assets	11,796,829		5,513,315		Other assets	6,765,405		9,925,714
Total assets	Total assets	$	3,355,127,686	$	1,426,957,126	Total assets	$	3,262,876,488	$	3,301,739,045

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:	Liabilities:					Liabilities:
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	$	77,930,891	$	30,265,713	Accounts payable and accrued liabilities	$	75,101,789	$	81,598,526
Notes Payable, net:	Notes Payable, net:					Notes Payable, net:
Mortgage notes payable, net	Mortgage notes payable, net	1,382,058,322		560,098,815		Mortgage notes payable, net	1,386,853,350		1,384,382,785
Credit facilities, net	Credit facilities, net	744,648,215		548,460,230		Credit facilities, net	745,072,888		744,862,886
Notes payable related to real estate held for sale, net		19,334,554		0
Total notes payable, net	Total notes payable, net	2,146,041,091		1,108,559,045		Total notes payable, net	2,131,926,238		2,129,245,671
Distributions payable	Distributions payable	8,182,566		4,021,509		Distributions payable	4,953,584		8,462,735
Distributions payable to affiliates	Distributions payable to affiliates	454,100		0		Distributions payable to affiliates	274,474		469,236
Due to affiliates	Due to affiliates	275,536		7,305,570		Due to affiliates	77,344		337,422
Liabilities related to real estate held for sale		696,441		788,720

Total liabilities	Total liabilities	2,233,580,625		1,150,940,557		Total liabilities	2,212,333,429		2,220,113,590
Commitments and contingencies (Note 12)	Commitments and contingencies (Note 12)					Commitments and contingencies (Note 12)	0		0
Redeemable common stock	Redeemable common stock	0		1,202,711		Redeemable common stock	712,069		0
Stockholders’ Equity:	Stockholders’ Equity:					Stockholders’ Equity:
Preferred stock, $0.01 par value per share; 100,000,000 shares authorized, 0 shares issued and outstanding	Preferred stock, $0.01 par value per share; 100,000,000 shares authorized, 0 shares issued and outstanding	0		0		Preferred stock, $0.01 par value per share; 100,000,000 shares authorized, 0 shares issued and outstanding	0		0
Common stock, $0.01 par value per share; 999,998,000 shares authorized, 109,979,371 and 52,607,695 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		1,099,794		526,077
Convertible stock, $0.01 par value per share; 1,000 shares authorized, 0 and 1,000 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		0		10
Class A Convertible stock, $0.01 par value per share; 1,000 shares authorized, 0 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		0		0
Common stock, $0.01 par value per share; 999,998,000 shares authorized, 110,187,405 and 110,070,572 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively						Common stock, $0.01 par value per share; 999,998,000 shares authorized, 110,187,405 and 110,070,572 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	1,101,874		1,100,706
Convertible stock, $0.01 par value per share; 1,000 shares authorized, 0 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively						Convertible stock, $0.01 par value per share; 1,000 shares authorized, 0 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	0		0
Class A Convertible stock, $0.01 par value per share; 1,000 shares authorized, 0 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively						Class A Convertible stock, $0.01 par value per share; 1,000 shares authorized, 0 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	0		0
Additional paid-in capital	Additional paid-in capital	1,602,384,557		698,453,981		Additional paid-in capital	1,605,912,272		1,603,989,130
Cumulative distributions and net losses	Cumulative distributions and net losses	(588,623,895)		(424,166,210)		Cumulative distributions and net losses	(659,581,535)		(627,787,040)
Total Steadfast Apartment REIT, Inc. (“STAR”) stockholders’ equity	Total Steadfast Apartment REIT, Inc. (“STAR”) stockholders’ equity	1,014,860,456		274,813,858		Total Steadfast Apartment REIT, Inc. (“STAR”) stockholders’ equity	947,432,611		977,302,796
Noncontrolling interest	Noncontrolling interest	106,686,605		0		Noncontrolling interest	102,398,379		104,322,659
Total equity	Total equity	1,121,547,061		274,813,858		Total equity	1,049,830,990		1,081,625,455
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	3,355,127,686	$	1,426,957,126	Total liabilities and stockholders’ equity	$	3,262,876,488	$	3,301,739,045

See accompanying notes to consolidated financial statements.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Revenues:	Revenues:									Revenues:
Rental income	Rental income	$	82,937,828	$	43,962,752	$	215,817,169	$	129,166,798	Rental income	$	82,379,277	$	53,266,672
Other income	Other income	732,680		228,088		1,862,873		824,096		Other income	778,540		447,267
Total revenues	Total revenues	83,670,508		44,190,840		217,680,042		129,990,894		Total revenues	83,157,817		53,713,939
Expenses:	Expenses:									Expenses:
Operating, maintenance and management	Operating, maintenance and management	21,497,606		11,802,969		53,713,931		32,370,752		Operating, maintenance and management	20,765,034		12,496,559
Real estate taxes and insurance	Real estate taxes and insurance	12,935,004		6,086,781		35,346,220		19,111,364		Real estate taxes and insurance	13,856,893		8,743,446
Fees to affiliates	Fees to affiliates	8,449,715		6,917,303		30,586,344		19,248,909		Fees to affiliates	4,287		8,427,296
Depreciation and amortization	Depreciation and amortization	47,564,706		18,632,477		129,596,268		55,430,404		Depreciation and amortization	33,874,505		28,575,896
Interest expense	Interest expense	20,628,159		12,562,978		54,734,431		36,962,055		Interest expense	19,807,678		14,390,954
General and administrative expenses	General and administrative expenses	11,775,591		2,216,129		19,478,747		5,881,278		General and administrative expenses	11,325,410		2,430,299

Impairment of real estate		0		0		5,039,937		0

Total expenses	Total expenses	122,850,781		58,218,637		328,495,878		169,004,762		Total expenses	99,633,807		75,064,450
Loss before other income		(39,180,273)		(14,027,797)		(110,815,836)		(39,013,868)
Other income (loss):
Loss before other income (expenses)										Loss before other income (expenses)	(16,475,990)		(21,350,511)
Other income (expenses):										Other income (expenses):
Gain on sale of real estate, net	Gain on sale of real estate, net	1,392,434		3,329,078		12,777,033		3,329,078		Gain on sale of real estate, net	0		11,384,599
Interest income	Interest income	165,495		252,227		553,011		592,792		Interest income	105,019		253,254
Insurance proceeds in excess of losses incurred	Insurance proceeds in excess of losses incurred	112,342		56,686		236,754		391,519		Insurance proceeds in excess of losses incurred	103,487		66,723
Equity in loss from unconsolidated joint venture	Equity in loss from unconsolidated joint venture	(16,711)		0		(3,020,111)		0		Equity in loss from unconsolidated joint venture	0		(35,193)
Fees and other income from affiliates	Fees and other income from affiliates	390,099		0		390,099		0		Fees and other income from affiliates	1,457,921		0

Loss on debt extinguishment		(621,451)		0		(621,451)		(41,609)
Total other income	Total other income	1,422,208		3,637,991		10,315,335		4,271,780		Total other income	1,666,427		11,669,383
Net loss	Net loss	(37,758,065)		(10,389,806)		(100,500,501)		(34,742,088)		Net loss	(14,809,563)		(9,681,128)
Loss allocated to noncontrolling interest	Loss allocated to noncontrolling interest	(844,653)		0		(681,339)		0		Loss allocated to noncontrolling interest	(778,275)		0
Net loss attributable to common stockholders	Net loss attributable to common stockholders	$	(36,913,412)	$	(10,389,806)	$	(99,819,162)	$	(34,742,088)	Net loss attributable to common stockholders	$	(14,031,288)	$	(9,681,128)
Loss per common share — basic and diluted	Loss per common share — basic and diluted	$	(0.34)	$	(0.20)	$	(1.04)	$	(0.67)	Loss per common share — basic and diluted	$	(0.13)	$	(0.14)

Weighted average number of common shares outstanding — basic and diluted	Weighted average number of common shares outstanding — basic and diluted	109,663,583		52,279,878		95,714,116		52,096,357		Weighted average number of common shares outstanding — basic and diluted	109,886,636		68,180,512

See accompanying notes to consolidated financial statements.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED ~~STATEMENTS~~STATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30, 2020~~ MARCH 31, 2021

(Unaudited)

Common Stock Convertible Stock Class A Convertible Stock Additional
Paid-In Capital Cumulative Distributions & Net Losses Total STAR Stockholders’ Equity Noncontrolling Interest Total
Stockholders’ Equity
Shares Amount Shares Amount Shares Amount
BALANCE, July 1, 2020 109,437,702 $ 1,094,377 0 $ 0 1,000 $ 10 $ 1,596,591,653 $ (526,888,587) $ 1,070,797,453 $ 14,450,000 $ 1,085,247,453
Issuance of common stock 824,152 8,242 — — — — 9,693,591 — 9,701,833 — 9,701,833
Issuance of Class B OP Units — — — — — — — — — 93,750,000 93,750,000
Repurchase of common stock (282,483) (2,825) — — — — (3,997,175) — (4,000,000) — (4,000,000)
Repurchase of Class A convertible stock — — — — (1,000) (10) (990) — (1,000) — (1,000)
Distributions declared ($0.226 per share
of common stock)
— — — — — — — (24,821,896) (24,821,896) (668,742) (25,490,638)
Amortization of stock-based compensation — — — — — — 97,478 — 97,478 — 97,478
Net loss — — — — — — — (36,913,412) (36,913,412) (844,653) (37,758,065)
BALANCE, September 30, 2020 109,979,371 $ 1,099,794 0 $ 0 0 $ 0 $ 1,602,384,557 $ (588,623,895) $ 1,014,860,456 $ 106,686,605 $ 1,121,547,061


	Common Stock			Convertible Stock			Class A Convertible Stock			Additional Paid-In Capital		Cumulative Distributions & Net Losses			Total STAR Stockholders’ Equity		Noncontrolling Interest		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount		Shares	Amount
BALANCE, January 1, 2021	110,070,572	$	1,100,706	—	$	—	—	$	—	$	1,603,989,130	$	(627,787,040)		$	977,302,796	$	104,322,659	$	1,081,625,455
Issuance of common stock	399,310	3,993		—	—		—	—		4,596,610		—			4,600,603		—		4,600,603
Transfer to redeemable common stock	—	—		—	—		—	—		(3,000,000)		—			(3,000,000)		—		(3,000,000)
Repurchase of common stock	(282,477)	(2,825)		—	—		—	—		2,825		—			0		—		0

Distributions declared ($0.16 per share of common stock)	—	—		—	—		—	—		—		(17,763,207)			(17,763,207)		(1,146,005)		(18,909,212)
Amortization of stock-based compensation	—	—		—	—		—	—		323,707		—			323,707		—		323,707
Net loss	—	—		—	—		—	—		—		(14,031,288)			(14,031,288)		(778,275)		(14,809,563)
BALANCE, March 31, 2021	110,187,405	$	1,101,874	—	$	—	—	$	—	$	1,605,912,272	$	(659,581,535)	0	$	947,432,611	$	102,398,379	$	1,049,830,990

Common Stock Convertible Stock Class A Convertible Stock Additional
Paid-In Capital Cumulative Distributions & Net Losses Total STAR Stockholders’ Equity Noncontrolling Interest Total
Stockholders’ Equity
Shares Amount Shares Amount Shares Amount
BALANCE, January 1, 2020 52,607,695 $ 526,077 1,000 $ 10 — $ — $ 698,453,981 $ (424,166,210) $ 274,813,858 $ — $ 274,813,858
Issuance of common stock 1,840,307 18,404 — — — — 25,322,884 — 25,341,288 — 25,341,288
Issuance of common stock in connection with the SIR Merger 43,775,314 437,753 — — — — 692,963,221 — 693,400,974 — 693,400,974
Issuance of common stock in connection with the STAR III Merger 12,240,739 122,407 — — — — 193,770,898 — 193,893,305 — 193,893,305
Issuance of OP Units — — — — — — — — — 108,200,000 108,200,000
Exchange of convertible common stock
into Class A convertible common stock
— — (1,000) (10) 1,000 10 — — — — —
Transfers to redeemable common stock — — — — — — (1,383,318) — (1,383,318) — (1,383,318)
Repurchase of common stock (484,684) (4,847) — — — — (6,902,980) — (6,907,827) — (6,907,827)
Repurchase of Class A convertible stock — — — — (1,000) (10) (990) — (1,000) — (1,000)
Distributions declared ($0.674 per share
of common stock)
— — — — — — — (64,638,523) (64,638,523) (832,056) (65,470,579)
Amortization of stock-based compensation — — — — — — 160,861 — 160,861 — 160,861
Net loss — — — — — — — (99,819,162) (99,819,162) (681,339) (100,500,501)
BALANCE, September 30, 2020 109,979,371 $ 1,099,794 0 $ 0 0 $ 0 $ 1,602,384,557 $ (588,623,895) $ 1,014,860,456 $ 106,686,605 $ 1,121,547,061

~~See accompanying notes to consolidated financial statements.~~

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

~~STEADFAST APARTMENT REIT, INC.~~

~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY~~

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 (Unaudited)~~


STEADFAST APARTMENT REIT, INC.																		STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY																		CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2020																		FOR THE THREE MONTHS ENDED MARCH 31, 2020
(Unaudited)																		(Unaudited)

		Common Stock			Convertible Stock			Additional Paid-In Capital				Cumulative Distributions & Net Losses				Total Stockholders’ Equity					Common Stock				Convertible Stock				Class A Convertible Stock				Additional Paid-In Capital			Cumulative Distributions & Net Losses			Total STAR Stockholders’ Equity
		Shares	Amount		Shares	Amount												Shares				Amount		Shares		Amount		Shares		Amount
BALANCE, July 1, 2019		52,142,845	$	521,428	1,000	$	10			$	690,921,687			$	(386,218,653)				$	305,224,472
BALANCE, January 1, 2020																		BALANCE, January 1, 2020			52,607,695		$	526,077	1,000		$	10	—		$	—		$	698,453,981		$	(424,166,210)		$	274,813,858
Issuance of common stock	Issuance of common stock	334,187	3,342		—	—		5,290,186				—				5,293,528		Issuance of common stock			327,635		3,277		—		—		—		—		5,080,878			—			5,084,155
Issuance of common stock in connection with the SIR Merger																		Issuance of common stock in connection with the SIR Merger			43,775,314		437,753		—		—		—		—		692,963,221			—			693,400,974
Issuance of common stock in connection with the STAR III Merger																		Issuance of common stock in connection with the STAR III Merger			12,240,739		122,407		—		—		—		—		193,770,898			—			193,893,305
Exchange of convertible common stock into Class A convertible common stock																		Exchange of convertible common stock into Class A convertible common stock			—		—		(1,000)		(10)		1,000		10		—			—			0

Transfers to redeemable common stock																		Transfers to redeemable common stock			—		—		—		—		—		—		(1,383,318)			—			(1,383,318)
Repurchase of common stock	Repurchase of common stock	(135,389)	(1,354)		—	—		(1,998,646)				—				(2,000,000)		Repurchase of common stock			(53,152)		(532)		—		—		—		—		(796,757)			—			(797,289)

Distributions declared ($0.227 per share of common stock)		—	—		—	—		—				(11,860,005)				(11,860,005)
Distributions declared ($0.224 per share of common stock)																		Distributions declared ($0.224 per share of common stock)			—		—		—		—		—		—		—			(15,391,533)			(15,391,533)
Amortization of stock-based compensation	Amortization of stock-based compensation	—	—		—	—		11,390				—				11,390		Amortization of stock-based compensation			—		—		—		—		—		—		42,455			—			42,455
Net loss	Net loss	—	—		—	—		—				(10,389,806)				(10,389,806)		Net loss			—		—		—		—		—		—		—			(9,681,128)			(9,681,128)
BALANCE, September 30, 2019		52,341,643	$	523,416	1,000	$	10	$	694,224,617			$	(408,468,464)			$	286,279,579
BALANCE, March 31, 2020																		BALANCE, March 31, 2020			108,898,231		$	1,088,982	0		$	0	1,000		$	10	$	1,588,131,358		$	(449,238,871)		$	1,139,981,479

Common Stock Convertible Stock Additional
Paid-In Capital Cumulative Distributions & Net Losses Total
Stockholders’ Equity
Shares Amount Shares Amount
BALANCE, January 1, 2019 51,723,801 $ 517,238 1,000 $ 10 $ 684,140,823 $ (338,670,111) $ 345,987,960
Issuance of common stock 1,028,077 10,280 — — 16,040,510 — 16,050,790
Repurchase of common stock (410,235) (4,102) — — (5,995,898) — (6,000,000)
Distributions declared ($0.673 per share of common stock) — — — — — (35,056,265) (35,056,265)
Amortization of stock-based compensation — — — — 39,182 — 39,182
Net loss — — — — — (34,742,088) (34,742,088)
BALANCE, September 30, 2019 52,341,643 $ 523,416 1,000 $ 10 $ 694,224,617 $ (408,468,464) $ 286,279,579

See accompanying notes to consolidated financial statements.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

~~Item 1. Financial Statements (continued)~~

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019			2021		2020
Cash Flows from Operating Activities:	Cash Flows from Operating Activities:					Cash Flows from Operating Activities:
Net loss	Net loss	$	(100,500,501)	$	(34,742,088)	Net loss	$	(14,809,563)	$	(9,681,128)
Adjustments to reconcile net loss to net cash provided by operating activities:	Adjustments to reconcile net loss to net cash provided by operating activities:					Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	129,596,268		55,430,404		Depreciation and amortization	33,874,505		28,575,896
Fees to affiliates paid in common stock		9,484,039		0

Loss on disposal of buildings and improvements	Loss on disposal of buildings and improvements	552,793		150,978		Loss on disposal of buildings and improvements	103,441		68,846
Loss on disposal of buildings and improvements from winter storm						Loss on disposal of buildings and improvements from winter storm	15,459,862		0
Amortization of deferred financing costs	Amortization of deferred financing costs	1,382,954		750,751		Amortization of deferred financing costs	548,781		327,470
Amortization of stock-based compensation	Amortization of stock-based compensation	160,861		39,182		Amortization of stock-based compensation	323,707		42,455
Amortization of below market leases	Amortization of below market leases	(4,265)		—		Amortization of below market leases	(1,671)		922
Change in fair value of interest rate cap agreements	Change in fair value of interest rate cap agreements	56,287		223,867		Change in fair value of interest rate cap agreements	(10,820)		2,251
Gain on sale of real estate	Gain on sale of real estate	(12,777,033)		(3,329,078)		Gain on sale of real estate	0		(11,384,599)

Impairment of real estate		5,039,937		0
Amortization of loan premiums	Amortization of loan premiums	(1,297,874)		—		Amortization of loan premiums	(553,764)		(144,457)
Accretion of loan discounts	Accretion of loan discounts	338,047		0		Accretion of loan discounts	135,875		29,875
Straight line of finance lease right-of-use assets						Straight line of finance lease right-of-use assets	5,433		0
Interest on finance lease furnishings	Interest on finance lease furnishings	47		0		Interest on finance lease furnishings	107		0
Loss on debt extinguishment		621,451		41,609

Equity in loss from unconsolidated joint venture						Equity in loss from unconsolidated joint venture	0		35,193
Insurance claim recoveries	Insurance claim recoveries	(777,353)		(706,654)		Insurance claim recoveries	(15,656,642)		(228,380)
Equity in loss from unconsolidated joint venture		3,020,111		0
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:

Rents and other receivables	Rents and other receivables	(675,979)		(87,831)		Rents and other receivables	(11,512,685)		58,590
Other assets	Other assets	(546,777)		(799,448)		Other assets	2,923,097		818,320
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	16,634,701		1,014,193		Accounts payable and accrued liabilities	(6,689,495)		(3,927,637)
Due to affiliates	Due to affiliates	(7,732,288)		807,450		Due to affiliates	(210,121)		598,136
Due from affiliates	Due from affiliates	(390,099)		0		Due from affiliates	110,818		0
Net cash provided by operating activities	Net cash provided by operating activities	42,185,327		18,793,335		Net cash provided by operating activities	4,040,865		5,191,753
Cash Flows from Investing Activities:	Cash Flows from Investing Activities:					Cash Flows from Investing Activities:
Acquisition of real estate investments	Acquisition of real estate investments	(69,914,948)		0		Acquisition of real estate investments	0		(69,196,179)
Cash acquired in connection with the Mergers, net of acquisition costs		98,283,732		0
Acquisition of assets from internalization transaction		(29,486,646)		0
Cash acquired in connection with the Mergers, net of transaction costs						Cash acquired in connection with the Mergers, net of transaction costs	0		98,283,732
Acquisition of real estate held for development	Acquisition of real estate held for development	(14,321,851)		(2,158,815)		Acquisition of real estate held for development	0		(6,287,613)
Additions to real estate investments	Additions to real estate investments	(17,205,299)		(19,206,964)		Additions to real estate investments	(4,818,069)		(1,221,453)
Additions to real estate held for development	Additions to real estate held for development	(10,687,626)		(1,789,630)		Additions to real estate held for development	(5,732,099)		(670,071)
Escrow deposits for pending real estate acquisitions	Escrow deposits for pending real estate acquisitions	(1,000,000)		(700,100)		Escrow deposits for pending real estate acquisitions	0		(2,500,000)
Capitalized acquisition costs related to mergers		0		(10,471)

Purchase of interest rate cap agreements	Purchase of interest rate cap agreements	(67,000)		(18,000)		Purchase of interest rate cap agreements	(12,200)		0
Net proceeds from sale of real estate investments		81,208,213		29,944,301
Net proceeds from sale of unconsolidated joint venture		19,022,280		0

Net proceeds from sale of real estate investment						Net proceeds from sale of real estate investment	0		32,962,285
Proceeds from insurance claims	Proceeds from insurance claims	1,452,262		781,654		Proceeds from insurance claims	412,138		86,892
Cash contribution to unconsolidated joint venture		(274,400)		0

Cash distribution from unconsolidated joint venture	Cash distribution from unconsolidated joint venture	360,700		0		Cash distribution from unconsolidated joint venture	0		118,000
Net cash provided by investing activities		57,369,417		6,841,975
Net cash (used in) provided by investing activities						Net cash (used in) provided by investing activities	(10,150,230)		51,575,593
Cash Flows from Financing Activities:						Cash Flows from Financing Activities:
Proceeds from issuance of mortgage notes payable						Proceeds from issuance of mortgage notes payable	4,584,641		0
Principal payments on mortgage notes payable						Principal payments on mortgage notes payable	(2,034,966)		(313,032)
Borrowings from credit facilities						Borrowings from credit facilities	0		40,468,000

Payments of commissions on sale of common stock						Payments of commissions on sale of common stock	0		(46,995)

Payment of loan financing deposits						Payment of loan financing deposits	0		(80,000)
Payment of deferred financing costs						Payment of deferred financing costs	0		(4,079,493)

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

~~Item 1. Financial Statements (continued)~~

STEADFAST APARTMENT REIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
Nine Months Ended September 30,
2020 2019
Cash Flows from Financing Activities:
   Proceeds from issuance of mortgage notes payable 2,205,999 126,121,000
   Principal payments on mortgage notes payable (35,190,503) (76,105,725)
   Borrowings from credit facilities 198,808,000 0
   Repurchase of Class A convertible stock (1,000) 0
   Payments of commissions on sale of common stock (50,051) (172,278)
   Payment of loan financing deposits 0 (254,722)
   Payment of deferred financing costs (6,753,413) (798,455)
   Payment of debt extinguishment costs (324,000) 0
   Distributions to common stockholders (45,742,635) (19,085,888)
   Repurchase of common stock (6,907,827) (6,000,000)
      Net cash provided by financing activities 106,044,570 23,703,932
      Net increase in cash, cash equivalents and restricted cash 205,599,314 49,339,242
Cash, cash equivalents and restricted cash, beginning of the period 148,539,671 72,738,775
Cash, cash equivalents and restricted cash, end of the period $ 354,138,985 $ 122,078,017

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)

Nine Months Ended September 30,
2020 2019
Supplemental Disclosures of Cash Flow Information:
      Interest paid, net of amounts capitalized of $576,521 and $49,068 for the nine months
        ended September 30, 2020 and 2019, respectively
$ 51,556,232 $ 36,328,593
Supplemental Disclosures of Noncash Flow Transactions:
Distributions payable to non-affiliated shareholders $ 8,182,566 $ 3,873,086
Distributions payable to affiliates $ 454,100 $ 0
Class A-2 OP Units issued for real estate $ 14,450,000 $ 0
Class B OP Units issued in exchange for net assets acquired in Internalization Transaction $ 93,750,000 $ 0
Goodwill acquired in the Internalization Transaction $ 125,220,448 $ 0
Affiliate assets acquired in the Internalization Transaction (except for affiliated operating
   lease right-of-use of $1,570,472, net which is included below in operating lease right-of-
    use assets )
$ 1,066,219 $ 0
Affiliate liabilities assumed in the Internalization Transaction $ 4,701,436 $ 0
Assumption of mortgage notes payable to acquire real estate $ 81,315,122 $ 0
Premiums on assumed mortgage notes payable $ 945,235 $ 0
Distributions paid to common stockholders through common stock issuances
pursuant to the distribution reinvestment plan $ 15,857,249 $ 16,050,790
Redeemable common stock $ 0 $ 1,182,360
Redemptions payable $ 4,000,000 $ 817,640
Accounts payable and accrued liabilities from additions to real estate investments $ 111,654 $ 729,005
Due to affiliates from additions to real estate investments $ 25,064 $ 62,159
Accounts payable and accrued liabilities from capitalized acquisition costs related to the
merger with SIR and STAR III $ 0 $ 503,041
Accounts payable and accrued liabilities from additions to real estate held for development $ 2,993,037 $ 41,434
Affiliate accounts payable and accrued liabilities from additions to real estate held
for development $ 56,427 $ 0
Due to affiliates for commissions on sales of common stock $ 21,237 $ 127,673
Operating lease right-of-use assets, net $ 2,332,352 $ 3,462
Operating lease liabilities, net $ 2,347,600 $ 4,989
Restricted cash held as substitution deposit for MCFA from proceeds from sale of real estate $ 0 $ 17,514,055
Fair value of real estate acquired in the SIR merger $ 1,100,742,973 $ 0
Fair value of STAR III real estate acquired in the STAR III merger $ 479,559,505 $ 0
Fair value of equity issued to SIR shareholders in the SIR merger $ 693,400,974 $ 0
Fair value of equity issued to STAR III shareholders in the STAR III merger $ 193,893,305 $ 0
Fair value of SIR debt assumed in the SIR merger $ 506,023,982 $ 0
Fair value of STAR III debt assumed in the STAR III merger $ 289,407,045 $ 0
Fair value of unconsolidated joint venture assumed in the SIR merger $ 22,128,691 $ 0
Net assets assumed in the SIR merger $ 3,553,868 $ 0
Net assets assumed in the STAR III merger $ 2,060,898 $ 0
Net liabilities assumed in the SIR merger $ 21,782,302 $ 0
Net liabilities assumed in the STAR III merger $ 7,334,616 $ 0
Premiums on assumed mortgage notes payable in the SIR and STAR III mergers $ 14,899,631 $ 0
Discount on assumed mortgage note payable in the SIR and STAR III mergers $ 10,489,075 $ 0


	Three Months Ended March 31,
	2021		2020
Distributions to common stockholders and noncontrolling interests	$	(18,012,522)	$	(6,716,712)
Repurchase of common stock	(4,000,000)		(797,289)
Net cash (used in) provided by financing activities	(19,462,847)		28,434,479
Net (decrease) increase in cash, cash equivalents and restricted cash	(25,572,212)		85,201,825
Cash, cash equivalents and restricted cash, beginning of the period	297,197,306		148,539,671
Cash, cash equivalents and restricted cash, end of the period	$	271,625,094	$	233,741,496




Supplemental Disclosures of Cash Flow Information:
Interest paid (net of capitalized interest of $315,244 and $69,569, respectively)	$	19,693,688	$	11,429,429
Supplemental Disclosures of Noncash Flow Transactions:
Distributions payable to non-affiliated stockholders	$	4,953,584	$	8,356,638
Distributions payable to affiliates	$	274,474	$	0
Real estate under development placed in service	$	4,678,910	$	0
Accounts payable related to winter storm	$	11,948,789	$	0
Insurance claims receivable related to winter storm	$	27,408,651	$	0





Investment management fees payable in shares	$	0	$	1,187,351
Assumption of mortgage notes payable to acquire real estate	$	0	$	36,515,122





Distributions paid to common stockholders through common stock issuances pursuant to the distribution reinvestment plan	$	4,600,603	$	5,084,155
Redeemable common stock	$	712,069	$	1,889,463


Redemptions payable	$	2,287,931	$	2,110,537
Accounts payable and accrued liabilities from additions to real estate investments	$	5,483,105	$	2,843,487

Due to affiliates from additions to real estate investments	$	0	$	267,567
Accounts payable & accrued liabilities from capitalized acquisition costs related to the mergers with SIR and STAR III	$	0	$	1,548,054
Accounts payable & accrued liabilities from additions to real estate held for development	$	3,270,368	$	1,816,203
Due to affiliates from additions to real estate held for development	$	400	$	93,213
Due to affiliates for commissions on sale of common stock	$	0	$	24,293
Operating and finance lease right-of-use asset, net	$	1,831,866	$	151,336
Operating and finance lease liabilities, net	$	1,859,368	$	163,491
Fair value of real estate acquired in the SIR merger	$	0	$	1,100,742,973
Fair value of real estate acquired in the STAR III merger	$	0	$	479,559,505
Fair value of equity issued to SIR shareholders in the SIR merger	$	0	$	693,400,974
Fair value of equity issued to STAR III shareholders in the STAR III merger	$	0	$	193,893,305
Fair value of debt assumed in the SIR merger	$	0	$	506,023,982
Fair value of debt assumed in the STAR III merger	$	0	$	289,407,045
Fair value of unconsolidated joint venture assumed in the SIR merger	$	0	$	22,128,691
Assets assumed in the SIR merger	$	0	$	3,553,868
Assets assumed in the STAR III merger	$	0	$	2,060,898
Liabilities assumed in the SIR merger	$	0	$	21,782,302
Liabilities assumed in the STAR III merger	$	0	$	7,334,616
Premiums on assumed mortgage notes payable in the SIR and STAR III Mergers	$	0	$	14,899,631
Discount on assumed mortgage notes payable in the SIR and STAR III Mergers	$	0	$	10,489,075

See accompanying notes to consolidated financial statements.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

1. Organization and Business

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

The Company owns and operates a diverse portfolio of multifamily properties located in targeted markets throughout the United States. As of ~~September 30, 2020,~~March 31, 2021, the Company owned 69 multifamily properties comprising a total of ~~21,529~~21,591 apartment homes and 3 parcels of land held for the development of apartment homes. The Company may acquire additional multifamily properties or pursue multifamily developments in the future. For more information on the Company’s real estate portfolio, see Note 4 (Real Estate).

Public Offering

On December 30, 2013, the Company commenced its initial public offering to offer a maximum of 66,666,667 shares of common stock for sale to the public at an initial price of $15.00 per share (with discounts available for certain categories of purchasers) (the “Primary Offering”). The Company also registered up to 7,017,544 shares of common stock for sale pursuant to the Company’s distribution reinvestment plan (the “DRP,” and together with the Primary Offering, the “Public Offering”) at an initial price of $14.25 per share. The Company terminated its ~~Public~~Primary Offering on March 24, 2016, but continues to offer shares of common stock pursuant to the DRP. As of the termination of the Primary Offering on March 24, 2016, the Company had sold 48,625,651 shares of common stock in the Public Offering for gross proceeds of $724,849,631, including 1,011,561 shares of common stock issued pursuant to the DRP for gross offering proceeds of $14,414,752. ~~On May 4, 2020, the Company registered up to 10,000,000 shares of common stock for sale pursuant to the DRP at an initial price of $15.23 per share.~~ As of ~~September 30, 2020,~~March 31, 2021, the Company had issued ~~111,316,079~~111,967,192 shares of common stock for gross offering proceeds of ~~$1,712,713,882,~~$1,722,630,330, including ~~7,685,999~~8,337,112 shares of common stock issued pursuant to the DRP for gross offering proceeds of ~~$114,984,724.~~$124,901,172 and 56,016,053 shares of common stock issued in connection with the Mergers described below.

On ~~April 17, 2020,~~March 9, 2021, the Company’s board of directors determined an estimated value per share of the Company’s common stock of ~~$15.23~~$15.55 as of December 31, 2020. Additional information on the Company’s estimated value per share can be found in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March ~~6, 2020 (unaudited).~~12, 2021. In connection with the determination of an ~~updated~~ estimated value per share, the Company’s board of directors ~~revised the~~determined a price per share for the DRP ~~to $15.23,~~of $15.55, effective ~~May~~April 1, ~~2020.~~2021. The Company’s board of directors may again, from time to time, in its sole discretion, change the price at which the Company offers shares pursuant to the DRP to reflect changes in the Company’s estimated value per share and other factors that the Company’s board of directors deems relevant.

Merger with Steadfast Income REIT, Inc.

On August 5, 2019, the Company, Steadfast Income REIT, Inc. (“SIR”), Steadfast Apartment REIT Operating Partnership, L.P., a wholly-owned subsidiary of the Company (the “STAR Operating Partnership”), Steadfast Income REIT Operating Partnership, L.P., the operating partnership of SIR (“SIR OP”), and SI Subsidiary, LLC, a wholly-owned subsidiary of the Company (“SIR Merger Sub”), entered into an Agreement and Plan of Merger (the “SIR Merger Agreement”). Pursuant to the terms and conditions of the SIR Merger Agreement, on March 6, 2020, SIR merged with and into SIR Merger Sub with SIR

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

Merger Sub surviving the merger (the “SIR Merger”). Following the SIR Merger, SIR Merger Sub, as the surviving entity, continued as the Company’s wholly-owned subsidiary. In accordance with the applicable provisions of the Maryland General Corporation Law (“MGCL”), the separate existence of SIR ceased.

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

Merger with Steadfast Apartment REIT III, Inc.

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

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

Combined Company

Through the Mergers, the Company acquired 36 multifamily properties with 10,166 apartment homes and a 10% interest in 1 unconsolidated joint venture that owned 20 multifamily properties with a total of 4,584 apartment homes, all of which had a gross real estate value of approximately $1.5 billion. The ~~Combined Company~~combined company after the Mergers retained the name “Steadfast Apartment REIT, Inc.” Each merger ~~qualified~~was intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). For more information on the Mergers, see Note 4 (Real Estate).

Pre-Internalization Operating Partnerships ~~Merger~~Mergers

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

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

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

On August 28, 2020, the Company, Steadfast Income Advisor, LLC, the initial limited partner of the Current Operating Partnership (“SIR Advisor”), Steadfast Apartment Advisor III, LLC, a Delaware limited liability company and the special limited partner of the Current Operating Partnership (“STAR III Advisor”), Wellington VVM LLC, a Delaware limited liability company and limited partner of the Current Operating Partnership (“Wellington”), and Copans VVM, LLC, a Delaware limited liability company and limited partner of the Current Operating Partnership (“Copans” and together with “Wellington”, “VV&M”), entered into a Second Amended and Restated Agreement of Limited Partnership of Steadfast Apartment REIT

109

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

Operating Partnership, L.P. (the “Second A&R Partnership Agreement”) in order to, among other things, reflect the consummation of the Operating Partnership Mergers. The purpose of the Operating Partnership Mergers was to simplify the Company’s corporate structure so that the Company has a single operating partnership that is a direct subsidiary of the Company.

Internalization Transaction

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

as a self-managed company.

Pursuant to a Contribution and Purchase Agreement (the “Contribution & Purchase Agreement”) between the Company, the Current Operating Partnership and SRI, SRI contributed to the Current Operating Partnership all of the membership interests in STAR RS Holdings, LLC, a Delaware limited liability company (“SRSH”), and the assets and rights necessary to operate ~~the Business~~as a self-managed company in all material respects, and the liabilities associated with such assets and rights in exchange for $124,999,000, which was paid as follows: (1) $31,249,000 in cash and (2) 6,155,613.92 Class B OP units of limited partnership interests in the Current Operating Partnership (the “Class B OP Units”) having the agreed value set forth in the Contribution & Purchase ~~Agreement.~~Agreement of $15.23 per Class B OP Unit. In addition, the Company purchased all of the Class A ~~convertible shares~~Convertible Stock of the Company held by the Former Advisor for $1,000. As a result of the Internalization Transaction, the Company became self-managed and acquired components of the advisory, investment management and property management ~~business~~operations of the Former Advisor by hiring the Transferring Employees (as defined in the Contribution & Purchase Agreement), who comprise the workforce necessary for the management and day-to-day real estate and accounting operations of the Company and the Current Operating Partnership. ~~Prior to the closing of the Internalization Transaction, the~~The Former Advisor ~~was~~is owned by SRI, the Company’s former sponsor. Mr. Emery, the Company’s Chairman of the board of directors and Chief Executive Officer, owns ~~an 86%~~a 48.6% interest in Steadfast Holdings, the ~~majority~~largest owner of SRI.

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

The Former Advisor

Prior to the Internalization Transaction, the ~~business of the~~ Company was externally managed by the Former Advisor, pursuant to the Amended and Restated Advisory Agreement effective as of March 6, 2020, by and between the Company and the Former Advisor (as may be amended, the “Advisory Agreement”). On August 31, 2020, prior to the Internalization Closing, the Company, the Former Advisor and the Current Operating Partnership entered into a Joinder Agreement (the “Joinder Agreement”) pursuant to which the Current Operating Partnership became a party to the Advisory Agreement. On August 31, 2020, prior to the Internalization Closing, the Former Advisor and the Company entered into the First Amendment to the Amended and Restated Advisory Agreement in order to remove certain restrictions in the Advisory Agreement related to business combinations and to provide that any amounts accrued to the Former Advisor commencing on September 1, 2020 ~~will be~~are paid in cash to the Former Advisor by the Current Operating Partnership (the “First Amendment”). In connection with the Internalization Transaction, SRS assumed the rights and obligations of the Advisory Agreement from the Former Advisor. ~~The term of the Advisory Agreement expires on March 6, 2021, and is subject to annual renewal by the Company’s board of directors.~~

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

The Current Operating Partnership

Substantially all of the Company’s business is conducted through the Current Operating Partnership. The Company is the sole general partner of the Current Operating Partnership. The Current Operating Partnership owns, directly or indirectly, all of the properties that the Company has acquired. As of ~~September 30, 2020,~~March 31, 2021, the Company owned approximately 94% of the operating partnership units of the Current Operating ~~Partnership.~~Partnership (the “OP Units”). As a result of the Internalization Transaction, SRI

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

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

The Operating Partnership Agreement provides that the Current Operating Partnership is operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Current Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code, which classification could result in the Current Operating Partnership being taxed as a corporation. In addition to the administrative and operating costs and expenses incurred by the Current Operating Partnership in acquiring and operating real properties, the Current Operating Partnership pays all of the Company’s administrative costs and expenses, and such expenses are treated as expenses of the Current Operating Partnership.

2. Summary of Significant Accounting Policies

There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, ~~2019, other than the Financial Accounting Standards Board (“FASB”) Staff Q&A related to Accounting Standards Codification (“ASC”) 842:~~ ~~Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic~~ ~~(the “ASC 842 Q&A”), and noncontrolling interest accounted for in accordance with ASC 810,~~ ~~Consolidation~~ ~~(“ASC 810”), each as further described below.~~2020. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, ~~2019,~~2020, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 12, ~~2020.~~ 2021.

Principles of Consolidation and Basis of Presentation

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

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

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Noncontrolling interests

Noncontrolling interests represent the portion of equity that the Company does not own in an entity that is consolidated. The Company’s noncontrolling interests are comprised of Class A-2 operating partnership units (“Class A-2 OP Units”) ~~in STAR III OP, the Company’s then- indirect subsidiary, which merged with and into the Current Operating Partnership pursuant to the OP Merger described in Note 1 (Organization and Business),~~ and Class B OP Units of the Current Operating Partnership. The Company accounts for noncontrolling interests in accordance with ASC 810, Consolidation (“ASC 810”). In accordance with ASC 810, the Company reports noncontrolling interests in subsidiaries within equity in the consolidated financial statements, but separate from stockholders’ equity. In accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), noncontrolling interests that are determined to be redeemable are carried at

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

their fair value or redemption value as of the balance sheet date and reported as liabilities or temporary equity depending on their terms. A noncontrolling interest that fails to qualify as permanent equity will be reclassified as a liability or temporary equity. As of ~~September 30,~~March 31, 2021 and December 31, 2020, the Company’s noncontrolling interests qualified as permanent equity. ~~There were 0 noncontrolling interests in 2019.~~ For more information on the Company’s noncontrolling interest, see Note 9 (Noncontrolling Interest).

Use of Estimates

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

Casualty loss

The Company carries liability insurance to mitigate its exposure to certain losses, including those relating to property damage and business interruption. The Company records the estimated amount of expected insurance proceeds for property damage and other losses incurred as an asset (typically a receivable from the insurer) and income up to the amount of the losses incurred when receipt of insurance proceeds is deemed probable. Any amount of insurance recovery in excess of the amount of the losses incurred is considered a gain contingency and is recorded in other income when the proceeds are received. During the three months ended March 31, 2021, the Company incurred property damage and other losses of $27,408,651, which was recorded as general and administrative expenses, with a corresponding insurance recoveries income up to the amount of losses incurred (as described above) within general and administrative expenses in the accompanying consolidated statements of operations.

Real Estate Assets

Real Estate Purchase Price Allocation

Upon the acquisition of real estate properties or other entities owning real estate properties, the Company evaluates whether the acquisition is a business combination or an asset acquisition under ASC ~~805,~~805-50, Business Combinations — Related Issues (“ASC 805”). For both business combinations and asset acquisitions the Company allocates the purchase price of real estate properties to acquired tangible assets, consisting of land, buildings and improvements, and acquired intangible assets and liabilities, consisting of the value of above-market and below-market leases and the value of in-place leases. For asset acquisitions, the Company capitalizes transaction costs and allocates the purchase price using a relative fair value method allocating all accumulated costs. For business combinations, the Company expenses transaction costs incurred and allocates the purchase price based on the estimated fair value of each separately identifiable asset and liability. Acquisition fees and costs associated with transactions determined to be asset acquisitions are capitalized in total real estate, net in the accompanying consolidated balance sheets. There were 0 real estate property acquisitions during the three months ended March 31, 2021. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020, all of the Company’s acquisitions of real estate properties, including pursuant to the Mergers, were determined to be asset ~~acquisitions, with the exception of the Internalization Transaction, which was accounted for as a business combination.~~acquisitions.

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

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

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

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

Impairment of Real Estate Assets

The Company accounts for its real estate assets in accordance with ASC 360, Property, Plant and Equipment (“ASC 360”). ASC 360 requires the Company to continually monitor events and changes in circumstances that could indicate that the carrying amounts of the Company’s real estate and related intangible assets may not be recoverable. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, the Company assesses the recoverability of the assets by estimating whether the Company will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition. Based on this analysis, if the Company does not believe that it will be able to recover the carrying value of the real estate and related intangible assets and liabilities, the Company records an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities. If any assumptions, projections or estimates regarding an asset changes in the future, the Company may have to record an impairment to reduce the net book value of such individual asset. The Company continues to monitor events in connection with the recent outbreak of the novel Coronavirus (“COVID-19”) and evaluates any potential indicators that could suggest that the carrying value of its real estate investments and related intangible assets and liabilities may not be recoverable. ~~The Company recorded an impairment charge related to 2 of its real estate assets during the nine months ended September 30, 2020.~~ NaN impairment loss was recorded ~~in 2019. See Note 4 (Real Estate) for details.~~

~~Property Held for Sale~~

~~The Company classifies certain long-lived assets as held for sale once~~during the ~~criteria, as defined by GAAP, have been met~~three months ended March 31, 2021 and are expected to sell within one year. Long-lived assets to be disposed of are reported at the lower of their carrying amount or fair value minus cost to sell, with any write-down recorded to impairment loss on the consolidated statements of operations. Depreciation and amortization is not recorded for assets classified as held for sale. As of each of September 30, 2020 and December 31, 2019, the Company classified 1 real estate asset, as presented on its consolidated balance sheets. See Note 4 (Real Estate) for details.2020.

Goodwill

Goodwill represents the excess of consideration paid over the fair value of underlying identifiable net assets of a business acquired. The Company’s goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company takes a qualitative approach to consider whether an impairment of goodwill exists prior to quantitatively determining the fair value of the reporting unit in step one of the impairment test. The Company performed its annual assessment on October ~~1st.~~1, 2020. The Company recorded goodwill during the ~~three and nine months~~year ended ~~September 30,~~December 31, 2020, in connection with the Internalization Transaction. See Note 3 (Internalization Transaction) for details.

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

Revenue recognition - operating leases

The majority of the Company’s revenue is derived from rental revenue, which is accounted for in accordance with ~~Accounting Standards Codification~~ASC 842, Leases (“ASC 842”). The Company leases apartment homes under operating leases with terms generally of one year or less. Generally, credit investigations are performed for prospective residents and security deposits are obtained. In accordance with ASC 842, the Company recognizes minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectability is probable and records amounts expected to be received in later years as deferred rent receivable. For lease arrangements when it is not probable that the Company will collect all or substantially all of the remaining lease payments under the term of the lease, rental revenue is limited to the lesser of the rental revenue that would be recognized on a straight-line basis (as applicable) or

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

the lease payments that have been collected from the lessee. Differences between rental revenue recognized and amounts contractually due under the lease agreements are credited or charged to straight-line rent receivable or straight-line rent liability, as applicable. Tenant reimbursements for common area maintenance and other recoverable expenses, are recognized when the services are provided and the performance obligations are satisfied. Tenant reimbursements for common area maintenance are accounted for as variable lease payments and are recorded as rental income on the Company’s consolidated statement of operations.

Rents and Other receivables

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

Residents’ payment plans due to COVID-19

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

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

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

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

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

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

In January 2021, the Company began offering an extension to the COVID-19 Payment Plan (the “Extension Plan”), that allows eligible residents to defer their rent, which is collected by the Company in ~~May~~monthly installment payments over the lesser of the duration of the current lease term or a maximum of three months (with the exception of certain states that allow a maximum of six months deferral). Under the Extension Plan, no concessions are offered for residents with a payment plan duration of two months or less and ~~June 2020.~~residents who opted for the COVID-19 Payment Plan are not eligible to participate in the Extension Plan unless they paid off the amounts due under the COVID-19 Payment Plan.

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

The Company elected not to evaluate whether the COVID-19 Payment Plans, ~~and~~ the Debt Forgiveness Program and the Extension Plan are lease modifications and therefore the Company’s policy is to account for the lease contracts with COVID-19 Payment Plans, ~~and~~ Debt Forgiveness Program and the Extension Plan as if no lease modifications occurred. Under this accounting method, a lessor with an operating lease may account for the concession (which in this case only applies to the COVID-19 Payment Plans) by continuing to recognize a lease receivable until the rental payment is received from the lessee at the revised payment date. If it is determined that the lease receivable is not collectable, the Company would treat that lease contract on a cash basis as defined in ASC 842. As of ~~September 30,~~March 31, 2021 and December 31, 2020, the Company reserved ~~$1,859,126~~$2,728,971 and $2,245,067 of accounts receivables, respectively, which are considered not probable for collection.

~~Investments in Unconsolidated Joint Ventures~~

The Company accounted for investments in unconsolidated joint venture entities in which it would have exercised significant influence over, but did not control, using the equity method of accounting. Under the equity method, the investment was initially recorded at cost including an outside basis difference, which represented the difference between the purchase price the Company paid for its investment in the joint venture and the book value of the Company’s equity in the joint venture, and subsequently adjusted it to reflect additional contributions or distributions, the Company’s proportionate share of equity in the joint venture’s earnings (loss) and amortization of the outside basis difference. The Company recognized its proportionate share of the ongoing income or loss of the unconsolidated joint venture as equity in earnings (loss) of unconsolidated joint venture on the consolidated statements of operations. On a quarterly basis, the Company evaluated its investment in an unconsolidated joint venture for other-than-temporary impairments. The Company recorded an other-than-temporary impairment (“OTTI”) on its investment in unconsolidated joint venture during the nine months ended September 30, 2020. NaN OTTI was recorded in the three and nine months ended September 30, 2019. See Note 5 (Investment in Unconsolidated Joint Venture) for details. The Company elected the cumulative earnings approach to classify cash receipts from the unconsolidated joint venture on the accompanying consolidated statements of cash flows.

Fair Value Measurements

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

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

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

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

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

When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and will establish a fair value by assigning weights to the various valuation sources. The ~~Company's~~Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. There were no transfers between the levels in the fair value hierarchy during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

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

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

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


	March 31, 2021
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements(1)	$	0	$	30,872	$	0


	December 31, 2020
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements(1)	$	0	$	7,852	$	0

_________________

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

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

Fair Value of Financial Instruments

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

The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities, distributions payable, amounts due from affiliates, amounts due to affiliates and distributions payable to affiliates to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. ~~The fair value of amounts due from affiliates, amounts due to affiliates and distributions payable to affiliates is not determinable due to the related party nature of such amounts.~~ The Company has determined that its notes payable, net are classified as Level 3 within the fair value hierarchy.

The fair value of the notes payable, net is estimated using a discounted cash flow analysis using borrowing rates available to the Company for debt instruments with similar terms and maturities. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the fair ~~value of the notes payable was $2,289,178,645 and $1,153,445,768, respectively, compared to the carrying value of $2,146,041,091 and $1,108,559,045, respectively.~~

1716

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

value of the notes payable was $2,213,714,331 and $2,246,242,677, respectively, compared to the carrying value of $2,131,926,238 and $2,129,245,671, respectively.

Restricted Cash

Restricted cash represents those cash accounts for which the use of funds is restricted by loan covenants ~~cash that is deposited with a qualified intermediary for reinvestment pursuant to Section 1031 of the Internal Revenue Code~~ and a cash account established in connection with a letter of credit to fund future workers compensation claims. As of ~~September 30,~~March 31, 2021 and December 31, 2020, the Company had a restricted cash balance of ~~$42,531,779,~~$29,333,777 and $38,998,980, respectively, which represented amounts set aside as impounds for future property tax payments, property insurance payments and tenant improvement payments as required by agreements with the Company’s lenders as well as an amount set aside in connection with a letter of credit. As of December 31, 2019, the Company had a restricted cash balance of $73,614,452, which included $36,740,983 in allocated loan amounts held by the lender of the Company’s master credit facility as collateral for two properties sold during the year ended December 31, 2019, $24,720,969 of cash proceeds from the sale of two properties that were being held by qualified intermediaries, and $12,152,500 related to amounts set aside as impounds for future property tax payments, property insurance payments and tenant improvement payments as required by agreements with the Company lenders.

The following table represents the components of the cash, cash equivalents and restricted cash presented on the accompanying consolidated statements of cash flows for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

September 30,
2020 2019
Cash and cash equivalents $ 311,515,756 $ 74,816,801
Restricted cash 42,531,779 47,261,216
Other assets related to real estate held for sale 91,450 0
Total cash, cash equivalents and restricted cash $ 354,138,985 $ 122,078,017


	March 31,
	2021		2020
Cash and cash equivalents	$	242,291,317	$	215,105,801
Restricted cash	29,333,777		18,635,695

Total cash, cash equivalents and restricted cash	$	271,625,094	$	233,741,496

Distribution Policy

The Company elected to be taxed, and currently qualifies, as a REIT commencing with the taxable year ended December 31, 2014. To maintain its qualification as a REIT, the Company intends to make distributions each taxable year equal to at least 90% of its REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). Distributions declared during the ~~nine months~~month ended ~~September 30, 2020,~~January 31, 2021, were based on daily record dates and calculated at a rate of ~~$0.002459~~$0.002466 per share of the Company’s common stock per day during the period from January 1, ~~2020~~2021 through ~~September~~January 31, 2021. On January 12, 2021, the Company’s board of directors determined to reduce the daily distribution payment to $0.001438 per share commencing on February 1, 2021 and ending February 28, 2021, which was extended for the months of March, April, May and June, 2021. As a result, distributions declared during the period from February 1, 2021 through March 31, 2021, and through June 30, ~~2020.~~2021 were based on daily record dates and calculated at a rate of $0.001438 per share of the Company’s common stock per day.

Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to qualify as a REIT under the Internal Revenue Code. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, the Company declared distributions totaling ~~$0.226~~$0.161 and ~~$0.674~~$0.224 per share of common stock, respectively. ~~During the three and nine months ended September 30, 2019, the Company declared distributions totaling $0.227 and $0.673 per share of common stock, respectively.~~

Lessee Accounting

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

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

Lease renewal or termination options are included in the lease asset and lease liability only if it is reasonably certain that the option to extend ~~would be exercised~~ or ~~the option~~ to terminate would ~~not~~ be exercised. As the implicit rate in most leases are not readily determinable, the Company’s incremental borrowing rate for each lease at commencement date is used to determine the present value of lease payments. Consideration is given to the Company’s recent debt financing transactions, as well as publicly available data for instruments with similar characteristics, adjusted for the respective lease term, when estimating incremental borrowing rates.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

Lease expense is recognized over the lease term based on an effective interest method for finance leases and on a straight-line basis for operating leases. On January 1, 2019, the Company adopted ASU 2016-02 and its related amendments (collectively, “ASC 842”) using the modified retrospective method. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carry forward its original assessment of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. The Company also elected the practical expedient that allows lessees the option to account for lease and non-lease components together as a single component for all classes of underlying assets. See Note 1615 (Leases).

Equity-Based Compensation

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

Per Share Data

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

~~In accordance with FASB ASC Topic 260-10-45,~~ ~~Earnings Per Share~~, the Company uses the two-class method to calculate earnings per share. Basic earnings per share is calculated based on dividends declared and the rights of common shares and participating securities in any undistributed earnings, which represents net income remaining after deduction of dividends declared during the period. The undistributed earnings are allocated to all outstanding common shares based on the relative percentage of each class of shares to the total number of outstanding shares.

Segment Disclosure

The Company has determined that it has 1 reportable segment with activities related to investing in multifamily properties. The ~~Company’s~~Company��s investments in real estate are in different geographic regions, and management evaluates operating performance on an individual asset level. However, as each of the Company’s assets has similar economic characteristics, residents and products and services, its assets have been aggregated into 1 reportable segment.

Recent Accounting Pronouncements

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326)~~, and subsequent amendments to the guidance including, ASU 2018-19 in November 2018, ASU 2019-04 in April 2019, ASU 2019-05 in May 2019, ASUs 2019-10 and 2019-11 in November 2019, and ASU 2020-02 in February 2020 (as amended “ASU 2016-13”). ASU 2016-13 requires more timely recording of credit losses on loans and other financial instruments that are not accounted for at fair value through net income (loss), including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. ASU 2016-13 requires that financial assets measured at

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology in current GAAP. This guidance does not apply to operating lease receivables arising from operating leases, which are within the scope of ASC 842. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption was permitted for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted ASU 2016-13 on January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement~~ (“ASU 2018-13”). The FASB issued ASU 2018-13 to improve the effectiveness of fair value measurement disclosures by adding, eliminating, and modifying certain disclosure requirements. The issuance of ASU 2018-13 is part of a disclosure framework project. The disclosure framework project’s objective and primary focus are to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the information required by GAAP that is most important to users of each entity’s financial statements. Achieving the objective of improving the effectiveness of the notes to financial statements includes: (1) the development of a framework that promotes consistent decisions by the FASB board about disclosure requirements and (2) the appropriate exercise of discretion by reporting entities. The amendments in ASU 2018-13 modify the disclosure requirements on fair value measurements in ~~Topic 820~~, Fair Value Measurement, based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting-Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits. ASU 2018-13 removed certain disclosure requirements under Topic 820 such as the disclosure requirements of the valuation process for level 3 fair value measurements and modified and added certain of the disclosure requirements in ~~Topic 820~~. ASU 2018-13 requires prospective and retrospective application depending on the amendment and is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption was permitted. The Company adopted ASU 2016-13 on January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815, (“ASU 2020-01”), which clarifies the interaction between the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The amendments in ASU 2020-01 should be applied prospectively. The Company ~~is currently assessing the impact of~~adopted ASU 2020-01 on ~~its consolidated financial statements and does~~January 1, 2021. The adoption of this guidance did not ~~expect~~have a material impact on ~~its~~the Company’s consolidated financial ~~statements and related disclosures from the adoption of ASU 2020-01.~~statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provided practical expedients to address existing guidance on contract modifications and hedge accounting due to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates (together “IBORs”) to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). In July 2017, the Financial Conduct Authority announced it intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Company refers to this transition as reference rate reform. The first practical expedient allows companies to elect to not apply certain modification accounting requirements to debt, derivative and lease contracts affected by reference rate reform if certain criteria are met. These criteria include the following: (i) the contract referenced an IBOR rate that is expected to be discontinued; (ii) the modified terms directly replace

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

at the modification date or reassessment of the previous accounting determination. The second practical expedient allows companies to change the reference rate and other critical terms related to the reference rate reform in derivative hedge documentation without having to de-designate the hedging relationship. This allows for companies to continue applying hedge accounting to existing cash flow and net investment hedges. ASU 2020-04 was effective upon issuance on a prospective basis beginning January 1, 2020 and may be elected over time as reference rate reform activities occur. Subsequently, in January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”). The amendments in ASU 2021-01 clarify that certain optional expedients and exceptions for contract modifications and hedge accounting apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of the discontinuation of the use of LIBOR as a benchmark interest rate due to reference rate reform. ASU 2021-01 is effective immediately for all entities with the option to apply retrospectively as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, and can be applied prospectively to any new contract modifications made on or after January 7, 2021. The ASUs can be adopted no later than December 1, 2022 with early adoption permitted. The relief provided in this guidance is temporary and generally cannot be applied to contract modifications that occur after December 31, 2022 or hedging relationships entered into or evaluated after that date. However, the guidance does allow an entity to continue to apply certain optional expedients related to hedge accounting. The Company identified the instruments influenced by LIBOR to be its variable rate mortgage notes payable and interest rate cap agreements and is currently ~~evaluating~~in the ~~impact ASU 2020-04 has on~~process of liaising with its ~~debt, derivative~~lenders to assess the nature of potential changes to its variable rate mortgage notes payable and ~~lease~~interest rate cap agreements and therefore determining whether it could meet the conditions of the practical expedients provided by the FASB and elect to not apply the modification accounting requirements to its contracts ~~that are eligible for modification relief and may apply those elections as needed. The Company does not expect a material impact on its consolidated financial statements and related disclosures from~~affected by the ~~adoption~~reference rate reform within the permitted period of ~~ASU 2020-04.~~December 31, 2022.

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

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

In November 2020, the SEC issued Release No. 33-10890, Amendments to Management's Discussion and ~~related disclosures from~~Analysis, Selected Financial Data, and Supplementary Financial Information, to simplify, modernize and enhance certain financial disclosure requirements in Regulation S-K. This amendment became effective on February 10, 2021. Early Adoption was permitted. The Company early adopted these modifications in its Annual Report on Form 10-K filed with the ~~adoption~~SEC on March 12, 2021. The

Table of ~~ASU 2020-10.~~Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

adoption of this guidance did not have a material impact on the consolidated financial statements.

3.Internalization Transaction

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

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

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

Fair Value of Consideration Transferred

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


	Amount
Cash consideration(1)	$	31,249,000

Class B OP Units issued	6,155,613.92
Fair value per Class B OP Unit	$	15.23
Fair value of OP Unit Consideration	93,750,000

Promote price(2)	1,000

Accounting value of total consideration	$	125,000,000

_________________

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

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

Assets Acquired and Liabilities Assumed

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

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

During the ~~three and nine months~~year ended ~~September 30,~~December 31, 2020, the Company finalized the purchase price allocation of the fair value of consideration transferred (described above) for the Internalization Transaction. The following table summarizes the finalized purchase price allocation as of the date of the Internalization Transaction:


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

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

_________________

(1)The intangible assets acquired consist of property management agreements that the Company, acting as advisor and property manager through certain subsidiaries, has with affiliates of SRI ~~(the~~(as amended from time to time, the “SRI Property Management Agreements”). The value of the SRI Property Management Agreements was determined based on a discounted cash flow valuation of the projected revenues of the acquired agreements. The SRI Property Management Agreements are subject to an estimated useful life of one year. As of ~~September 30, 2020,~~March 31, 2021, the SRI Property Management Agreements were approximately 9%58% amortized.

Goodwill

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

Pro Forma Financial Information ~~(unaudited)~~(Unaudited)

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

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

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


							Year Ended December 31,
							2020		2019
		Nine Months Ended September 30, 2020		Year Ended December 31, 2019
Revenue	Revenue	$	221,430,696	$	323,258,776	Revenue	$	303,851,813	$	323,258,776
Net income (loss)(1)(2)	Net income (loss)(1)(2)	$	(94,314,302)	$	29,545,827	Net income (loss)(1)(2)	$	(109,151,163)	$	29,545,827
Net income (loss) attributable to noncontrolling interests	Net income (loss) attributable to noncontrolling interests	$	(4,976,871)	$	1,585,124	Net income (loss) attributable to noncontrolling interests	$	(5,759,798)	$	1,585,124
Net income (loss) attributable to common stockholders(3)	Net income (loss) attributable to common stockholders(3)	$	(89,337,431)	$	27,960,703	Net income (loss) attributable to common stockholders(3)	$	(103,391,365)	$	27,960,703
Net income (loss) attributable to common stockholders per share - basic and diluted	Net income (loss) attributable to common stockholders per share - basic and diluted	$	(0.93)	$	0.26	Net income (loss) attributable to common stockholders per share - basic and diluted	$	(1.04)	$	0.26

_________________

(1)The incremental cost of hiring the existing workforce responsible for the Company’s real estate management and operations of $17,906,923 and $17,742,481, was included in pro forma expenses in arriving at the pro forma net ~~income/~~income (loss) for the ~~nine months ended September 30, 2020 and the year~~years ended December 31, 2020 and 2019, respectively. The pro forma impact of the Internalization Transaction on the Company’s historical results of operations based on the historical net income of SRI and its affiliates was $19,083,158 for the year ended December 31, 2019.

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

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

4.Real Estate

As of March 31, 2021, the Company owned 69 multifamily properties comprising a total of 21,591 apartment homes and 3 parcels of land held for the development of apartment homes.

The total acquisition price of the Company’s real estate portfolio was $3,133,589,671, excluding real estate held for the development of apartment homes of $39,326,042. As of March 31, 2021 and December 31, 2020, the Company’s portfolio was approximately 95.3% and 95.4% occupied and the average monthly rent was $1,180 and $1,173, respectively.

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


	March 31, 2021
	Assets
	Land		Building and Improvements		Tenant Origination and Absorption Costs		Total Real Estate Held for Investment		Real Estate Under Development
Investments in real estate	$	337,896,051	$	2,877,749,041	$	1,752,793	$	3,217,397,885	$	39,326,042
Less: Accumulated depreciation and amortization	0		(428,928,968)		(938,115)		(429,867,083)		0
Net investments in real estate and related lease intangibles	$	337,896,051	$	2,448,820,073	$	814,678	$	2,787,530,802	$	39,326,042

2322

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

4.~~Real Estate~~

~~Current Period Acquisitions~~


	December 31, 2020
	Assets
	Land		Building and Improvements		Tenant Origination and Absorption Costs		Total Real Estate Held for Investment		Real Estate Under Development
Investments in real estate	$	337,322,234	$	2,882,411,683	$	1,752,793	$	3,221,486,710	$	39,891,218
Less: Accumulated depreciation and amortization	0		(397,413,838)		(330,839)		(397,744,677)		0
Net investments in real estate and related lease intangibles	$	337,322,234	$	2,484,997,845	$	1,421,954	$	2,823,742,033	$	39,891,218

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, the Company ~~acquired 41 real estate properties, all~~wrote off $15,459,862 and $0 of which were determined to be asset acquisitions, including 36 real estate properties acquired in the Mergers, 2 parcels of land for the development of apartment homes and three real estate properties, two of which were acquired through exchanges pursuant to Section 1031 of the Internal Revenue Code.

~~The following is a summary of real estate properties acquired during the nine months ended September 30, 2020:~~

Purchase Price Allocation
Property Name Location Purchase Date Properties Homes Land Buildings and Improvements Tenant Origination and Absorption Costs Below Market Leases Discount (Premium) on Assumed Liabilities Total Purchase Price
Eleven10 @ Farmers Market Dallas, TX 1/28/2020 1 313 $ 10,574,569 $ 50,026,284 $ 1,463,076 $ 0 $ 0 $ 62,063,929
Patina Flats at the Foundry Loveland, CO 2/11/2020 1 155 2,463,617 41,537,960 1,184,050 (61,845) 0 45,123,782
SIR Merger(1)
Various 3/6/2020 27 7,527 114,377,468 959,337,747 27,027,759 0 1,391,489 1,102,134,463
STAR III
Merger(1)
Various 3/6/2020 9 2,639 58,056,275 411,461,858 10,041,373 0 (5,802,045) 473,757,461
Arista at Broomfield Broomfield, CO 3/13/2020 1 0 7,283,803 1,121,939 0 0 0 8,405,742
VV&M Dallas, TX 4/21/2020 1 310 8,207,057 51,299,734 1,407,518 0 (945,235) 59,969,074
Flatirons Broomfield, CO 6/19/2020 1 0 8,574,704 145,898 0 0 0 8,720,602
41 10,944 $ 209,537,493 $ 1,514,931,420 $ 41,123,776 $ (61,845) $ (5,355,791) $ 1,760,175,053

~~____________________~~

(1) In connection with the Mergers, the Company capitalized transaction costs on the accompanying consolidated balance sheets of $28,145,708 under ASC 805 using a relative fair value method (the “Capitalized Transaction Costs”). $26,515,662 and $628,691 of the Capitalized Transaction Costs were incurred upon the completion of the Mergers on March 6, 2020, and were allocatedfixed assets related to the ~~real estate acquired and investment in unconsolidated joint venture, respectively, and $1,630,046 of the Capitalized Transaction Costs, which were incurred and initially capitalized~~damage caused to ~~buildings and improvements on the Company’s consolidated balance sheets as of December 31, 2019, were reallocated to the real estate acquired in the Mergers upon the completion of the Mergers.~~

~~As of September 30, 2020, the Company owned 69 multifamily properties comprising a total of 21,529 apartment homes and 3 parcels of land held for the development of apartment homes.~~

~~The total acquisition price of~~ the Company’s multifamily ~~real estate portfolio was $3,113,751,097, excluding land held for~~properties impacted by the development of apartment homes of $35,183,272. As of September 30, 2020 and December 31, 2019, the Company’s portfolio was approximately 95.9% and 94.6% occupied and the average monthly rent was $1,172 and $1,200, respectively.

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

~~As of September 30, 2020 and December 31, 2019, investments~~winter storm that took place in ~~real estate and accumulated depreciation and amortization related to the Company’s consolidated real estate properties was as follows:~~

September 30, 2020
Assets
Land
Building and Improvements(1)
Tenant Origination and Absorption Costs Total Real Estate Held for Investment Real Estate Under Development Real Estate Held for Sale
Investments in real estate $ 332,223,332 $ 2,822,838,232 $ 1,976,514 $ 3,157,038,078 $ 35,183,272 $ 33,010,463
Less: Accumulated depreciation and amortization 0 (364,616,228) (1,290,368) (365,906,596) 0 (584,731)
Net investments in real estate and related lease intangibles $ 332,223,332 $ 2,458,222,004 $ 686,146 $ 2,791,131,482 $ 35,183,272 $ 32,425,732

December 31, 2019
Assets
Land
Building and Improvements(1)
Tenant Origination and Absorption Costs Total Real Estate Held for Investment Real Estate Under Development Real Estate Held for Sale
Investments in real estate $ 151,294,208 $ 1,369,256,465 $ 0 $ 1,520,550,673 $ 5,687,977 $ 27,285,576
Less: Accumulated depreciation and amortization 0 (277,033,046) 0 (277,033,046) 0 (5,619,814)
Net investments in real estate and related lease intangibles $ 151,294,208 $ 1,092,223,419 $ 0 $ 1,243,517,627 $ 5,687,977 $ 21,665,762

~~____________________~~

(1) During the year ended December 31, 2019, the Company capitalized $1,630,046 of costs related to the Mergers, included in building and improvements in the accompanying consolidated balance sheets.February 2021.

Total depreciation and amortization expenses were ~~$47,564,706~~$33,874,505 and ~~$129,596,268~~$28,575,896 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021, and 2020, ~~and $18,632,477and $55,430,404 for the three and nine months ended September 30, 2019,~~ respectively.

Depreciation of the Company’s buildings and improvements was ~~$33,055,972~~$33,044,052 and ~~$89,122,949~~$22,751,822 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021, and 2020, ~~and $18,631,573 and $55,429,500 for the three and nine months ended September 30, 2019,~~ respectively. Depreciation of the Company’s acquired ~~fixtures~~furniture and ~~fittings~~fixtures in the Internalization Transaction was ~~$2,490~~$12,999 and $0 for ~~each of~~ the three ~~and nine~~ months ended ~~September 30, 2020.~~March 31, 2021, and 2020, respectively.

~~Amortization~~Total amortization of the Company’s intangible assets was ~~$14,506,244~~$817,454 and ~~$40,470,829~~$5,824,074 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021, and 2020, ~~and $0 for the three and nine months ended September 30, 2019,~~ respectively.

Amortization of the Company’s tenant origination and absorption costs was ~~$14,431,485~~$607,276 and ~~$40,392,592~~$5,822,805 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021, and 2020, ~~and $0 for the three and nine months ended September 30, 2019,~~ respectively. Tenant origination and absorption costs had a weighted-average amortization period as of the date of acquisition of less than one year.

Amortization of the Company’s operating ~~right-of-use-assets~~ROU assets was $3,367 and ~~$6,845~~$1,269 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021, and 2020, ~~and $904 for each of the three and nine months ended September 30, 2019,~~ respectively. This represents the amortization of initial ~~indirect~~direct costs included in the measurement of the operating ~~right-of-use~~ROU assets.

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

Amortization of the Company’s SRI Property Management Agreements was ~~$71,392~~$206,811 and $0 for ~~each of~~ the three ~~and nine~~ months ended ~~September 30, 2020.~~March 31, 2021, and 2020, respectively. This represents the amortization of the SRI ~~property management costs.~~Property Management Agreements acquired in the Internalization Transaction.

Amortization of the Company’s other intangible assets, which consist of below-market leases, was $1,671 and ~~$4,265~~$922 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, respectively, and is included as an increase to rental income in the accompanying consolidated condensed statements of operations. Other intangible assets had a weighted-average amortization period as of the date of acquisition of 10 years.

~~Operating Leases~~Impairment of Real Estate Assets

As The Company accounts for its real estate assets in accordance with ASC 360, Property, Plant and Equipment (“ASC 360”). ASC 360 requires the Company to continually monitor events and changes in circumstances that could indicate that the carrying amounts of ~~September 30, 2020,~~ the Company’s real estate ~~portfolio comprised 21,529 residential~~and related intangible assets may not be recoverable. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, the Company assesses the recoverability of the assets by estimating whether the Company will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition. Based on this analysis, if the Company does not believe that it will be able to recover the carrying value of the real estate and related intangible assets and liabilities, the Company records an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities. If any assumptions, projections or estimates regarding an asset changes in the future, the Company may have to record an impairment to reduce the net book value of such individual asset. The Company continues to monitor events in connection with the recent outbreak of the novel Coronavirus (“COVID-19”) and evaluates any potential indicators that could suggest that the carrying value of its real estate investments and related intangible assets and liabilities may not be recoverable. NaN impairment loss was recorded during the three months ended March 31, 2021 and 2020.

Goodwill

Goodwill represents the excess of consideration paid over the fair value of underlying identifiable net assets of a business acquired. The Company’s goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company takes a qualitative approach to consider whether an impairment of goodwill exists prior to quantitatively determining the fair value of the reporting unit in step one of the impairment test. The Company performed its annual assessment on October 1, 2020. The Company recorded goodwill during the year ended December 31, 2020, in connection with the Internalization Transaction. See Note 3 (Internalization Transaction) for details.

Revenue recognition - operating leases

The majority of the Company’s revenue is derived from rental revenue, which is accounted for in accordance with ASC 842, Leases (“ASC 842”). The Company leases apartment homes ~~and was 97.4% leased by a diverse group~~under operating leases with terms generally of residents. For the three and nine months ended September 30, 2020 and 2019, the Company’s real estate portfolio earned in excess of 99% and less than 1% of its rental income from residential tenants and commercial tenants, respectively. The residential tenant lease terms consist of lease durations equal to 12 monthsone year or less. ~~The commercial tenant~~Generally, credit investigations are performed for prospective residents and security deposits are obtained. In accordance with ASC 842, the Company recognizes minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, ~~consist~~on a straight-line basis over the term of ~~remaining~~the related leases when collectability is probable and records amounts expected to be received in later years as deferred rent receivable. For lease ~~durations varying from 0.25 to 9.6 years.~~

~~Some residential leases contain provisions to extend~~arrangements when it is not probable that the ~~lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. The~~ Company ~~retains~~will collect all or substantially all of the ~~risks and benefits of ownership~~remaining lease payments under the term of the ~~real estate assets leased~~lease, rental revenue is limited to ~~residents. Generally, upon~~ the ~~execution of a lease, the Company requires security deposits from residents in the form of a cash deposit. Amounts required as security deposits vary depending upon the terms~~lesser of the ~~respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent~~rental revenue that would be recognized on a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in accounts payables and accrued liabilities in the accompanying consolidated balance sheets and totaled $6,966,388 and $4,351,837 as of September 30, 2020 and December 31, 2019, respectively.

~~The future minimum rental receipts from the Company’s properties under non-cancelable operating leases attributable to commercial tenants as of September 30, 2020, and thereafter is as follows:~~

October 1 through December 31, 2020 $ 54,250
2021 166,983
2022 244,460
2023 250,196
2024 257,214
Thereafter 731,348
$ 1,704,451

As of September 30, 2020 and December 31, 2019, 0 tenant represented over 10% of the Company’s annualized base rent and there were no significant industry concentrations with respect to its commercial leases.

straight-line basis (as applicable) or

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

~~Real Estate~~the lease payments that have been collected from the lessee. Differences between rental revenue recognized and amounts contractually due under the lease agreements are credited or charged to straight-line rent receivable or straight-line rent liability, as applicable. Tenant reimbursements for common area maintenance and other recoverable expenses, are recognized when the services are provided and the performance obligations are satisfied. Tenant reimbursements for common area maintenance are accounted for as variable lease payments and are recorded as rental income on the Company’s consolidated statement of operations.

Rents and Other receivables

Residents’ payment plans due to COVID-19

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

During the ~~three and nine months~~fiscal quarter ended ~~September~~June 30, 2020, the Company ~~owned~~instituted payment plans for its residents that were experiencing hardship due to COVID-19, which the ~~following parcels~~Company refers to as the “COVID-19 Payment Plan.” Pursuant to the COVID-19 Payment Plan, the Company allowed qualifying residents to defer their rent, which is collected by the Company in monthly installment payments over the duration of ~~land held~~the current lease or renewal term (which may not exceed 12 months). Additionally, for the ~~development~~months of ~~apartment homes:~~

Development Name Location Purchase Date Land Held for Development Construction in Progress Total Carrying Value
Garrison Station Murfreesboro, TN 5/30/2019 $ 2,469,183 $ 15,587,745 $ 18,056,928
Arista at Broomfield Broomfield, CO 3/13/2020 7,283,803 1,121,939 8,405,742
Flatirons Broomfield, CO 6/19/2020 8,574,704 145,898 8,720,602
$ 18,327,690 $ 16,855,582 $ 35,183,272

~~Property Disposition~~

~~Ansley at Princeton Lakes~~

On March 6, 2020, in connection with the STAR III Merger, the Company acquired Ansley at Princeton Lakes, a multifamily property located in Atlanta, Georgia, containing 306 apartment homes. The purchase price of Ansley at Princeton Lakes was $51,564,357, including closing costs. On September 30,May and June 2020, the Company ~~sold Ansley at Princeton Lakes for $49,500,000, excluding selling costs of $466,550, resulting in~~began providing certain qualifying residents with a ~~gain of $1,392,434, which includes reductions~~one-time concession to incentivize their performance under the COVID-19 Payment Plan. If the qualifying resident fails to make payments pursuant to the ~~net book value~~COVID-19 Payment Plan, the concession is immediately terminated, and the qualifying resident is required to immediately repay the amount of the ~~property~~concession. The Company did not offer residents any other payment plans during the remaining months in fiscal year 2020 due to ~~impairment and historical depreciation and amortization expense. The carrying value~~the reduced demand of ~~Ansley at Princeton Lakes as of the date of sale was $47,641,016. The purchaser of Ansley at Princeton Lakes is not affiliated with the Company or the Former Advisor.~~

~~Terrace Cove Apartment Homes~~

On August 28, 2014, the Company, through an indirect wholly-owned subsidiary, acquired Terrace Cove Apartment Homes, a multifamily property located in Austin, Texas, containing 304 apartment homes. The purchase price of Terrace Cove Apartment Homes was $23,500,000, exclusive of closing costs. On February 5, 2020, the Company sold Terrace Cove Apartment Homes for $33,875,000, excluding selling costs of $732,529, resulting in a gain of $11,384,599, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The carrying value of Terrace Cove Apartment Homes as of the date of sale was $21,757,872. The purchaser of Terrace Cove Apartment Homes is not affiliated with the Company or the Former Advisor.

such payment plans.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

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

During the three ~~and nine~~ months ended September 30, 2020, the Company initiated a debt forgiveness program for certain qualifying residents that were experiencing hardship due to COVID-19 and ~~2019, through~~who were in default of their lease payments (the “Debt Forgiveness Program”). Pursuant to the ~~dates~~Debt Forgiveness Program, the Company offered qualifying residents an opportunity to terminate their lease without being liable for any unpaid rent and penalties. The Company determined that accounts receivable related to the Debt Forgiveness Program are not probable of ~~sale for all properties disposed of through September 30, 2020 were~~collection and therefore included these accounts in ~~continuing operations on~~its reserve.

The Company elected not to evaluate whether the COVID-19 Payment Plans, the Debt Forgiveness Program and the Extension Plan are lease modifications and therefore the Company’s ~~consolidated statements of operations~~policy is to account for the lease contracts with COVID-19 Payment Plans, Debt Forgiveness Program and ~~are~~the Extension Plan as ~~follows:~~

For the Three Months Ended September 30, For the Nine Months Ended September 30,
2020 2019 2020 2019
Revenues:
   Rental income $ 974,222 $ 2,480,249 $ 2,713,105 $ 7,315,557
   Other income 72,275 12,652 92,408 44,277
Total revenues 1,046,497 2,492,901 2,805,513 7,359,834
Expenses:
   Operating, maintenance and management 333,859 733,746 967,789 2,068,221
   Real estate taxes and insurance 340,839 477,627 680,873 1,575,050
   Fees to affiliates 42,467 131,162 141,344 373,819
   Depreciation and amortization 664,489 708,267 1,908,139 2,541,133
   Interest expense 205,927 0 527,516 0
   General and administrative expenses 28,306 16,610 44,717 59,156
   Impairment of real estate 0 0 1,770,471 0
Total expenses 1,615,887 2,067,412 6,040,849 6,617,379
(Loss) income before other income (569,390) 425,489 (3,235,336) 742,455
Other income:
   Gain on sale of real estate, net 1,392,434 3,329,078 12,777,033 3,329,078
   Interest income 39 2,158 113 5,647
   Loss on debt extinguishment (621,451) 0 (621,451) 0
Total other income 771,022 3,331,236 12,155,695 3,334,725
Net (loss) income $ 201,632 $ 3,756,725 $ 8,920,359 $ 4,077,180

~~Real Estate Held~~if no lease modifications occurred. Under this accounting method, a lessor with an operating lease may account for ~~Sale~~

~~Montecito Apartments~~

~~On March 6, 2020,~~the concession (which in ~~connection with~~this case only applies to the ~~SIR Merger,~~COVID-19 Payment Plans) by continuing to recognize a lease receivable until the rental payment is received from the lessee at the revised payment date. If it is determined that the lease receivable is not collectable, the Company ~~acquired Montecito Apartments,~~would treat that lease contract on a ~~multifamily property located~~cash basis as defined in ~~Austin, Texas, containing 268 apartment homes.~~ASC 842. As of ~~September 30,~~March 31, 2021 and December 31, 2020, ~~Montecito Apartments,~~the Company reserved $2,728,971 and $2,245,067 of accounts receivables, respectively, which are considered not probable for collection.

Fair Value Measurements

Under GAAP, the Company is required to measure certain financial instruments at fair value on a ~~multifamily property located in Austin, Texas, met all~~recurring basis. In addition, the ~~criteria~~Company is required to ~~be classified as held for sale. Montecito Apartments was sold for $34,700,000, excluding selling costs of $395,883,~~measure other assets and liabilities at fair value on ~~October 29, 2020 to an unaffiliated buyer, resulting in~~ a ~~gain of $1,699,349. The~~non-recurring basis (e.g., carrying value of ~~Montecito Apartments~~impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

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

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

When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of ~~sale was $32,604,768, See Note 17 (Subsequent Events)~~the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for ~~details.~~a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and will establish a fair value by assigning weights to the various valuation sources. The ~~real estate, other assets, mortgage notes~~Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and ~~other liabilities related~~considers factors specific to ~~Montecito Apartments are disclosed separately for~~ the ~~periods presented~~asset or liability. There were no transfers between the levels in the ~~accompanying consolidated balance sheets.~~

fair value hierarchy during the three months ended March 31, 2021 and 2020.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

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

Interest rate cap agreements - The Company has entered into certain interest rate cap agreements. These derivatives are recorded at fair value. Fair value was based on a model-driven valuation using the associated variable rate curve and an implied market volatility, both of which were observable at commonly quoted intervals for the ~~three~~full term of the interest rate cap agreements. Therefore, the Company’s interest rate cap agreements were classified within Level 2 of the fair value hierarchy and ~~nine months ended September 30, 2020, which~~ are ~~summarized~~included in other assets in the ~~following table, were included~~accompanying consolidated balance sheets. Changes in ~~continuing operations on~~ the ~~Company’s~~fair value of the interest rate cap agreements are recorded as interest expense in the accompanying consolidated statements of operations.

For the Three Months Ended September 30, 2020 For the Nine Months Ended September 30, 2020
Revenues $ 864,329 $ 1,979,995
Expenses 1,162,943 6,265,169
Total loss $ (298,614) $ (4,285,174)

~~Completion of Mergers~~

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

The following ~~table summarizes~~tables reflect the ~~purchase price of SIR and STAR III as of~~Company’s assets required to be measured at fair value on a recurring basis on the ~~date of the Mergers:~~consolidated balance sheets:

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

~~____________________~~

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


	March 31, 2021
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements(1)	$	0	$	30,872	$	0


	December 31, 2020
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements(1)	$	0	$	7,852	$	0

_________________

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

Fair Value of Financial Instruments

The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities, distributions payable, amounts due from affiliates, amounts due to affiliates and distributions payable to affiliates to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. The Company has determined that its notes payable, net are classified as Level 3 within the fair value hierarchy.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

value of the notes payable was $2,213,714,331 and $2,246,242,677, respectively, compared to the carrying value of $2,131,926,238 and $2,129,245,671, respectively.

Restricted Cash

Restricted cash represents those cash accounts for which the use of funds is restricted by loan covenants and a cash account established in connection with a letter of credit to fund future workers compensation claims. As of March 31, 2021 and December 31, 2020, the Company had a restricted cash balance of $29,333,777 and $38,998,980, respectively, which represented amounts set aside as impounds for future property tax payments, property insurance payments and tenant improvement payments as required by agreements with the Company’s lenders as well as an amount set aside in connection with a letter of credit.

The following table represents the components of the cash, cash equivalents and restricted cash presented on the accompanying consolidated statements of cash flows for the three months ended March 31, 2021 and 2020:


	March 31,
	2021		2020
Cash and cash equivalents	$	242,291,317	$	215,105,801
Restricted cash	29,333,777		18,635,695

Total cash, cash equivalents and restricted cash	$	271,625,094	$	233,741,496

Distribution Policy

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

Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to qualify as a REIT under the Internal Revenue Code. During the three months ended March 31, 2021 and 2020, the Company declared distributions totaling $0.161 and $0.224 per share of common stock, respectively.

Lessee Accounting

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

Lease renewal or termination options are included in the lease asset and lease liability only if it is reasonably certain that the option to extend or to terminate would be exercised. As the implicit rate in most leases are not readily determinable, the Company’s incremental borrowing rate for each lease at commencement date is used to determine the present value of lease payments. Consideration is given to the Company’s recent debt financing transactions, as well as publicly available data for instruments with similar characteristics, adjusted for the respective lease term, when estimating incremental borrowing rates.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

Equity-Based Compensation

Per Share Data

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

Segment Disclosure

The Company has determined that it has 1 reportable segment with activities related to investing in multifamily properties. The Company��s investments in real estate are in different geographic regions, and management evaluates operating performance on an individual asset level. However, as each of the Company’s assets has similar economic characteristics, residents and products and services, its assets have been aggregated into 1 reportable segment.

Recent Accounting Pronouncements

In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815, (“ASU 2020-01”), which clarifies the interaction between the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The amendments in ASU 2020-01 should be applied prospectively. The Company adopted ASU 2020-01 on January 1, 2021. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

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

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

In November 2020, the SEC issued Release No. 33-10890, Amendments to Management's Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information, to simplify, modernize and enhance certain financial disclosure requirements in Regulation S-K. This amendment became effective on February 10, 2021. Early Adoption was permitted. The Company early adopted these modifications in its Annual Report on Form 10-K filed with the SEC on March 12, 2021. The

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

adoption of this guidance did not have a material impact on the consolidated financial statements.

3.Internalization Transaction

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

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

Fair Value of Consideration Transferred

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


	Amount
Cash consideration(1)	$	31,249,000

Class B OP Units issued	6,155,613.92
Fair value per Class B OP Unit	$	15.23
Fair value of OP Unit Consideration	93,750,000

Promote price(2)	1,000

Accounting value of total consideration	$	125,000,000

_________________

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

Assets Acquired and Liabilities Assumed

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

During the year ended December 31, 2020, the Company finalized the purchase price allocation of ~~SIR’s and STAR III’s identifiable assets and liabilities assumed~~the fair value of consideration transferred (described above) for the Internalization Transaction. The following table summarizes the finalized purchase price allocation as of the date of the ~~Mergers:~~Internalization Transaction:

SIR STAR III
Assets
Land $ 114,377,468 $ 58,056,275
Building and improvements 959,337,747 411,461,858
Acquired intangible assets 27,027,759 10,041,373
Other assets, net 122,688,608 21,438,855
Investment in unconsolidated joint venture 22,128,691 0
Total assets $ 1,245,560,273 $ 500,998,361
Liabilities
Mortgage notes payable $ (506,023,981) $ (289,407,045)
Other liabilities (46,135,318) (17,698,011)
$ (552,159,299) $ (307,105,056)
$ 693,400,974 $ 193,893,305


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

~~Capitalized Acquisition Costs Related~~_________________

(1)The intangible assets acquired consist of property management agreements that the Company, acting as advisor and property manager through certain subsidiaries, has with affiliates of SRI (as amended from time to time, the “SRI Property Management Agreements”). The value of the SRI Property Management Agreements was determined based on a discounted cash flow valuation of the projected revenues of the acquired agreements. The SRI Property Management Agreements are subject to an estimated useful life of one year. As of March 31, 2021, the SRI Property Management Agreements were approximately 58% amortized.

Goodwill

Pro Forma Financial Information (Unaudited)

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

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

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


	Year Ended December 31,
	2020		2019

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

_________________

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

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

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

4.Real Estate

As of March 31, 2021, the Company owned 69 multifamily properties comprising a total of 21,591 apartment homes and 3 parcels of land held for the development of apartment homes.

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


	March 31, 2021
	Assets
	Land		Building and Improvements		Tenant Origination and Absorption Costs		Total Real Estate Held for Investment		Real Estate Under Development
Investments in real estate	$	337,896,051	$	2,877,749,041	$	1,752,793	$	3,217,397,885	$	39,326,042
Less: Accumulated depreciation and amortization	0		(428,928,968)		(938,115)		(429,867,083)		0
Net investments in real estate and related lease intangibles	$	337,896,051	$	2,448,820,073	$	814,678	$	2,787,530,802	$	39,326,042

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)


	December 31, 2020
	Assets
	Land		Building and Improvements		Tenant Origination and Absorption Costs		Total Real Estate Held for Investment		Real Estate Under Development
Investments in real estate	$	337,322,234	$	2,882,411,683	$	1,752,793	$	3,221,486,710	$	39,891,218
Less: Accumulated depreciation and amortization	0		(397,413,838)		(330,839)		(397,744,677)		0
Net investments in real estate and related lease intangibles	$	337,322,234	$	2,484,997,845	$	1,421,954	$	2,823,742,033	$	39,891,218

During the three months ended March 31, 2021 and 2020, the Company wrote off $15,459,862 and $0 of fixed assets related to the damage caused to the Company’s multifamily properties impacted by the winter storm that took place in February 2021.

Total depreciation and amortization expenses were ~~each accounted~~$33,874,505 and $28,575,896 for the three months ended March 31, 2021, and 2020, respectively.

Depreciation of the Company’s buildings and improvements was $33,044,052 and $22,751,822 for the three months ended March 31, 2021, and 2020, respectively. Depreciation of the Company’s acquired furniture and fixtures in the Internalization Transaction was $12,999 and $0 for the three months ended March 31, 2021, and 2020, respectively.

Total amortization of the Company’s intangible assets was $817,454 and $5,824,074 for the three months ended March 31, 2021, and 2020, respectively.

Amortization of the Company’s tenant origination and absorption costs was $607,276 and $5,822,805 for the three months ended March 31, 2021, and 2020, respectively. Tenant origination and absorption costs had a weighted-average amortization period as of the date of acquisition of less than one year.

Amortization of the Company’s operating ROU assets was $3,367 and $1,269 for the three months ended March 31, 2021, and 2020, respectively. This represents the amortization of initial direct costs included in the measurement of the operating ROU assets.

Amortization of the Company’s SRI Property Management Agreements was $206,811 and $0 for the three months ended March 31, 2021, and 2020, respectively. This represents the amortization of the SRI Property Management Agreements acquired in the Internalization Transaction.

Amortization of the Company’s other intangible assets, which consist of below-market leases, was $1,671 and $922 for the three months ended March 31, 2021 and 2020, respectively, and is included as an ~~asset acquisition. In accordance with the asset acquisition method of accounting, costs incurred~~increase to acquire the asset were capitalized as part of the acquisition price. Upon the execution of the SIR Merger Agreement and the STAR III Merger Agreement on August 5, 2019, the SIR Merger and STAR III Merger were considered probable of occurring, at which point the Company began to capitalize the merger related acquisition costs to building and improvementsrental income in the accompanying consolidated ~~balance sheets. Prior to such date, the merger related acquisition costs were expensed to general and administrative expenses in the accompanying consolidated~~condensed statements of operations. Other intangible assets had a weighted-average amortization period as of the date of acquisition of 10 years.

Impairment of Real Estate Assets

~~Ansley at Princeton Lakes~~ The Company accounts for its real estate assets in accordance with ASC 360, Property, Plant and ~~Montecito Apartments~~Equipment (“ASC 360”). ASC 360 requires the Company to continually monitor events and changes in circumstances that could indicate that the carrying amounts of the Company’s real estate and related intangible assets may not be recoverable. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, the Company assesses the recoverability of the assets by estimating whether the Company will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition. Based on this analysis, if the Company does not believe that it will be able to recover the carrying value of the real estate and related intangible assets and liabilities, the Company records an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities. If any assumptions, projections or estimates regarding an asset changes in the future, the Company may have to record an impairment to reduce the net book value of such individual asset. The Company continues to monitor events in connection with the recent outbreak of the novel Coronavirus (“COVID-19”) and evaluates any potential indicators that could suggest that the carrying value of its real estate investments and related intangible assets and liabilities may not be recoverable. NaN impairment loss was recorded during the three months ended March 31, 2021 and 2020.

Goodwill

Goodwill represents the excess of consideration paid over the fair value of underlying identifiable net assets of a business acquired. The Company’s goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company takes a qualitative approach to consider whether an impairment of goodwill exists prior to quantitatively determining the fair value of the reporting unit in step one of the impairment test. The Company performed its annual assessment on October 1, 2020. The Company recorded goodwill during the year ended December 31, 2020, in connection with the Internalization Transaction. See Note 3 (Internalization Transaction) for details.

Revenue recognition - operating leases

The majority of the Company’s revenue is derived from rental revenue, which is accounted for in accordance with ASC 842, Leases (“ASC 842”). The Company leases apartment homes under operating leases with terms generally of one year or less. Generally, credit investigations are performed for prospective residents and security deposits are obtained. In accordance with ASC 842, the Company recognizes minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectability is probable and records amounts expected to be received in later years as deferred rent receivable. For lease arrangements when it is not probable that the Company will collect all or substantially all of the remaining lease payments under the term of the lease, rental revenue is limited to the lesser of the rental revenue that would be recognized on a straight-line basis (as applicable) or

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Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

Rents and Other receivables

Residents’ payment plans due to COVID-19

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

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

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

In January 2021, the Company began offering an ~~impairment charge~~extension to the COVID-19 Payment Plan (the “Extension Plan”), that allows eligible residents to defer their rent, which is collected by the Company in monthly installment payments over the lesser of ~~$5,039,937 as it was~~the duration of the current lease term or a maximum of three months (with the exception of certain states that allow a maximum of six months deferral). Under the Extension Plan, no concessions are offered for residents with a payment plan duration of two months or less and residents who opted for the COVID-19 Payment Plan are not eligible to participate in the Extension Plan unless they paid off the amounts due under the COVID-19 Payment Plan.

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

The Company elected not to evaluate whether the COVID-19 Payment Plans, the Debt Forgiveness Program and the Extension Plan are lease modifications and therefore the Company’s policy is to account for the lease contracts with COVID-19 Payment Plans, Debt Forgiveness Program and the Extension Plan as if no lease modifications occurred. Under this accounting method, a lessor with an operating lease may account for the concession (which in this case only applies to the COVID-19 Payment Plans) by continuing to recognize a lease receivable until the rental payment is received from the lessee at the revised payment date. If it is determined that the lease receivable is not collectable, the Company would treat that lease contract on a cash basis as defined in ASC 842. As of March 31, 2021 and December 31, 2020, the Company reserved $2,728,971 and $2,245,067 of accounts receivables, respectively, which are considered not probable for collection.

Fair Value Measurements

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

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

When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and will establish a fair value by assigning weights to the various valuation sources. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. There were no transfers between the levels in the fair value hierarchy during the three months ended March 31, 2021 and 2020.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

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


	March 31, 2021
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements(1)	$	0	$	30,872	$	0


	December 31, 2020
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements(1)	$	0	$	7,852	$	0

_________________

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

Fair Value of Financial Instruments

The Company considers the carrying value of ~~Ansley at Princeton Lakes~~cash and ~~Montecito Apartments would not be recoverable. The impairment charge was a result of actively marketing Ansley at Princeton Lakes~~cash equivalents, restricted cash, rents and ~~Montecito Apartments for sale at disposition prices that were less than their carrying values. In determining~~other receivables, accounts payable and accrued liabilities, distributions payable, amounts due from affiliates, amounts due to affiliates and distributions payable to affiliates to approximate the fair value of ~~property,~~these financial instruments based on the short duration between origination of the instruments and their expected realization. The Company has determined that its notes payable, net are classified as Level 3 within the fair value hierarchy.

The fair value of the notes payable, net is estimated using a discounted cash flow analysis using borrowing rates available to the Company ~~considered Level 3 inputs.~~for debt instruments with similar terms and maturities. As of March 31, 2021 and December 31, 2020, the fair

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

value of the notes payable was $2,213,714,331 and $2,246,242,677, respectively, compared to the carrying value of $2,131,926,238 and $2,129,245,671, respectively.

Restricted Cash


	March 31,
	2021		2020
Cash and cash equivalents	$	242,291,317	$	215,105,801
Restricted cash	29,333,777		18,635,695

Total cash, cash equivalents and restricted cash	$	271,625,094	$	233,741,496

Distribution Policy

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

Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to qualify as a REIT under the Internal Revenue Code. During the three months ended March 31, 2021 and 2020, the Company declared distributions totaling $0.161 and $0.224 per share of common stock, respectively.

Lessee Accounting

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

Equity-Based Compensation

Per Share Data

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

Segment Disclosure

Recent Accounting Pronouncements

In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815, (“ASU 2020-01”), which clarifies the interaction between the accounting for ~~further details. Ansley at Princeton Lakes was sold on September 30,~~equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020, and ~~Montecito Apartments has been classified~~interim periods within those fiscal years. Early adoption is permitted. The amendments in ASU 2020-01 should be applied prospectively. The Company adopted ASU 2020-01 on January 1, 2021. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

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

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

adoption of this guidance did not have a material impact on the consolidated financial statements.

3.Internalization Transaction

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

Fair Value of Consideration Transferred


	Amount
Cash consideration(1)	$	31,249,000

Class B OP Units issued	6,155,613.92
Fair value per Class B OP Unit	$	15.23
Fair value of OP Unit Consideration	93,750,000

Promote price(2)	1,000

Accounting value of total consideration	$	125,000,000

_________________

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

Assets Acquired and Liabilities Assumed

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

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


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

_________________

(1)The intangible assets acquired consist of property management agreements that the Company, acting as advisor and property manager through certain subsidiaries, has with affiliates of SRI (as amended from time to time, the “SRI Property Management Agreements”). The value of the SRI Property Management Agreements was determined based on a discounted cash flow valuation of the projected revenues of the acquired agreements. The SRI Property Management Agreements are subject to an estimated useful life of one year. As of March 31, 2021, the SRI Property Management Agreements were approximately 58% amortized.

Goodwill

Pro Forma Financial Information (Unaudited)

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

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)


	Year Ended December 31,
	2020		2019

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

_________________

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

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

4.Real Estate

As of March 31, 2021, the Company owned 69 multifamily properties comprising a total of 21,591 apartment homes and 3 parcels of land held for ~~sale property~~the development of apartment homes.

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


	March 31, 2021
	Assets
	Land		Building and Improvements		Tenant Origination and Absorption Costs		Total Real Estate Held for Investment		Real Estate Under Development
Investments in real estate	$	337,896,051	$	2,877,749,041	$	1,752,793	$	3,217,397,885	$	39,326,042
Less: Accumulated depreciation and amortization	0		(428,928,968)		(938,115)		(429,867,083)		0
Net investments in real estate and related lease intangibles	$	337,896,051	$	2,448,820,073	$	814,678	$	2,787,530,802	$	39,326,042

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)


	December 31, 2020
	Assets
	Land		Building and Improvements		Tenant Origination and Absorption Costs		Total Real Estate Held for Investment		Real Estate Under Development
Investments in real estate	$	337,322,234	$	2,882,411,683	$	1,752,793	$	3,221,486,710	$	39,891,218
Less: Accumulated depreciation and amortization	0		(397,413,838)		(330,839)		(397,744,677)		0
Net investments in real estate and related lease intangibles	$	337,322,234	$	2,484,997,845	$	1,421,954	$	2,823,742,033	$	39,891,218

Total depreciation and amortization expenses were $33,874,505 and $28,575,896 for the three months ended March 31, 2021, and 2020, respectively.

Total amortization of the Company’s intangible assets was $817,454 and $5,824,074 for the three months ended March 31, 2021, and 2020, respectively.

Amortization of the Company’s other intangible assets, which consist of below-market leases, was $1,671 and $922 for the three months ended March 31, 2021 and 2020, respectively, and is included as an increase to rental income in the accompanying consolidated condensed statements of operations. Other intangible assets had a weighted-average amortization period as of the date of acquisition of 10 years.

Operating Leases

As of March 31, 2021, the Company’s real estate portfolio comprised 21,591 residential apartment homes and was ~~sold subsequent~~96.9% leased by a diverse group of residents. For the three months ended March 31, 2021 and 2020, the Company’s real estate portfolio earned in excess of 99% and less than 1% of its rental income from residential tenants and commercial tenants, respectively. The residential tenant lease terms consist of lease durations equal to ~~September 30, 2020. See Note 17 (Subsequent Events)~~12 months or less. The commercial tenant leases consist of remaining lease durations varying from six to nine years.

Some residential leases contain provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to residents. Generally, upon the execution of a lease, the Company requires security deposits from residents in the form of a cash deposit. Amounts required as security deposits vary depending upon the

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in accounts payables and accrued liabilities in the accompanying consolidated balance sheets and totaled $8,701,518 and $8,545,977 as of March 31, 2021 and December 31, 2020, respectively.

The future minimum rental receipts from the Company’s properties under non-cancelable operating leases attributable to commercial tenants as of March 31, 2021, and thereafter is as follows:



April 1, through December 31, 2021	$	166,108
2022	244,460
2023	250,196
2024	257,214
2025	264,423
Thereafter	980,059
	$	2,162,460

As of March 31, 2021 and December 31, 2020, 0 tenant represented over 10% of the Company’s annualized base rent and there were no significant industry concentrations with respect to its commercial leases.

Real Estate Under Development

During the three months ended March 31, 2021, the Company owned the following parcels of land held for the development of apartment homes:


Development Name	Location	Purchase Date	Land Held for Development		Construction in Progress		Total Carrying Value
Garrison Station(1)	Murfreesboro, TN	5/30/2019	$	1,895,365	$	19,795,882	$	21,691,247
Arista at Broomfield	Broomfield, CO	3/13/2020	7,283,803		1,447,922		8,731,725
Flatirons	Broomfield, CO	6/19/2020	8,574,704		328,366		8,903,070
			$	17,753,872	$	21,572,170	$	39,326,042

(1) The Company is developing Garrison Station, which consists of 9 residential buildings comprised of 176 apartment homes. During the three months ended March 31, 2021, 1 building comprised of 24 apartment homes was placed in service totaling $4,678,909, and is included in total real estate held for investment, net in the accompanying consolidated balance sheets.

Completion of Mergers

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

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

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


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

____________________

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

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


	SIR		STAR III
Assets:
Land	$	114,377,468	$	58,056,275
Buildings and improvements	959,337,747		411,461,858
Acquired intangibles	27,027,759		10,041,373
Other assets	122,688,608		21,438,855
Investment in unconsolidated joint venture	22,128,691		0
Total assets:	$	1,245,560,273	$	500,998,361
Liabilities:
Mortgage notes payable, net	$	(506,023,981)	$	(289,407,045)
Other liabilities	(46,135,318)		(17,698,011)
Total liabilities:	$	(552,159,299)	$	(307,105,056)
Fair value of net assets acquired	$	693,400,974	$	193,893,305

Capitalized Acquisition Costs Related to the Mergers

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

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

5. Investment in Unconsolidated Joint Venture

On March 6, 2020, upon consummation of the SIR Merger, the Company acquired a 10% interest in BREIT Steadfast MF JV LP (the “Joint Venture”)~~, which consisted of 20 multifamily properties with a total of 4,584 apartment homes.~~. On July 16, 2020 (the “JV Disposition Date”), the Company sold its joint venture interest for ~~$19,278,280.~~$19,278,280 to an affiliate of the general partner of the Joint Venture. The Company did not exercise significant influence, nor did it control the Joint Venture and had accounted for its former investment in the Joint Venture under the equity method of accounting. Income, losses, contributions and distributions were generally allocated based on the members’ respective equity interests.

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

The Company recognized an ~~OTTI~~other-than-temporary impairment (“OTTI”) on its investment in the Joint Venture of $2,442,411 during the three months ended June 30, 2020. The OTTI was a result of the Company receiving an indication of value in connection with negotiating a sale of the Company’s joint venture interest at a disposition price that was less than the carrying value of the Joint Venture. The OTTI iswas included in equity in loss from unconsolidated joint venture on the Company’s consolidated statements of operations. In determining the fair value of the Joint Venture, the Company considered Level 3 inputs. ~~See Note 15 (Fair Value Measurement), for details.~~

As of the JV Disposition Date, the book value of the Company’s investment in the Joint Venture was $18,955,478, which included ~~$8,662,003, primarily consisting of~~ an accounting outside basis difference of $8,067,010, net and capitalized transaction costs of $594,993, net. The accounting outside basis difference represented the difference between the purchase price the Company paid for its investment in the Joint Venture in connection with the SIR Merger and the book value of the Company’s equity in the Joint Venture as of the JV Disposition Date. The capitalized transaction costs relate to acquiring the interest in the Joint Venture through the consummation of the SIR Merger.

During the ~~three and nine months~~year ended ~~September 30,~~December 31, 2020, ~~$58,144 and~~ $490,586 of amortization of the basis difference was included in equity in losses from unconsolidated joint venture on the accompanying consolidated statements of ~~operations, respectively.~~operations. The Company recorded the gain on sale of the investment in unconsolidated joint venture of $66,802 in equity in losses from unconsolidated joint venture on the accompanying consolidated statements of operations. During the ~~three and nine months~~year ended ~~September 30,~~December 31, 2020, the Company received distributions of ~~$0 and~~ $360,700 related to its investment in the Joint ~~Venture, respectively.~~Venture.

Unaudited financial information for the Joint Venture for the ~~periods~~period from March 6, 2020 through ~~the JV Disposition Date,~~March 31, 2020 is summarized below:

For the Period from July 1, 2020 through July 16, 2020 For the Period from March 6, 2020 through July 16, 2020
Revenues $ 2,779,246 $ 23,313,921
Expenses (3,079,277) (25,078,993)
Other income 46,341 225,914
Net loss $ (253,690) $ (1,539,158)
Company’s proportional net loss $ (25,369) $ (153,916)
Amortization of outside basis (58,144) (490,586)
Impairment of unconsolidated joint venture 0 (2,442,411)
Gain on sale of unconsolidated joint venture 66,802 66,802
Equity in losses of unconsolidated joint venture $ (16,711) $ (3,020,111)


	For the Period from March 6, 2020 through March 31, 2020
Revenues	$	4,634,604
Expenses	(4,921,775)
Other income	0
Net loss	$	(287,171)

Company’s proportional net loss	$	(28,717)
Amortization of outside basis	(6,476)


Equity in losses of unconsolidated joint venture	$	(35,193)

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Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

6. Other Assets

As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, other assets consisted of:


		September 30, 2020		December 31, 2019

							March 31, 2021		December 31, 2020
Prepaid expenses	Prepaid expenses	$	7,354,973	$	1,521,084	Prepaid expenses	$	3,715,312	$	6,446,847
SRI Property Management Agreements, net	SRI Property Management Agreements, net	744,628		0		SRI Property Management Agreements, net	339,580		543,332
Interest rate cap agreements (Note 14)	Interest rate cap agreements (Note 14)	16,955		132		Interest rate cap agreements (Note 14)	30,872		7,852
Escrow deposits for pending real estate acquisitions		500,000		2,600,300

Other deposits	Other deposits	717,004		1,342,615		Other deposits	655,888		649,470
Corporate computers, net	Corporate computers, net	58,370		0		Corporate computers, net	145,979		132,708
Lease right-of-use assets, net (Note 17)(1)		2,404,899		49,184
Lease right-of-use assets, net (Note 15)(1)						Lease right-of-use assets, net (Note 15)(1)	1,877,774		2,145,505
Other assets	Other assets	$	11,796,829	$	5,513,315	Other assets	$	6,765,405	$	9,925,714

~~____________________~~_________________

(1)

~~(1)~~ As of ~~September 30,~~March 31, 2021, lease ROU assets, net included a finance lease ROU asset, net of $13,785 and operating ROU assets, net of $1,863,989. As of December 31, 2020, lease ROU assets, net included a finance lease ROU asset, net of ~~$19,905~~$16,845 and operating ROU assets, net of ~~$2,384,994. As of December 31, 2019, lease ROU assets, net included finance lease ROU asset, net of $0 and operating ROU assets, net of $49,184.~~

$2,128,660.

Amortization of the Company’s SRI Property Management Agreements was $206,811 and $0 for ~~each of~~ the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021, and 2020, ~~was $71,392.~~respectively.

Amortization of the Company’s initial ~~indirect~~direct costs included in the measurement of the operating ROU assets was $3,367 and $1,269 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021, and 2020, was $3,367 and $6,845, respectively. Amortization of the Company’s initial indirect costs included in the measurement of the operating ROU assets for the three and nine months ended September 30, 2019, was $904 and $904, respectively. See Note 1615 (Leases) for details.

7. Debt

Mortgage Notes Payable

The following is a summary of mortgage notes payable, net secured by individual properties as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020:


		September 30, 2020														March 31, 2021
				Interest Rate Range				Weighted Average Interest Rate												Interest Rate Range						Weighted Average Interest Rate
Type	Type	Number of Instruments	Maturity Date Range	Minimum		Maximum			Principal Outstanding	Type				Number of Instruments			Maturity Date Range		Minimum			Maximum					Principal Outstanding
Variable rate(1)	Variable rate(1)	4	10/16/2022 - 1/1/2027	1-Mo LIBOR + 1.88%		1-Mo LIBOR + 2.31%			2.28%			$	109,585,999		Variable rate(1)		4		10/16/2022 - 1/1/2027			1-Mo LIBOR + 1.88%			1-Mo LIBOR + 2.31%		2.23%			$	117,670,742
Fixed rate	Fixed rate	43	10/1/2022 - 10/1/2056	3.19	%	4.66	%	3.85%		1,294,240,476		Fixed rate				42		10/1/2022 - 10/1/2056		3.19	%		4.66	%		3.85%		1,272,208,826
Mortgage notes payable, gross	Mortgage notes payable, gross	47						3.73%		1,403,826,475		Mortgage notes payable, gross				46										3.71%		1,389,879,568
Premiums and discounts, net(2)										4,680,952
Premiums and discount, net(2)												Premiums and discount, net(2)																3,391,845
Deferred financing costs, net(3)	Deferred financing costs, net(3)									(7,114,551)		Deferred financing costs, net(3)																(6,418,063)
Mortgage notes payable, net	Mortgage notes payable, net									$	1,401,392,876	Mortgage notes payable, net																$	1,386,853,350

3227

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

December 31, 2019
Interest Rate Range Weighted Average Interest Rate
Type Number of Instruments Maturity Date Range Minimum Maximum Principal Outstanding
Variable rate(1)
2 1/1/2025 - 9/1/2025 1-Mo LIBOR + 1.88% 1-Mo LIBOR + 2.28% 3.82% $ 75,670,000
Fixed rate 14 7/1/2025 - 5/1/2054 3.36 % 4.60 % 3.96% 488,805,387
Mortgage notes payable, gross 16 3.94% 564,475,387
Deferred financing costs, net(3)
(4,376,572)
Mortgage notes payable, net $ 560,098,815

~~___________~~


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

_________________

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

(2)

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


Unamortized Portion of Net Debt Premium (Discount) as of September 30, 2020		Amortization of Debt (Premium) Discount During the Nine Months Ended September 30,		Amortized Net Debt Premium (Discount) as of September 30, 2020
Net Debt Premium (Discount) before Amortization as of March 31, 2021						Net Debt Premium (Discount) before Amortization as of March 31, 2021	Amortization of Debt (Premium) Discount During the Three Months Ended March 31, 2021		Unamortized Net Debt Premium (Discount) as of March 31, 2021
$	15,844,866	$	(1,297,874)	$	14,546,992	15,375,305	$	(2,390,339)	$	12,984,966
(10,179,526)	(10,179,526)	313,486		(9,866,040)		(10,179,526)	586,405		(9,593,121)
$	5,665,340	$	(984,388)	$	4,680,952	5,195,779	$	(1,803,934)	$	3,391,845


Net Debt Premium (Discount) before Amortization as of December 31, 2020			Amortization of Debt (Premium) Discount During the Year Ended December 31, 2020		Unamortized Net Debt Premium (Discount) as of December 31, 2020
$	15,375,305		$	(1,836,575)	$	13,538,730
(10,179,526)			450,530		(9,728,996)
$	5,195,779	5195779	$	(1,386,045)	$	3,809,734

(3)

~~(3)~~ Accumulated amortization related to deferred financing costs as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 was ~~$3,144,973~~$3,833,961 and ~~$2,215,461,~~$3,495,183, respectively.

Construction ~~loan~~Loan

On October 16, 2019, the Company entered into an agreement with PNC Bank, National Association (“PNC Bank”) for a construction loan related to the development of a multifamily property known as Garrison Station in an aggregate principal amount not to exceed $19,800,000 for a ~~thirty-six~~36 month initial term and 2 ~~twelve~~12 month mini-perm extensions. The rate of interest on the construction loan is daily LIBOR plus 2.00%, which then reduces to daily LIBOR plus 1.80% upon achieving completion as defined in the construction loan agreement and at a debt service coverage ratio of 1.15x. The loan includes a 0.4% fee at

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

closing, a 0.1% fee upon exercising the mini-perm and a 0.1% fee upon extending the mini-perm, each payable to PNC Bank. There is an exit fee of 1% which will be waived if permanent financing is secured through PNC Bank or one of its affiliates. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the principal outstanding balance on the construction loan was ~~$2,205,999~~$10,849,189 and ~~$0,~~$6,264,549, respectively, and was included within mortgage notes payable, net on the accompanying consolidated balance sheets.

Credit Facilities

Master Credit Facility

On July 31, 2018, 16 indirect wholly-owned subsidiaries of the Company entered into a Master Credit Facility Agreement (“MCFA”) with Newmark Group Inc., formerly Berkeley Point Capital, LLC (“Facility Lender”) for an aggregate principal amount of $551,669,000. On February 11, 2020, in connection with the financing of Patina Flats at the Foundry, the Company and the Facility Lender

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

amended the MCFA to substitute Patina Flats at the Foundry and Fielders Creek, the then-unencumbered multifamily property owned by the Company, as substitute collateral for the ~~three~~3 multifamily properties disposed of and released from the MCFA. The Company also increased its outstanding borrowings pursuant to the MCFA by $40,468,000, a portion of which was attributable to the acquisition of Patina Flats at the Foundry. The MCFA provides for 4 tranches: ~~(i)~~(1) a fixed rate loan in the aggregate principal amount of $331,001,400 that accrues interest at 4.43% per annum; ~~(ii)~~(2) a fixed rate loan in the aggregate principal amount of $137,917,250 that accrues interest at 4.57%~~; (iii)~~ per annum; (3) a variable rate loan in the aggregate principal amount of $82,750,350 that accrues interest at the one-month LIBOR plus 1.70%; per annum; and ~~(iv)~~(4) a fixed rate loan in the aggregate principal amount of $40,468,000 that accrues interest at 3.34%. per annum. The first three tranches have a maturity date of August 1, 2028, and the fourth tranche has a maturity date of March 1, 2030, unless in each case the maturity date is accelerated in accordance with the terms of the loan documents. Interest only payments are payable monthly through August 1, 2025 and April 1, 2027 on the first three tranches and fourth tranche, respectively, with interest and principal payments due monthly thereafter. ~~The Company paid $2,072,480 in the aggregate in loan origination fees to the Facility Lender in connection with the refinancings, and paid the Former Advisor a loan coordination fee of $3,061,855.~~

PNC Master Credit Facility

On June 17, 2020, the Company, through 7 indirect wholly-owned subsidiaries (each, a “Borrower” and collectively, the “Borrowers”), entered into a Master Credit Facility Agreement (the “PNC MCFA,”), a fixed rate Multifamily Note and a variable rate Multifamily Note (collectively, the “Notes”) and the other loan documents for the benefit of PNC Bank. The PNC MCFA provides for 2 tranches: ~~(i)~~(1) a fixed rate loan in the aggregate principal amount of $79,170,000 that accrues interest at 2.82% per annum; and ~~(ii)~~(2) a variable rate loan in the aggregate principal amount of $79,170,000 that accrues interest at the one-month LIBOR plus 2.135%. per annum. If LIBOR is no longer posted through electronic transmission, is no longer available or, in PNC Bank’s determination, is no longer widely accepted or has been replaced as the index for similar financial instruments, PNC Bank will choose a new index taking into account general comparability to LIBOR and other factors, including any adjustment factor to preserve the relative economic positions of the Borrowers and PNC Bank with respect to any advances made pursuant to the PNC MCFA. The Company paid $633,360 in the aggregate in loan origination fees to PNC Bank in connection with the financings, and paid the Former Advisor a loan coordination fee of $791,700.

Revolving Credit Loan Facility

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

The Company has the option to select the interest rate in respect of the outstanding unpaid principal amount of ~~the~~each Revolver ~~Loans~~Loan from the following options: (1) a fluctuating rate per annum equal to the sum of the daily LIBOR rate plus the ~~daily LIBOR rate spread or (2) a fluctuating rate per annum equal to the base rate plus the alternate rate spread.~~

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Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

daily LIBOR rate spread or (2) a fluctuating rate per annum equal to the base rate plus the alternate rate spread. NaN amounts were outstanding on the Revolver at March 31, 2021.

As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the advances obtained and certain financing costs incurred under the MCFA, PNC MCFA and the Revolver, which are included in credit facilities, net, in the accompanying consolidated balance sheets, are summarized in the following table.


		Amount of Advance as of					Amount of Advance as of
		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Principal balance on MCFA, gross	Principal balance on MCFA, gross	$	592,137,000	$	551,669,000	Principal balance on MCFA, gross	$	592,137,000	$	592,137,000
Principal balance on PNC MCFA, gross	Principal balance on PNC MCFA, gross	158,340,000		0		Principal balance on PNC MCFA, gross	158,340,000		158,340,000
Principal balance on Revolver, gross		0		0

Deferred financing costs, net on MCFA(1)	Deferred financing costs, net on MCFA(1)	(3,555,957)		(3,208,770)		Deferred financing costs, net on MCFA(1)	(3,320,332)		(3,436,850)
Deferred financing costs, net on PNC MCFA(2)	Deferred financing costs, net on PNC MCFA(2)	(1,736,067)		0		Deferred financing costs, net on PNC MCFA(2)	(1,644,807)		(1,689,935)
Deferred financing costs, net on Revolver(3)	Deferred financing costs, net on Revolver(3)	(536,761)		0		Deferred financing costs, net on Revolver(3)	(438,973)		(487,329)
Credit facilities, net	Credit facilities, net	$	744,648,215	$	548,460,230	Credit facilities, net	$	745,072,888	$	744,862,886

~~___________~~_________________

(1)Accumulated amortization related to deferred financing costs in respect of the MCFA as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, was ~~$1,179,157~~$1,414,783 and ~~$832,187,~~$1,298,265, respectively.

(2)Accumulated amortization related to deferred financing costs in respect of the PNC MCFA as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, was ~~$53,152~~$144,412 and ~~$0,~~$99,283, respectively.

(3)Accumulated amortization related to deferred financing costs in respect of the Revolver as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, was ~~$52,118~~$149,905 and ~~$0,~~$101,549, respectively.

Assumed Debt as a Result of the Completion of Mergers

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

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

Interest Rate Range

Type

Number of Instruments

Maturity Date Range

Minimum

Maximum

Principal Outstanding At Merger Date

Type

Number of Instruments

Maturity Date Range

Minimum

Maximum

Principal Outstanding At Merger Date

Variable rate

1/1/2027 - 9/1/2027

1-Mo LIBOR + 2.195%

1-Mo LIBOR + 2.31%

64,070,000

Variable rate

1/1/2027 - 9/1/2027

1-Mo LIBOR + 2.195%

1-Mo LIBOR +2.31%

64,070,000

Fixed rate

10/1/2022 - 10/1/2056

3.19%

4.66%

726,950,471

Fixed rate

10/1/2022 - 10/1/2056

3.19%

4.66%

726,950,471

Assumed Principal Mortgage Notes Payable

791,020,471

Assumed Principal
Mortgage Notes Payable

791,020,471

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Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

Maturity and Interest

The following is a summary of the Company’s aggregate maturities as of ~~September 30, 2020:~~March 31, 2021:


						Maturities During the Years Ending December 31,															Maturities During the Years Ending December 31,
Contractual Obligations	Contractual Obligations	Total		Remainder of 2020		2021		2022		2023		2024		Thereafter		Contractual Obligations	Total		Remainder of 2021		2022		2023		2024		2025		Thereafter
Principal payments on outstanding debt (1)	Principal payments on outstanding debt (1)	$	2,154,303,475	$	1,654,287	$	8,723,709	$	37,047,540	$	60,646,440	$	58,164,822	$	1,988,066,677	Principal payments on outstanding debt (1)	$	2,140,356,568	$	6,620,798	$	45,703,199	$	60,658,369	$	58,176,299	$	197,607,413	$	1,771,590,490

~~______________~~_________________

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

The Company’s notes payable contain customary financial and non-financial debt covenants. At ~~September 30,~~March 31, 2021 and December 31, 2020, the Company was in compliance with all debt covenants.

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, the Company incurred interest expense of ~~$20,628,159~~$19,807,678 and ~~$54,734,431,~~$14,390,954, respectively. Interest expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, includes amortization of deferred financing costs ~~totaling $573,078~~of $548,781 and ~~$1,382,954,~~$327,470, net unrealized loss from the change in fair value of interest rate cap agreements of $29,093 and $56,287, amortization of net loan premiums and discounts of $(431,387) and $(959,827) and costs associated with the refinancing of debt of $0 and $42,881, net of capitalized interest of $313,902 and $576,521, and imputed interest on the finance lease portion of the sublease of $47 and $47, respectively. The capitalized interest is included in real estate held for development on the consolidated balance sheets.

For the three and nine months ended September 30, 2019, the Company incurred interest expense of $12,562,978 and $36,962,055, respectively. Interest expense for the three and nine months ended September 30, 2019, includes amortization of deferred financing costs of $256,547 and $750,751, net unrealized(gains) losses from the change in fair value of interest rate cap agreements of ~~$24,144~~$(10,820) and ~~$223,867~~$2,251, amortization of net loan premiums and discounts of $417,889 and $114,582, credit facility commitment fees of $34,575 and $0, costs associated with the refinancing of debt of $0 and ~~$2,137, net~~$31,397, imputed interest on the finance lease portion of the sublease of $107 and $0, and capitalized interest of ~~$49,068~~$315,244 and ~~$49,068,~~$69,569, respectively. The capitalized interest is included in real estate held for development on the consolidated balance sheets.

Interest expense of ~~$6,653,424~~$6,800,506 and ~~$3,954,686~~$6,806,695 was payable as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

8. Stockholders’ Equity

General

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

Common Stock

The shares of the Company’s common stock entitle the holders to 1 vote per share on all matters upon which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the MGCL and to all rights of a stockholder pursuant to the MGCL. The common stock has no preferences or preemptive, conversion or exchange rights.

On September 3, 2013, the Company issued 13,500 shares of common stock to SRI, the Company’s former sponsor, for $202,500. From inception through March 24, 2016, the date of the termination of the Primary Offering, the Company had

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~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

issued 48,625,651 shares of common stock in its Public Offering for offering proceeds of $640,012,497, including 1,011,561 shares of common stock issued pursuant to the DRP for total proceeds of $14,414,752, net of offering costs of $84,837,134. The offering costs primarily consisted of selling commissions and dealer manager fees paid in the Primary Offering. Following the termination of the Public Offering, the Company continues to offer shares pursuant to the DRP. ~~On May 4, 2020,~~

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

As of March 31, 2021, the Company ~~amended its registration statement for the DRP to register up to 10,000,000~~had issued 111,967,192 shares of common stock for ~~sale at an initial price~~offering proceeds of ~~$15.23.~~

$1,637,793,196, including 8,337,112 shares of common stock issued pursuant to the DRP and 56,016,053 shares of common stock issued in connection with the Mergers (described below), for total proceeds of $124,901,172, net of offering costs of $84,837,134. The offering costs primarily consisted of selling commissions and dealer manager fees paid in the Primary Offering. On March 6, 2020, the Company issued 43,775,314 shares of its common stock to SIR’s stockholders and 12,240,739 shares of its common stock to STAR III’s stockholders in connection with the Mergers. As of September 30, 2020, the Company had issued 111,316,079 shares of common stock for offering proceeds of $1,627,876,748, including 7,685,999 shares of common stock issued pursuant to the DRP for total proceeds of $114,984,724, net of offering costs of $84,837,134.

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

The issuance and vesting activity for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021, and year ended December 31, ~~2019,~~2020, for the restricted stock issued to the Company’s independent directors were as follows:


		Nine Months Ended September 30, 2020	Year Ended December 31, 2019		Three Months Ended March 31, 2021	Year Ended December 31, 2020
Nonvested shares at the beginning of the period	Nonvested shares at the beginning of the period	7,497	7,497	Nonvested shares at the beginning of the period	33,369	7,497
Granted shares	Granted shares	6,666	4,998	Granted shares	0	31,288
Vested shares	Vested shares	(4,166)	(4,998)	Vested shares	(1,667)	(5,416)

Nonvested shares at the end of the period	Nonvested shares at the end of the period	9,997	7,497	Nonvested shares at the end of the period	31,702	33,369

Additionally, the weighted average fair value of restricted common stock issued to the Company’s independent directors for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021, and year ended December 31, ~~2019~~2020, was as follows:


Grant Year	Grant Year	Weighted Average Fair Value	Grant Year	Weighted Average Fair Value
2019		$15.84
2020	2020	15.84	2020	$	15.36
2021			2021	N/A

Included in general and administrative expenses is ~~$18,309~~$63,168 and ~~$81,692~~$42,455 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and $11,390 and $39,182 for the three and nine months ended September 30, 2019,~~ respectively, for compensation expense related to the issuance of restricted common ~~stock to the Company’s independent directors.~~stock. As of ~~September 30, 2020,~~March 31, 2021, the compensation expense related to the issuance of the restricted common stock ~~to the Company’s independent directors~~ not yet recognized was ~~$122,074.~~ $402,998.The weighted average remaining term of the restricted common stock ~~issued to the Company’s independent directors~~ was approximately 1.2 years as of ~~September 30, 2020.~~March 31, 2021. As of ~~September 30, 2020,~~March 31, 2021, 0 shares of restricted common stock issued to the independent directors have been forfeited.

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

Issuance of Restricted Stock Awards to Key Employees

2020 Restricted Stock Awards

In connection with the Internalization Transaction, on September 1, 2020, certain key employees of the Company were issued restricted stock grants under the terms of the Company’s Amended and Restated 2013 Incentive Plan (the “Incentive Award Plan”), which grants had been approved by the ~~Special Committee~~board of directors and the ~~board~~special committee formed for the purpose of ~~directors.~~

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

reviewing, considering, investigating, evaluating, proposing and negotiating the Mergers (the “Special Committee”). The grants to the key employees of the Company were made pursuant to a restricted stock grant agreement. The grants vest 50% on the second anniversary of the grant date and 50% on the third anniversary of the grant date (collectively, the “2020 Restricted Stock Awards”).

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

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

2021 Restricted Stock Awards

Pursuant to employment agreements with key employees, on March 15, 2021, the Company granted key employees an award of time-based restricted stock (the “Time-Based 2021 Award”) with a total grant date fair value of $1,512,000 subject to the terms of the Incentive Award Plan. The Time-Based 2021 Awards vest ratably over three years following the grant date, subject to the key employee’s continuous employment through the applicable vesting dates, with certain exceptions.

Total compensation expense related to the 2020 Restricted Stock Awards and the Time-Based 2021 Award for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, respectively, was ~~$79,169,~~$260,539 and $0, and was included in general and administrative costs on the accompanying consolidated statements of operations. As of ~~September 30, 2020,~~March 31, 2021, the compensation expense related to the issuance of the restricted common stock to the key employees not yet recognized was ~~$2,770,831.~~$3,784,785. The weighted average remaining term of the restricted common stock issued to the Company’s key employees was approximately ~~2.4~~1.9 years as of ~~September 30, 2020.~~March 31, 2021. As of ~~September 30, 2020,~~March 31, 2021, 0 shares of restricted common stock issued to the Company’s key employees have been forfeited.

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

Following the completion of the Mergers on March 6, 2020 and until the ~~closing of the~~ Internalization ~~Transaction, all~~Closing, and pursuant to the Advisory Agreement, the Company paid the Former Advisor a monthly investment management fee, payable 50% in cash and 50% in shares of the Company’s common stock at the estimated value per share at the time of issuance. The shares of common stock fully ~~vest~~vested and ~~become~~became non-forfeitable upon payment of the monthly investment management fee. The fair value of the vested common stock at the date of issuance, using the then- most recent publicly disclosed estimated value per share, iswas recorded in stockholders’ equity in the accompanying consolidated balance sheets. Investment management fees incurred in shares, included in fees to affiliates in the accompanying consolidated statements of operations were ~~$2,863,215~~$0 and ~~$8,367,340, respectively,~~$1,187,351 for the three ~~and nine~~ months ended ~~September 30, 2020. NaN investment management fees were incurred in shares for the three~~March 31, 2021 and ~~nine months ended September 30, 2019.~~

~~Following the closing of the Mergers on March 6,~~ 2020, and until the closing of the Internalization Transaction, all pursuant to the Advisory Agreement, the Company paid the Former Advisor a loan coordination fee in shares of the Company’s common stock at the estimated value per share at the time of issuance. The loan coordination fee was payable in shares equals 0.5% of the amount of debt financed or refinanced (in each case, other than at the time of the acquisition of a property) or the Company’s proportionate share of the amount refinanced in the case of investments made through a joint venture. Loan coordination fees incurred in shares and included in fees to affiliates in the accompanying consolidated statements of operations, were $0 and $1,116,700 for the three and nine months ended September 30, 2020. NaN loan coordination fees were incurred in shares for the three and nine months ended September 30, 2019.respectively.

Convertible Stock and Class A Convertible Stock

Prior to the completion of the Mergers on March 6, 2020, the Company’s then-outstanding Convertible Stock would have been converted into shares of the Company’s common stock if and when: (A) the Company had made total distributions on the then-outstanding shares of the Company’s common stock equal to the original issue price of those shares plus an aggregate 6.0% cumulative, non-compounded, annual return on the original issue price of those shares, (B) the Company listed its common stock for trading on a national securities exchange, or (C) the Company’s ~~then~~ Advisory Agreement was terminated or not

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

renewed (other than for “cause” as defined in the Advisory Agreement). In the event of a termination or non-renewal of the Advisory Agreement for cause, all of the shares of the Convertible Stock would have been repurchased by the Company for $1.00. In general, each share of Convertible Stock would convert into a number of shares of common stock equal to 1/1000 of

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

the quotient of (A) 15% of the excess of (1) the Company’s “enterprise value” plus the aggregate value of distributions paid to date on the then outstanding shares of the Company’s common stock over (2) the aggregate purchase price paid by stockholders for those outstanding shares of common stock plus an aggregated 6.0% cumulative, non-compounded, annual return on the original issue price of those outstanding shares, divided by (B) the Company’s enterprise value divided by the number of outstanding shares of common stock on an as-converted basis, in each case calculated as of the date of the conversion.

In connection with the Mergers, the Company and the Former Advisor exchanged the then-outstanding Convertible Stock for new Class A Convertible Stock. The Class A Convertible Stock would have been converted into shares of the Company’s common stock if (1) the Company had made total distributions of money or other property to its stockholders or by SIR and STAR III to their respective holders of common shares (with respect to SIR and STAR III, including in each case distributions paid to SIR and STAR III stockholders prior to the closing of the Mergers), which the Company refers to collectively as the “Class A Distributions,” equal to the sum of the original issue price of the Company’s shares of common stock, shares of common stock of SIR and shares of common stock of STAR III (the “Common Equity”), plus an aggregate 6.0% cumulative, non-compounded, annual return on the original issue price of those shares, (2) the Company listed its common stock for trading on a national securities exchange or ~~enters~~entered into a merger whereby holders of the Company’s common stock receive listed securities of another issuer or (3) the Company’s Advisory Agreement was terminated or not renewed (other than for “cause” as defined in the Advisory Agreement), each of the above is referred to as a “Triggering Event.” Upon any of these Triggering Events, each share of Class A Convertible Stock would have been converted into a number of shares of the Company’s common stock equal to 1/1000 of the quotient of (A) 15% of the amount, if any, by which (i) the “Class A Enterprise Value” plus the aggregate value of the Class A Distributions paid to date on the Common Equity exceeded (ii) the aggregate purchase price paid by stockholders for the Common Equity plus an aggregated 6.0% cumulative, non-compounded, annual return on the original issue price of the Common Equity as of the date of the Triggering Event, divided by (B) the Class A Enterprise Value divided by the number of the Company’s outstanding common shares on an as-converted basis as of the date of Triggering Event.

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

Preferred Stock

The Charter provides the Company’s board of directors with the authority to issue 1 or more classes or series of preferred stock, and prior to the issuance of such shares of preferred stock, the board of directors shall have the power from time to time to classify or reclassify, in 1 or more series, any unissued shares and designate the preferences, rights and privileges of such shares of preferred stock. The Company’s board of directors is authorized to amend the Charter without the approval of the stockholders to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, 0 shares of the Company’s preferred stock were issued and outstanding.

Distribution Reinvestment Plan

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

The Company’s board of directors may again, in its sole discretion, from time to time, change this price based upon changes in the Company’s estimated value per share and other factors that the Company’s board of directors deems relevant.

NaN sales commissions or dealer manager fees are payable on shares sold through the DRP. The Company’s board of directors may amend, suspend or terminate the DRP at its discretion at any time upon ten days’ notice to the Company’s stockholders. Following any termination of the DRP, all subsequent distributions to stockholders will be made in cash.

3934

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

Share Repurchase Plan and Redeemable Common Stock

The Company’s share repurchase plan may provide an opportunity for stockholders to have their shares of common stock repurchased by the Company, subject to certain restrictions and limitations. NaN shares can be repurchased under the Company’s share repurchase plan until after the first anniversary of the date of purchase of such shares; provided, however, that this holding period shall not apply to repurchases requested within two years after the death or disability of a stockholder.

~~On March 14, 2018,~~In connection with the announcement of the then-proposed Mergers, on August 5, 2019, the Company’s board of directors approved the Amended and Restated Share Repurchase Plan (the “Amended & Restated SRP”), which became effective September 5, 2019, and applied with repurchases made on the repurchase dates subsequent to the effective date of the Amended & Restated SRP. Under the Amended & Restated SRP, the Company ~~determined~~only repurchased shares of common stock in connection with the death or qualifying disability (as defined in the Amended and Restated SRP) of a stockholder. Repurchases pursuant to ~~amend~~ the ~~terms~~Amended & Restated SRP were limited to $2,000,000 per quarter.

On March 3, 2020, in connection with the closing of the Mergers, the Company’s ~~share repurchase plan effective as~~board of ~~April 15, 2018~~directors amended the Amended & Restated SRP to: (1) allow all stockholders to ~~(1)~~request repurchases (as opposed to death and disability only), (2) limit the amount of shares repurchased pursuant to the ~~Company’s~~ share repurchase plan each quarter to ~~$2,000,000~~$4,000,000 and ~~(2) revise~~(3) set the repurchase price in all instances (including death and disability) to an amount equal to 93% of the most recent publicly disclosed estimated value per share. The $4,000,000 quarterly limit was first in effect on the repurchase date at April 30, 2020, with respect to repurchases for the three months ended March 31, 2020, but was limited to death and disability only. The Amended & Restated SRP was open to all repurchase requests beginning April 1, 2020.

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

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


Share Purchase Anniversary						Repurchase Price on Repurchase Date(1)
Less than 1 year						NaN Repurchase Allowed
1 year						92.5% of the Share Repurchase Price(2)
2 years						95.0% of the Share Repurchase Price(2)
3 years						97.5% of the Share Repurchase Price(2)
4 years						100% of the Share Repurchase Price(2)
In the event of a stockholder’s death or disability(3)						Average Issue Price for Shares(4)

~~________________~~_________________

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

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

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

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

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

The purchase price per share for shares repurchased pursuant to the Company’s share repurchase plan is further reduced by the aggregate amount of net proceeds per share, if any, distributed to the Company’s stockholders prior to the Repurchase Date (defined below) as a result of the sale of 1 or more of the Company’s assets that constitutes a return of capital as a result of such sales.

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

In connection with the announcement of the then-proposed SIR Merger and STAR III Merger, on August 5, 2019, the Company’s board of directors approved the Amended and Restated Share Repurchase Plan (the “Amended & Restated SRP”), which became effective September 5, 2019, and applied to repurchases made on the Repurchase Dates subsequent to the effective date of the Amended & Restated SRP. Under the Amended & Restated SRP, the Company only repurchased shares of common stock in connection with the death or qualifying disability (as defined in the Amended and Restated SRP) of a stockholder. Repurchases pursuant to the Amended & Restated SRP continued to be limited to $2,000,000 per quarter. On March 3, 2020, in connection with the closing of the SIR Merger and the STAR III Merger, the Company’s board of directors amended its share repurchase plan to: (1) allow all stockholders to request repurchases (as opposed to death and disability only),

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

(2) limit the amount of shares repurchased pursuant to the share repurchase plan each quarter to $4,000,000 and (3) set the repurchase price in all instances (including death and disability) to an amount equal to 93% of the most recent publicly disclosed estimated value per share. The $4,000,000 quarterly limit was first in effect on the repurchase date at April 30, 2020, with respect to repurchases for the three months ended March 31, 2020, but was limited to death and disability only. The Amended & Restated SRP was open to all repurchase requests beginning April 1, 2020. The current share repurchase price is $14.16 per share, which represents 93% of the most recently published estimated value per share of $15.23.

The Company is not obligated to repurchase shares of its common stock under the share repurchase plan. In no event shall repurchases under the share repurchase plan exceed 5% of the weighted average number of shares of common stock outstanding during the prior calendar year or the ~~$2,000,000~~$3,000,000 limit for any quarter put in place by the Company’s board of ~~directors, which increased to $4,000,000 beginning in the second quarter of 2020.~~directors. There is no fee in connection with a repurchase of shares of the Company’s common stock pursuant to the Company’s share repurchase plan. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company had recorded ~~$4,000,000~~$2,287,931 and ~~$797,289,~~$4,000,000, respectively, which represents ~~281,220~~158,225 and 282,477 (pursuant to the Amended & Restated SRP) ~~and 53,152~~ shares of common stock, respectively, in accounts payable and accrued liabilities on the accompanying consolidated balance sheets related to these unfulfilled repurchase requests, all of which were repurchased on the ~~October 31, 2020~~April 30, 2021 and January ~~31, 2020~~29, 2021 repurchase dates.

During the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, the Company repurchased a total of ~~282,483 and 484,684~~282,477 shares with a total repurchase value of $4,000,000, ~~and $6,907,827,~~the then quarterly cap, which was accrued as of December 31, 2020, and received requests for repurchases of ~~1,568,908 and 4,382,676~~158,225 shares with a total repurchase value of ~~$22,215,732 and $62,058,686, respectively.~~

$2,287,931. During the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, the Company repurchased a total of ~~135,389 and 410,234~~53,152 shares with a total repurchase value of ~~$2,000,000 and $6,000,000,~~$797,289 and received requests for the repurchase of ~~55,301 and 851,817~~149,049 shares with a total repurchase value of ~~$819,634 and $12,443,570,~~$2,110,537, respectively.

The Company cannot guarantee that the funds set aside for the share repurchase plan will be sufficient to accommodate all repurchase requests made in any quarter. In the event that the Company does not have sufficient funds available to repurchase all of the shares of the Company’s common stock for which repurchase requests have been submitted ~~in any quarter, priority will be given to~~for death and disability, repurchase requests in the case of the death or disability of a stockholder. If the Company repurchases less than all of the shares subject to a repurchase request in any quarter, with respect to any shares which have not been repurchased, the Company will treat the shares that have not been repurchased as a request for repurchase in the following quarter pursuant to the limitations of the share repurchase plan and when sufficient funds are available, unless the stockholder withdraws the request for repurchase. Such pending requests will be ~~honored among all requests for repurchases in any given repurchase period as follows: first,~~paid on a pro rata asbasis up to ~~repurchases sought upon a stockholder’s death or disability; next in exigent circumstances as determined by~~ the ~~Company’s board of directors in its sole discretion and finally, pro rata as to other repurchase requests.~~$3,000,000 quarterly cap.

The Company’s board of directors may, in its sole discretion, amend, suspend or terminate the share repurchase plan at any time upon 30 days’ notice to its stockholders if it determines that the funds available to fund the share repurchase plan are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase plan is in the best interest of the Company’s stockholders. Therefore, a stockholder may not have the opportunity to make a repurchase request prior to any potential termination or suspension of the Company’s share repurchase plan. The share repurchase plan will terminate in the event that a secondary market develops for the Company’s shares of common stock.

For the three and nine months ended September 30, 2020, the Company reclassified $0 and $1,383,318, net of $4,000,000 and $6,907,827 of fulfilled repurchase requests, from permanent equity to temporary equity, which was included as redeemable common stock on the accompanying balance sheets. For the three and nine months ended September 30, 2019, the Company reclassified $1,182,360, net pursuant to the share repurchase program from accounts payable and accrued liabilities to temporary equity.

Distributions

The Company’s long-term goal is to pay distributions solely from cash flow from operations. However, because the Company may receive income from interest or rents at various times during the Company’s fiscal year and because the Company may need cash flow from operations during a particular period to fund capital expenditures and other expenses, the

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

Company expects that at times during the Company’s operational stage, the Company will declare distributions in anticipation of cash flow that the Company expects to receive during a later period, and the Company expects to pay these distributions in advance of its actual receipt of these funds. The Company’s board of directors has the authority under its organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or ~~advances and the deferral of fees and expense reimbursements by the Former Advisor, in its sole discretion.~~advances. The Company has not established a limit on the amount of proceeds it may use to fund distributions from sources other than cash flow from operations. If the Company pays distributions from sources other than cash flow from operations, the Company will have fewer funds available and stockholders’ overall return on their investment in the Company may be reduced.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

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

Distributions Declared and Paid

The Company’s board of directors approved a cash distribution that accrued at a rate of $0.002466 per day for each share of the Company’s common stock during the month ended January 31, 2021 and $0.002459 per day for each share of the Company’s common stock during each of the three months ended March 31, 2020, which, if paid over a 365-day and 366-day period, respectively, is equivalent to $0.90 per share. On January 12, 2021, the Company’s board of directors approved a cash distribution that accrues at a rate of $0.001438 per day for each share of the Company’s common stock for the period commencing on February 1, 2021 and ending on February 28, 2021, which was extended for the months of March, April, May and June, 2021, and which, if paid over a 365-day period is equivalent to $0.525 per share. The distributions declared accrue daily to stockholders of record as of the close of business on each day and are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month. There is no guarantee that the Company will continue to pay distributions at this rate or at all.

The following tables reflect distributions declared and paid to common stockholders and Class A-2 and Class B OP Unit holders (the “Noncontrolling Interest OP Unit Holders”) for the three months ended March 31, 2021 and 2020:


	For the Three Months Ended March 31, 2021
	Common Stockholders		Noncontrolling Interest OP Unit Holders		Total
DRP distributions declared (in shares)	250,562		—		250,562
DRP distributions declared (value)	$	3,816,054	$	—	$	3,816,054
Cash distributions declared	13,947,153		1,146,005		15,093,158
Total distributions declared	$	17,763,207	$	1,146,005	$	18,909,212

DRP distributions paid (in shares)	302,075		—		302,075
DRP distributions paid (value)	$	4,600,603	$	—	$	4,600,603
Cash distributions paid	16,641,735		1,370,787		18,012,522
Total distributions paid	$	21,242,338	$	1,370,787	$	22,613,125

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)


	For the Three Months Ended March 31, 2020
	Common Stockholders		Noncontrolling Interest OP Unit Holders		Total
DRP distributions declared (in shares)	324,236		—		324,236
DRP distributions declared (value)	$	5,135,895	$	—	$	5,135,895
Cash distributions declared	10,255,638		—		10,255,638
Total distributions declared	$	15,391,533	$	—	$	15,391,533

DRP distributions paid (in shares)	320,969		—		320,969
DRP distributions paid (value)	$	5,084,155	$	—	$	5,084,155
Cash distributions paid	6,716,712		—		6,716,712
Total distributions paid	$	11,800,867	$	—	$	11,800,867

As of March 31, 2021 and December 31, 2020, $5,228,058 and $8,931,971 of distributions declared were payable, which included $1,037,032 and $1,821,581, or 68,091 shares and 119,605 shares of common stock, attributable to the DRP, respectively.

As reflected in the table above, for the three months ended March 31, 2021 and 2020, the Company paid total distributions of $22,613,125 and $11,800,867, respectively.

9.Noncontrolling Interest

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

Class A-2 Operating Partnership Units

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

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

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

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

Class B Operating Partnership Units

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

As of March 31, 2021, noncontrolling interests were approximately 6.06% of total shares and 6.06% of weighted average shares outstanding (both measures assuming Class A-2 OP Units and Class B OP Units were converted to common stock). The changes in the carrying amount of noncontrolling interests consisted of the following for the three months ended March 31, 2021:


	Three Months Ended March 31, 2021
Beginning balance Class A-2 OP Units	$	13,219,354
Beginning balance Class B OP Units	91,103,305
Loss allocated to Class A-2 OP Units	(103,911)
Loss allocated to Class B OP Units	(674,364)
Distributions to Class A-2 OP Units	(153,048)
Distributions to Class B OP Units	(992,957)
Noncontrolling interests ending balance	$	102,398,379

There were 0 noncontrolling interests as of March 31, 2020.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

10.Related Party Arrangements

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

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

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

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

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


	Incurred (Received) for the				Payable (Receivable) as of
	Three Months Ended March 31,
	2021		2020			Mar 31, 2021		Dec 31, 2020
Consolidated Statements of Operations:
Expensed

Investment management fees (1)	$	0	$	5,354,437		$	0	$	0

Due diligence costs (2)	33,000		1,111			0		102,301
Loan coordination fees (1)	0		488,952			0		0
Disposition fees (3)	0		338,750			0		0
Disposition transaction costs (3)	0		5,144			0		0
Property management:
Fees (1)	4,287		1,496,370			1,771		5,585
Reimbursement of onsite personnel (4)	0		4,695,047			0		0
Reimbursement of other (1)	0		1,087,537			0		0
Reimbursement of property operations (4)	72		79,011			0		0
Reimbursement of property G&A (2)	0		32,405			0		0
Other operating expenses (2)	445,313		710,172			60,233		158,723
Reimbursement of personnel benefits (5)	32,092		0			14,940		20,457

Property insurance (2)	0		924,936			0		0
Earned
Rental revenue (6)	0		(17,747)			0		0
Transition services agreement income (7)	(8,178)		0			(22,202)		(103,552)
SRI property management agreement income (7)	(238,209)		0			(85,975)		(77,760)
Other reimbursement income under the SRI property management agreements (7)	(90,553)		0			0		(21,980)
Reimbursement of onsite personnel income under the SRI property management agreements (7)	(1,075,609)		0			(112,851)		(173,927)
SRI construction management fee income (7)	(45,372)		0			(45,372)		0
Consolidated Balance Sheets:


Sublease security deposit (8)	0		0			(85,000)		(85,000)
Capitalized to Real Estate
Capitalized development service fee (9)	0		151,071			0		50,357
Capitalized investment management fees (9)	0		81,214			0		0
Capitalized development costs (9)	1,600		595			400		0
Acquisition expenses (10)	0		256,224			0		0
Acquisition fees (10)	0		17,376,268			0		0
Loan coordination fees (10)	0		8,588,071			0		0

Construction management:
Fees (11)	0		122,763			0		0
Reimbursement of labor costs (11)	0		70,547			0		0
Additional paid-in capital



Distributions to Class B OP Unit holders (12)	992,958		0			274,474		469,236


	$	51,401	$	41,842,878		$	418	$	344,440

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

_____________________

1)Included in fees to affiliates in the accompanying consolidated statements of operations. Property management fees of $4,287 relate to compliance fees incurred under a compliance agreement with the Former Property Manager, as defined below, to follow certain tax compliance procedures with respect to the leasing of apartment homes to qualified residents.

2)Included in general and administrative expenses in the accompanying consolidated statements of operations. Due diligence costs of $33,000 represent acquisition expenses related to the Company’s real estate projects that did not come to fruition and which were incurred by an affiliate of SIP on behalf of the Company. Other operating expenses of $445,313 relate to sublease rental expenses of $270,676 and $174,637 of expenses related to information systems costs incurred by SIP on behalf of the Company.

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

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

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

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

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

8)Included in other assets in the accompanying consolidated balance sheets

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

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

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

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

Investment Management Fee

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

Acquisition Fees and Expenses

Prior to the completion of the Mergers, the Company paid the Former Advisor an acquisition fee equal to 1.0% of the cost of investment, which includes the amount actually paid or budgeted to fund the acquisition, origination, development, construction or improvement (i.e. value-enhancement) of any real property or real estate-related asset acquired. In addition to

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Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

acquisition fees, the Company reimbursed the Former Advisor for amounts directly incurred by the Former Advisor and amounts the Former Advisor paid to third parties in connection with the selection, evaluation, acquisition and development of a property or acquisition of real estate-related assets, whether or not the Company ultimately acquired the property or the real estate-related assets. Following the completion of the Mergers and until the Internalization Closing, the Company paid the Former Advisor an acquisition fee of 0.5%, which was calculated on the same basis as above. In connection with the Mergers, the Company paid the Former Advisor an acquisition fee of $16,281,487, which was capitalized to the acquired real estate and investment in unconsolidated joint venture in the accompanying consolidated balance sheets.

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

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

Loan Coordination Fee

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

Following the completion of the Mergers and until the Internalization Closing, the Company paid the Former Advisor or one of its affiliates, in cash, the loan coordination fee equal to 0.5% of (1) the initial amount of new debt financed or outstanding debt assumed in connection with the acquisition, development, construction, improvement or origination of any type of real estate asset or real estate-related asset acquired directly or (2) the Company’s allocable portion of the purchase price and therefore the related debt in connection with the acquisition or origination of any type of real estate asset or real estate-related asset acquired through a joint venture. In connection with the Mergers, the Company paid the Former Advisor a loan coordination fee of $7,910,205, which was capitalized to the acquired real estate and investment in unconsolidated joint venture in the accompanying consolidated balance sheets.

As compensation for services rendered in connection with any financing or the refinancing of any debt (in each case, other than at the time of the acquisition of a property), the Company also paid the Former Advisor or one of its affiliates, in the form of shares equal to such amount, a loan coordination fee equal to 0.5% of the amount refinanced or the Company’s proportionate share of the amount refinanced in the case of investments made through a joint venture. NaN loan coordination fee was paid in shares to the Company’s Former Advisor during the three months ended March 31, 2021 and 2020.

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

Property Management Fees and Expenses

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Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

majority of the independent directors. Each Property Management Agreement had an initial one-year term and continued thereafter on a month-to-month basis unless either party gave 60-days’ prior notice of its desire to terminate the Property Management Agreement, provided that the Company could terminate the Property Management Agreement at any time upon a determination of gross negligence, willful misconduct or bad acts of the Former Property Manager or its employees or upon an uncured breach of the Property Management Agreement upon 30 days’ prior written notice to the Former Property Manager.

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

Construction Management Fees and Expenses

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

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

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

Development Services

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

Property Insurance

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

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Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

Other Operating Expense Reimbursement

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

The Charter limits the Company’s total operating expenses during any 4 fiscal quarters to the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income for the same period (the “2%/25% Limitation”). The Company was to reimburse the Former Advisor, at the end of each fiscal quarter, for operating expenses incurred by the Former Advisor; provided, however, that the Company did not reimburse the Former Advisor at the end of any fiscal quarter for operating expenses that exceed the 2%/25% Limitation unless the independent directors determined that such excess expenses were justified based on unusual and non-recurring factors. The Former Advisor was obligated to reimburse the Company for the amount by which the Company’s operating expenses for the preceding four fiscal quarters then ended exceeded the 2%/25% Limitation, unless approved by the independent directors. For purposes of determining the 2%/25% Limitation amount, “average invested assets” means the average monthly book value of the Company’s assets invested directly or indirectly in equity interests and loans secured by real estate during the 12-month period before deducting depreciation, bad debt reserves or other non-cash reserves. “Total operating expenses” means all expenses paid or incurred by the Company that are in any way related to the Company’s operation, including the Company’s allocable share of Former Advisor overhead, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, listing and registration of shares of the Company’s common stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of the Company’s assets; (f) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that the Company does not close) and investment management fees; (g) real estate commissions on the resale of investments; and (h) other expenses connected with the acquisition, disposition, management and ownership of investments (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property).

As of March 31, 2021, the Company’s total operating expenses, as defined above, did not exceed the 2%/25% Limitation.

Disposition Fee

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

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

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

Class A Convertible Stock

In connection with the Mergers, the Company and the Former Advisor exchanged the then-outstanding Convertible Stock for the new Class A Convertible Stock. The Class A Convertible Stock would convert into shares of the Company’s common stock if (1) the Company had made total Class A Distributions equal to the original issue price of the Common Equity, plus an aggregate 6.0% cumulative, non-compounded, annual return on the original issue price of those shares, (2) the Company listed its common stock for trading on a national securities exchange or entered into a merger whereby holders of the Company’s

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Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

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

Ancillary Internalization Transaction Agreements

Transition Services Agreement

As a condition to the Internalization Closing, on August 31, 2020, the Company and SIP entered into a Transition Services Agreement (the “Transition Services Agreement”), pursuant to which, commencing on August 31, 2020 until March 31, 2021, which was extended through September 30, 2021, unless earlier terminated pursuant to the Transition Services Agreement or extended by mutual consent, SIP will continue to provide certain operational and administrative support at cost plus 15% to the Company, which may include support relating to, without limitation, shared legal and tax support as set forth in the Transition Services Agreement. Similarly, the Company agreed to provide certain services to SIP and its affiliates at cost plus 15%, which may include acquisition, disposition and financing support, legal support, shared information technology and human resources.

SRI Property Management Agreements

In connection with the Internalization Transaction, the Company terminated its existing property-level property management agreements with the Former Property Manager, an affiliate of SRI. On August 31, 2020, SRS, entered into the SRI Property Management Agreements with an affiliate of SRI to provide property management services in connection with certain properties owned by SIP or its affiliates (each a “Property Owner” and collectively, the “Property Owners”). Pursuant to each SRI Property Management Agreement, SRS receives a monthly management fee equal to 2.0% of each property’s gross collections for such month (“Gross Collections”). Each SRI Property Management Agreement has an initial one-year term and will continue thereafter on a month-to-month basis unless the Property Owner terminates the SRI Property Management Agreement with 60 days’ prior written notice or upon the determination of gross negligence, willful misconduct or bad acts of SRS or its employees with 30 days’ prior written notice to SRS. After the first one-year term, either party may terminate the SRI Property Management Agreement in the event of a material breach that remains uncured for a period of 30 days after written notification of such breach. As of March 31, 2021, the Company recognized the SRI Property Management Agreements asset, net of $339,580 within other assets on the accompanying consolidate balance sheets.

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

SRI Construction Management Agreements

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

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

Registration Rights Agreement

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

Non-Competition Agreement

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

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

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

Sub-Lease

In connection with the Internalization Transaction, SRS, an indirect subsidiary of the Company, entered into a sub-lease agreement (the “Sub-Lease”) with the Former Property Manager on September 1, 2020, for its headquarters in Irvine, California. The Sub-Lease also includes certain furniture and fixtures, that will become the property of SRS at the end of the lease term. As of March 31, 2021, the Sub-Lease has a remaining lease term of 14 months with no option to renew. The monthly sub-lease expense is recognized on a straight line basis over the remaining term of the Sub-Lease. As of March 31, 2021 and December 31, 2020, as it pertains to the Sub-Lease of the office space, the Company recorded an operating lease ROU asset, net of $1,107,099 and $1,339,591 and an operating lease liability, net of $1,119,776 and $1,346,835, respectively. As of March 31, 2021 and December 31, 2020, as it pertains to the Sub-Lease of the furniture and fixtures, the Company recognized a finance lease ROU asset, net of $13,785 and $16,845 and a finance lease liability, net of $14,067 and $17,020, respectively. For the three months ended March 31, 2021, the Sub-Lease expense related to the office space and the furniture and fixtures were $241,549 and $107, respectively. See Note 15 (Leases) for further details about the Company’s leases.

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Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

Certain Conflict Resolution Procedures

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

11.Incentive Award Plan and Independent Director Compensation

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

Under the independent directors’ compensation plan, and subject to such plan’s conditions and restrictions, each of the Company’s independent directors received 3,333 shares of restricted common stock once the Company raised $2,000,000 in gross offering proceeds in the Public Offering. Each subsequent independent director that joins the Company’s board of directors receives 3,333 shares of restricted common stock upon election to the Company’s board of directors. In addition, on the date following an independent director’s re-election to the Company’s board of directors, he or she receives 1,666 shares of restricted common stock. On March 6, 2020, the Company granted 3,333 shares of restricted common stock pursuant to the independent directors’ compensation plan to each of its 2 newly elected independent directors. One-fourth of the shares of restricted common stock generally vest and become non-forfeitable upon issuance and the remaining portion will vest in three equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted stock will become fully vested and become non-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company. These restricted stock awards entitle the holders to participate in distributions even if the shares are not fully vested.

On September 15, 2020, the Company’s board of directors approved an amendment to the independent directors’ compensation plan, pursuant to which, each of the Company’s current independent directors is entitled to receive an annual retainer of $75,000 in cash and $75,000 in shares of restricted common stock upon election or re-election to the Company’s board of directors. On December 3, 2020, the Company granted 4,924 shares of restricted common stock to each of its 5 independent directors pursuant to the Incentive Award Plan at a fair value of $15.23 per share in connection with their re-election to the board of directors at the Company’s annual meeting of stockholders. These shares generally vest in two equal annual installments beginning on the first anniversary of the date of grant and ending on the second anniversary of the date of grant; provided, however, that the restricted stock will become fully vested on the earlier to occur of: (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company.

The Company recorded stock-based compensation expense of $63,168 and $42,455 for the three months ended March 31, 2021 and 2020, respectively, related to the independent directors’ restricted common stock.

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

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Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

received $1,000 for each teleconference meeting and $1,500 for each in-person meeting. All directors also receive reimbursement of reasonable out of pocket expenses incurred in connection with attendance at meetings of the board of directors.

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

Director compensation is an operating expense of the Company that, prior to the Internalization Closing, was subject to the operating expense reimbursement obligation of the Former Advisor discussed in Note 10 (Related Party Arrangements). For the three months ended March 31, 2021 and 2020, the Company recorded an operating expense of $269,250 and $68,750, respectively, related to the independent directors’ annual cash retainer and attending board and committee meetings, which is included in general and administrative expenses in the accompanying consolidated statements of operations. Upon signing the Merger Agreements, merger related acquisition expenses, including $0 and $3,000 for the three months ended March 31, 2021 and 2020, respectively, related to attending committee meetings, met the definition of capitalized expenses and were therefore capitalized in the accompanying consolidated balance sheets. As of March 31, 2021 and December 31, 2020, $269,250 and $209,250, respectively, related to the independent directors’ annual retainer paid in cash and board and committee meetings attendance is included in accounts payable and accrued liabilities in the consolidated balance sheets.

12.Commitments and Contingencies

Economic Dependency

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

As of March 31, 2021, the Company is developing a multifamily property consisting of 9 residential buildings with 176 apartment homes known as Garrison Station that is currently in various stages of development with remaining commitments to fund of $6,146,023 (inclusive of applicable construction loan obligations) and estimated completion dates ranging through August 2021. As of March 31, 2021, 24 of the 176 units were placed in service.

Concentration of Credit Risk

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

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

Environmental

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

Legal Matters

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

13.Earnings Per Share

The following table presents a reconciliation of net loss attributable to common stockholders and shares used in calculating basic and diluted loss per share, or EPS, for the three months ended March 31, 2021 and 2020:


	Three Months Ended March 31,
	2021		2020
Net loss attributable to common stockholders	$	(14,031,288)	$	(9,681,128)
Less:
Distributions related to unvested restricted stockholders(1)	(50,982)		(3,095)
Numerator for loss per common share — basic	$	(14,082,270)	$	(9,684,223)
Weighted average common shares outstanding — basic and diluted(2)	109,886,636		68,180,512

Loss per common share — basic and diluted	$	(0.13)	$	(0.14)

_____________________

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

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

14.Derivative Financial Instruments

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

March 31, 2021

Type

Maturity Date Range

Based on

Number of Instruments

Notional Amount

Variable Rate

Weighted Average Rate Cap

Fair Value

Interest Rate Cap

6/1/2021 - 7/1/2023

One-Month LIBOR

352,300,350

0.11%

3.56%

30,872

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

December 31, 2020

Type

Maturity Date Range

Based on

Number of Instruments

Notional Amount

Variable Rate

Weighted Average Rate Cap

Fair Value

Interest Rate Cap

1/1/2021 - 7/1/2023

One-Month LIBOR

407,935,350

0.14%

3.41%

7,852

15.Leases

Lessee

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

The components of lease costs were as follows:



		Three Months Ended March 31,
Lease Cost	Classification	2021		2020
Operating Lease cost(1)	Operating, maintenance and management	$	10,044	$	7,505
Operating Lease cost(1)	General and administrative	241,549		0
Finance lease cost
Amortization of leased assets	Depreciation and amortization	3,060		0
Accretion of lease liabilities	Interest expense	107		0


Total lease cost		$	254,760	$	7,505

_____________________

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

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

Other information related to leases was as follows:


Lease Term and Discount Rate	March 31, 2021		December 31, 2020
Weighted average remaining lease term (in years)
Operating leases	3.4		3.4
Finance leases	1.2		1.4
Weighted average discount rate
Operating Leases	3.3	%	3.2	%
Finance Leases	2.9	%	2.9	%


	Three Months Ended March 31,
Supplemental Disclosure of Cash Flows Information	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows related to operating leases	$	282,500	$	31,185
Operating cash outflows related to finance leases	$	3,060	$	0
Financing cash outflows related to finance leases	$	0	$	0

Operating Leases

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


Year	Amount

Remainder of 2021	$	886,020
2022	611,239
2023	190,315
2024	120,701
2025	94,506
Thereafter	266,910
Total undiscounted operating lease payments	$	2,169,691
Less: interest	(324,390)
Present value of operating lease liabilities	$	1,845,301

Finance Leases

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

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)


Year	Amount

Remainder of 2021	$	9,180
2022	5,100
2023	0
2024	0
2025	0
Thereafter	0
Total undiscounted finance lease payments	$	14,280
Less: interest	(213)
Present value of finance lease liabilities	$	14,067

16.Subsequent Events

Distributions Paid

On April 1, 2021, the Company paid distributions of $5,228,058, which related to distributions declared for each day in the period from March 1, 2021, through March 31, 2021, and consisted of cash distributions paid in the amount of $4,191,026 and $1,037,032 in shares issued pursuant to the DRP.

On May 3, 2021, the Company paid distributions of $5,063,937, which related to distributions declared for each day in the period from April 1, 2021 through April 30, 2021 and consisted of cash distributions paid in the amount of $4,043,827 and $1,020,110 in shares issued pursuant to the DRP.

Shares Repurchased

On April 30, 2021, the Company repurchased 158,225 shares of its common stock for a total repurchase value of $2,287,931, or $14.46 per share, pursuant to the Company’s share repurchase plan.

~~Distributions Declared~~Investment Management Fee

Prior to the completion of the Mergers on March 6, 2020, the Company paid the Former Advisor a monthly investment management fee equal to one-twelfth of 1.0% of (1) the cost of real properties and real estate-related assets acquired directly by the Company or (2) the Company’s allocable cost of each investment in real property or real estate related asset acquired through a joint venture. The investment management fee is calculated including the amount actually paid or budgeted to fund acquisition fees, acquisition expenses, cost of development, construction or improvement and any debt attributable to such investments, or the Company’s ~~board~~proportionate share thereof in the case of ~~directors approved~~investments made through joint ventures. Following the completion of the Mergers and until the Internalization Closing, the Company paid the Former Advisor a monthly investment management fee, which was calculated on the same basis as described above, and payable 50% in cash ~~distribution that accrues at a rate of $0.002459 per day for each share~~and 50% in shares of the Company’s common ~~stock during each of the three and nine months ended September 30, 2020, which, if paid over a 366-day period is equivalent~~stock. Investment management fees incurred in shares, included in fees to $0.90 per share. During the three and nine months ended September 30, 2019, cash distributions accrued at a rate of $0.002466 per day for each share, which, if paid over a 365-day period, is equivalent to $0.90 per share. The distributions declared accrue daily to stockholders of record as of the close of business on each day and are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month. There is no guarantee that the Company will continue to pay distributions at this rate or at all.

Distributions declared for the three and nine months ended September 30, 2020, were $25,490,638 and $65,470,579, including $5,366,210 and $15,865,995, or 352,345 and 1,028,773 shares of common stock, respectively, attributable to the DRP.

Distributions declared for the three and nine months ended September 30, 2019, were $11,860,005 and $35,056,265, including $5,269,020 and $15,899,564, or 332,640 and 1,018,429 shares of common stock, respectively, attributable to the DRP.

As of September 30, 2020 and December 31, 2019, $8,636,666 and $4,021,509 of distributions declared were payable, which included $1,752,986 and $1,744,240, or 115,101 shares and 110,116 shares of common stock, attributable to the DRP, respectively.

~~Distributions Paid~~

For the three and nine months ended September 30, 2020, the Company paid cash distributions of $19,712,608 and $45,742,635, which related to distributions declared for each day in the period from June 1, 2020 through August 31, 2020 and December 1, 2019 through August 31, 2020, respectively. Additionally, for the three and nine months ended September 30, 2020, 352,832 shares and 1,023,791 shares of common stock were issued pursuant to the DRP for gross offering proceeds of $5,373,636 and $15,857,249, respectively. For the three and nine months ended September 30, 2020, the Company paid total distributions of $25,086,244 and $61,599,884, respectively. Included within distributions paidaffiliates in the accompanying consolidated statements of ~~cash flows is $744,461, which was a payable assumed~~operations were $0 and $1,187,351 for the three months ended March 31, 2021 and 2020, respectively.

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

Acquisition Fees and Expenses

Prior to the completion of the Mergers, ~~and paid during the nine months ended September 30, 2020.~~

~~For the three and nine months ended September 30, 2019,~~ the Company paid ~~cash distributions~~the Former Advisor an acquisition fee equal to 1.0% of ~~$6,550,164 and $19,085,888,~~the cost of investment, which ~~related~~includes the amount actually paid or budgeted to ~~distributions declared for each day in~~fund the period from June 1, 2019 through August 31, 2019 and December 1, 2018 through August 31, 2019, respectively. Additionally, for the three and nine months ended September 30, 2019, 334,187 shares and 1,028,071 sharesacquisition, origination, development, construction or improvement (i.e. value-enhancement) of ~~common stock were issued pursuant~~any real property or real estate-related asset acquired. In addition to the DRP for gross offering proceeds of $5,293,528 and $16,050,790, respectively. For the three and nine months ended September 30, 2019, the Company paid total distributions of $11,843,692 and $35,136,678, respectively.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

9.~~Noncontrolling Interest~~

~~Noncontrolling interests represent operating partnership interests~~acquisition fees, the Company reimbursed the Former Advisor for amounts directly incurred by the Former Advisor and amounts the Former Advisor paid to third parties in connection with the selection, evaluation, acquisition and development of a property or acquisition of real estate-related assets, whether or not the Company ultimately acquired the property or the real estate-related assets. Following the completion of the Mergers and until the Internalization Closing, the Company paid the Former Advisor an acquisition fee of 0.5%, which was calculated on the same basis as above. In connection with the Mergers, the Company paid the Former Advisor an acquisition fee of $16,281,487, which was capitalized to the acquired real estate and investment in unconsolidated joint venture in the ~~Current Operating Partnership of which the Company is the general partner.~~

~~Class A-2 Operating Partnership Units~~

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

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

~~On August 28, 2020, STAR III OP merged with~~The Charter limits the Company’s ability to pay acquisition fees if the total of all acquisition fees and ~~into the Current Operating Partnership and VV&M owns the Class A-2 operating partnership units in the Current Operating Partnership pursuant~~expenses relating to the ~~Operating Partnership Agreement on substantially the same terms described above.~~

~~Class B Operating Partnership Units~~

~~Class B OP Units were issued as part~~purchase would exceed 4.5% of the contract purchase price. Under the Charter, a majority of the Company’s board of directors, including a majority of the independent directors, is required to approve any acquisition fees (or portion thereof) that would cause the total of all acquisition fees and expenses relating to an acquisition to exceed 4.5% of the contract purchase price.

Following the Internalization ~~Transaction as discussed~~Closing, acquisition fees and expenses paid by the Company are intercompany transactions and are eliminated in ~~Note 1 (Organization and Business). The Class B OP Units were valued at $15.23 per unit~~consolidation.

Loan Coordination Fee

Prior to the completion of the Mergers, the Company paid the Former Advisor or its affiliate a loan coordination fee equal to 1.0% of the initial amount of new debt financed or outstanding debt assumed in connection with the acquisition, development, construction, improvement or origination of a property or a real estate-related asset. In addition, in connection with any debt financing or refinancing (in each case, other than identified at the time of the ~~transaction. On August 31, 2020,~~acquisition of a property or a real estate-related asset), the ~~closing date~~Company paid the Former Advisor or its affiliate a loan coordination fee equal to 0.75% of the ~~Internalization Transaction,~~amount of debt financed or refinanced. In some instances, the Company ~~VV&M, STAR OP~~ and ~~SRI entered into~~ the ~~Operating Partnership Agreement. The Operating Partnership Agreement includes~~Former Advisor agreed to a ~~provision for SRI to request~~loan coordination fee of $100,000 per loan refinanced.

Following the ~~repurchase of all outstanding Class B OP Units, one year from the Closing Date; however, under the terms~~completion of the ~~Contribution Agreement, SRI is precluded from redeeming~~Mergers and until the Internalization Closing, the Company paid the Former Advisor or ~~transferring~~one of its affiliates, in cash, the ~~Class B OP Units for two years from~~loan coordination fee equal to 0.5% of (1) the ~~closing date~~initial amount of new debt financed or outstanding debt assumed in connection with the acquisition, development, construction, improvement or origination of any type of real estate asset or real estate-related asset acquired directly or (2) the Company’s allocable portion of the ~~Internalization Transaction. The Operating Partnership Agreement also includes~~purchase price and therefore the related debt in connection with the acquisition or origination of any type of real estate asset or real estate-related asset acquired through a ~~provision for~~joint venture. In connection with the Mergers, the Company paid the Former Advisor a loan coordination fee of $7,910,205, which was capitalized to ~~settle~~ the ~~repurchase request~~acquired real estate and investment in unconsolidated joint venture in the accompanying consolidated balance sheets.

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

Property Management Fees and Expenses

Prior to the Internalization Closing, the Company was party to property management agreements (each, as amended from time to time, a “Property Management Agreement”) with Steadfast Management Company, Inc., an affiliate of SRI (the “Former Property Manager”), in connection with the management of each of the Company’s ~~common stock rather than~~properties. Pursuant to each Property Management Agreement, the Company paid the Former Property Manager a monthly management fee equal to a range from 2.5% to 3.5% of each property’s gross revenues (as defined in ~~cash, in its sole discretion~~the respective Property Management Agreements) for each month, as determined by the ~~general partner of the Current Operating Partnership. The Class B OP Units receive distributions at the same rate paid to holders~~Former Advisor and approved by a majority of the Company’s ~~common stock and are allocated~~board of directors, including a share of the Current Operating Partnership and its subsidiaries’ net income or losses on a pro rata basis. The Company has evaluated the terms of the Operating Partnership Agreement and in accordance with ASC 480, determined that the Class B OP Units are properly recognized as permanent equity on the consolidated balance sheets.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

Asmajority of ~~September~~the independent directors. Each Property Management Agreement had an initial one-year term and continued thereafter on a month-to-month basis unless either party gave 60-days’ prior notice of its desire to terminate the Property Management Agreement, provided that the Company could terminate the Property Management Agreement at any time upon a determination of gross negligence, willful misconduct or bad acts of the Former Property Manager or its employees or upon an uncured breach of the Property Management Agreement upon 30 ~~2020, noncontrolling interests were approximately 6.46% of total shares~~days’ prior written notice to the Former Property Manager.

In addition to the property management fee, the Property Management Agreements also specified certain other reimbursements payable to the Former Property Manager for benefit administration, information technology infrastructure, licenses, support and ~~7.42% of weighted average shares outstanding (both measures assuming Class A-2 OP Units~~training services and ~~Class B OP Units were converted to common stock).~~capital expenditures supervision. The ~~following summarizes~~Company also reimbursed the ~~activity for noncontrolling interests recorded as equity~~Former Property Manager for the ~~three~~salaries and ~~nine months ended September 30, 2020:~~related benefits of on-site property management employees.

Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020
Issuance of Class A-2 OP Units $ 0 $ 14,450,000
Issuance of Class B OP Units 93,750,000 93,750,000
Loss allocated to Class A-2 OP Units (700,327) (537,013)
Loss allocated to Class B OP Units (144,326) (144,326)
Distributions to Class A-2 OP Units (214,642) (377,956)
Distributions to Class B OP Units (454,100) (454,100)
Noncontrolling interests $ 92,236,605 $ 106,686,605
In connection with the Internalization Transaction, the Company terminated its existing property-level property management agreements with the Former Property Manager. Following the Internalization Closing, property management fees paid by the Company are intercompany transactions and are eliminated in consolidation.

~~10.Related Party Arrangements~~Construction Management Fees and Expenses

Prior to the Internalization Closing, ~~on August 31, 2020,~~the Company was party to construction management agreements (each, a “Construction Management Agreement”) with Pacific Coast Land & Construction, Inc., an affiliate of SRI (the “Former Construction Manager”), in connection with capital improvements and renovation or value-enhancement projects for certain properties the Company acquired. The construction management fee payable with respect to each property under the Construction Management Agreements ranged from 6.0% to 12.0% of the costs of the improvements for which the Construction Manager had planning and oversight authority. Generally, each Construction Management Agreement could have been terminated by either party with 30 days’ prior written notice to the other party. Construction management fees were capitalized to the respective real estate properties in the period in which they were incurred as such costs relate to capital improvements and renovations for apartment homes taken out of service while they undergo the planned renovation.

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

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

Development Services

The Company is a party to a development services agreement (the “Development Services Agreement”) with Steadfast Multifamily Development, Inc., an affiliate of SRI (the “Developer”), in connection with certain development projects, pursuant to which the Developer receives a development fee and reimbursement for certain expenses for overseeing the development project. The Company entered into a Development Services Agreement with the Developer in connection with the Garrison Station, the Arista at Broomfield and the Flatirons development projects that provide for a development fee equal to 4% of the hard and soft costs of the development project (as defined in the applicable Development Services Agreement) as ~~such, supervised~~specified in the Development Services Agreement. 75% of the development fee is paid in 14 monthly installments and ~~managed~~ the ~~Company’s day-to-day operations and selected the Company’s real property investments and real estate-related assets, subject to oversight~~remaining 25% is paid upon delivery of a certificate of occupancy by the ~~Company’s board~~Developer to the Company.

Property Insurance

Prior to the Internalization Closing, the Company deposited amounts with an affiliate of ~~directors. The Former Advisor also provided marketing, sales and client services on the Company’s behalf. The Former Advisor was owned by~~ SRI, the Company’s former ~~sponsor. Mr. Emery,~~sponsor, to fund a prepaid insurance deductible account to cover the ~~Company’s Chairman~~cost of ~~the board~~required insurance deductibles across all properties of directors and Chief Executive Officer, owns an 86% interest in Steadfast Holdings, the majority owner of SRI. Ms. del Rio, the Company’s then Secretary and affiliated director, owns a 7% interest in Steadfast Holdings. Since 2014, Ms. Neyland, the Company’s President, Chief Financial Officer and Treasurer, earned an annual 5% profit interest from Steadfast Holdings.

Crossroads Capital Multifamily, LLC (“Crossroads Capital Multifamily”), owns a 25% membership interest in SRI. Pursuant to the Third Amended and Restated Operating Agreement of SRI effective as of January 1, 2014, as amended, distributions are allocated to each member of SRI in an amount equal to such member’s accrued and unpaid 10% preferred return, as defined in the Third Amended and Restated Operating Agreement. Thereafter, all distributions to Crossroads Capital Multifamily were subordinated to distributions to the other member of SRI, Steadfast Holdings, until Steadfast Holdings had received an amount equal to certain expenses, including certain organization and offering costs, incurred by Steadfast Holdings and its affiliates on our behalf.

~~Prior to the Closing,~~ the Company and the STAR Operating Partnership operated pursuant to the Advisory Agreement with the Former Advisor which had a one-year term expiring March 6, 2021. Pursuant to the Advisory Agreement, the Company was obligated to pay the Former Advisor specified fees upon the provision of certain services, the investment of funds in real estate and real estate-related investments and the managementother affiliated entities of the Company’s ~~investments and for other services (including, but not limited to,~~former sponsor. Upon filing a major claim, proceeds from the ~~disposition of investments). Subject to the limitations described below, the Company was also obligated to reimburse the Former Advisor and its affiliates for organization and offering costs incurred~~insurance deductible account could be used by ~~the Former Advisor and its affiliates on behalf of the Company, as well as acquisition and origination expenses and certain operating expenses incurred on behalf of~~ the Company or ~~incurred in connection~~another affiliate of SRI. In addition, the Company deposited amounts with ~~providing services~~an affiliate of the Company’s former sponsor to cover the cost of property and property related insurance across certain properties of the Company. As a result of the Internalization Transaction, the Company is no longer party to the ~~Company.~~

~~Summarized below are~~insurance deductible arrangement with any affiliates of the related party transactions incurred by the Company for the three and nine months ended September 30, 2020 and 2019, respectively, and any related amounts payable and (receivable) as of September 30, 2020 and December 31, 2019:Former Sponsor.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

Incurred (Received) For the Incurred (Received) For the Payable (Receivable) as of
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019 September 30, 2020 December 31, 2019
Consolidated Statements of Operations:
Expensed
Investment management fees (1)
$ 5,648,468 $ 4,190,746 $ 19,537,998 $ 12,525,074 $ 20 $ 4,120,353
Acquisition expenses (2)
10,270 5,933 11,381 98,594 0 0
Loan coordination fees (1)
0 542,833 1,605,652 542,833 0 600,000
Disposition fees (3)
256,000 310,000 594,750 310,000 0 591,000
Disposition transaction costs (3)
0 3,252 5,144 3,252 0 0
          Property management:
Fees (1)
1,618,611 1,276,621 5,484,468 3,756,048 0 418,173
Reimbursement of onsite personnel (4)
4,926,692 3,937,443 17,402,120 11,441,579 0 843,763
Reimbursement of other (1)
1,182,636 907,103 3,958,226 2,424,954 0 50,778
Reimbursement of property operations (4)
42,026 28,519 230,225 78,261 0 11,465
Reimbursement of property G&A (2)
30,480 14,269 114,696 76,101 0 7,000
         Other operating expenses (2)
1,134,085 493,915 2,798,549 1,322,066 174,096 463,301
         Reimbursement of personnel benefits (5)
470,925 0 470,925 0 4,412 0
    Insurance proceeds (6)
0 0 (150,000) 0 0 0
         Property insurance (6)
9,214 891,113 2,449,166 1,533,091 0 (542,324)
         Rental revenue (8)
(12,133) (14,745) (53,162) (44,235) 0 0
         Transition services agreement income (6)
(62,000) 0 (62,000) 0 (62,000) 0
        SRI Property management fee income (6)
(71,446) 0 (71,446) 0 (71,446) 0
         Other reimbursement income (6)
(38,487) 0 (38,487) 0 (38,487) 0
         Reimbursement of onsite personnel income (6)
(218,166) 0 (218,166) 0 (218,166) 0
Consolidated Balance Sheets:
Net assets acquired in internalization transaction (9)
123,236,646 0 123,236,646 0 0 0
      Sublease security deposit (10)
85,000 0 85,000 0 0 0
      Deferred financing costs (10)
0 3,594 49,050 3,594 0 0
Capitalized to Real Estate
Capitalized development service fee (12)
151,071 0 453,213 0 50,357 50,357
Capitalized investment management fees (12)
78,053 0 257,721 0 6,070 25,811
Capitalized development costs (12)
0 0 3,030 0 0 0
     Acquisition expenses (13)
36,470 278,311 426,389 497,023 19,345 0
     Acquisition fees (13)
0 0 17,717,639 48,343 0 0
Loan coordination fees (13)
0 0 8,812,071 0 0 0
Construction management:
    Fees (14)
153,826 492,218 536,098 953,635 0 43,757
    Reimbursement of labor costs (14)
70,238 117,871 236,477 379,176 0 8,525
Additional paid-in capital
Selling commissions 0 0 0 0 21,236 71,287
Distributions (15)
454,378 0 454,378 0 454,100 0
Issuance of Class B OP Units (16)
93,750,000 0 93,750,000 0 0 0
Redemption of convertible stock (16)
1,000 0 1,000 0 0 0
$ 232,943,857 $ 13,478,996 $ 300,088,751 $ 35,949,389 $ 339,537 $ 6,763,246
Other Operating Expense Reimbursement

As of March 31, 2021, the Company’s total operating expenses, as defined above, did not exceed the 2%/25% Limitation.

Disposition Fee

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

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

Class A Convertible Stock

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

Ancillary Internalization Transaction Agreements

Transition Services Agreement

SRI Property Management Agreements

SRI Construction Management Agreements

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

~~_____________________~~Registration Rights Agreement

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

Non-Competition Agreement

Sub-Lease

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

Certain Conflict Resolution Procedures

~~Included~~Every transaction that the Company enters into with its affiliates is subject to an inherent conflict of interest. The board of directors may encounter conflicts of interest in ~~general and administrative expenses~~enforcing the Company’s rights against any affiliate in the ~~accompanying consolidated statements~~event of ~~operations.~~

3)~~Included~~a default by or disagreement with an affiliate or in ~~gain on sale~~invoking powers, rights or options pursuant to any agreement between the Company and the Company’s affiliates. As a general rule, any related party transaction must be approved by a majority of ~~real estate, net~~the directors (including a majority of independent directors) not otherwise interested in the ~~accompanying consolidated statements~~transaction. In determining whether to approve or authorize a particular related party transaction, these persons will consider whether the transaction between the Company and the related party is fair and reasonable to the Company and has terms and conditions no less favorable to the Company than those available from unaffiliated third parties.

11.Incentive Award Plan and Independent Director Compensation

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

4)~~Included~~Under the independent directors’ compensation plan, and subject to such plan’s conditions and restrictions, each of the Company’s independent directors received 3,333 shares of restricted common stock once the Company raised $2,000,000 in ~~operating, maintenance and management~~gross offering proceeds in the ~~accompanying consolidated statements~~Public Offering. Each subsequent independent director that joins the Company’s board of ~~operations.~~

5)~~Represents reimbursements~~directors receives 3,333 shares of ~~employee benefits~~restricted common stock upon election to ~~SIP (the company who contracted with~~ the ~~insurance carrier, and is responsible for collecting employee benefits from~~Company’s board of directors. In addition, on the date following an independent director’s re-election to the Company’s board of directors, he or she receives 1,666 shares of restricted common stock. On March 6, 2020, the Company granted 3,333 shares of restricted common stock pursuant to the ~~Transition Services Agreement)~~independent directors’ compensation plan to each of its 2 newly elected independent directors. One-fourth of the shares of restricted common stock generally vest and become non-forfeitable upon issuance and the remaining portion will vest in three equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted stock will become fully vested and become non-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company. These restricted stock awards entitle the holders to participate in distributions even if the shares are not fully vested.

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

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

received $1,000 for each teleconference meeting and ~~employer benefit cost portion. The former is collected by~~$1,500 for each in-person meeting. All directors also receive reimbursement of reasonable out of pocket expenses incurred in connection with attendance at meetings of the board of directors.

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

Director compensation is ~~then remitted to SIP who in turn remits it~~an operating expense of the Company that, prior to the ~~insurance carrier. The latter is included in~~Internalization Closing, was subject to the operating ~~maintenance and management and general and administrative expenses in the accompanying consolidated statements of operations.~~

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

7)~~Property related insurance~~ expense ~~and the amortization~~reimbursement obligation of the ~~prepaid insurance deductible account are~~Former Advisor discussed in Note 10 (Related Party Arrangements). For the three months ended March 31, 2021 and 2020, the Company recorded an operating expense of $269,250 and $68,750, respectively, related to the independent directors’ annual cash retainer and attending board and committee meetings, which is included in general and administrative expenses in the accompanying consolidated statements of operations. ~~The amortization~~Upon signing the Merger Agreements, merger related acquisition expenses, including $0 and $3,000 for the three months ended March 31, 2021 and 2020, respectively, related to attending committee meetings, met the definition of ~~the prepaid property insurance is included in operating, maintenance~~capitalized expenses and ~~management expenses in the accompanying consolidated statements of operations. The prepaid insurance is included in other assets~~were therefore capitalized in the accompanying consolidated balance ~~sheets upon payment.~~sheets. As of March 31, 2021 and December 31, 2020, $269,250 and $209,250, respectively, related to the independent directors’ annual retainer paid in cash and board and committee meetings attendance is included in accounts payable and accrued liabilities in the consolidated balance sheets.

12.Commitments and Contingencies

8)Economic Dependency~~Included in rental income in the accompanying consolidated statements of operations.~~

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

Concentration of Credit Risk

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

Environmental

Legal Matters

13.Earnings Per Share

The following table presents a reconciliation of net ~~assets assumed~~loss attributable to common stockholders and shares used in calculating basic and diluted loss per share, or EPS, for the three months ended March 31, 2021 and 2020:


	Three Months Ended March 31,
	2021		2020
Net loss attributable to common stockholders	$	(14,031,288)	$	(9,681,128)
Less:
Distributions related to unvested restricted stockholders(1)	(50,982)		(3,095)
Numerator for loss per common share — basic	$	(14,082,270)	$	(9,684,223)
Weighted average common shares outstanding — basic and diluted(2)	109,886,636		68,180,512

Loss per common share — basic and diluted	$	(0.13)	$	(0.14)

_____________________

(1)Unvested restricted stockholders that have a right to participate in dividends declared on common stock are accounted for as participating securities and reflected in the ~~Internalization Transaction~~calculation of ~~$123,236,646,~~basic and diluted EPS under the two-class method.

14.Derivative Financial Instruments

March 31, 2021

Type

Maturity Date Range

Based on

Number of Instruments

Notional Amount

Variable Rate

Weighted Average Rate Cap

Fair Value

Interest Rate Cap

6/1/2021 - 7/1/2023

One-Month LIBOR

352,300,350

0.11%

3.56%

30,872

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

December 31, 2020

Type

Maturity Date Range

Based on

Number of Instruments

Notional Amount

Variable Rate

Weighted Average Rate Cap

Fair Value

Interest Rate Cap

1/1/2021 - 7/1/2023

One-Month LIBOR

407,935,350

0.14%

3.41%

7,852

~~10)Included~~statements of operations. During the three months ended March 31, 2021 and 2020, the Company acquired an interest rate cap agreement of $12,200 and $0, and assumed, through the Mergers, interest rate cap agreements of $0 and $6,110, respectively. The fair value of the interest rate cap agreements of $30,872 and $7,852 as of March 31, 2021 and December 31, 2020, respectively, is included in other assets inon the accompanying consolidated balance sheets.

15.Leases

Lessee

The components of lease costs were as follows:



		Three Months Ended March 31,
Lease Cost	Classification	2021		2020
Operating Lease cost(1)	Operating, maintenance and management	$	10,044	$	7,505
Operating Lease cost(1)	General and administrative	241,549		0
Finance lease cost
Amortization of leased assets	Depreciation and amortization	3,060		0
Accretion of lease liabilities	Interest expense	107		0


Total lease cost		$	254,760	$	7,505

_____________________

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

~~11)~~

~~Included in notes payable, net in~~Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

Other information related to leases was as follows:


Lease Term and Discount Rate	March 31, 2021		December 31, 2020
Weighted average remaining lease term (in years)
Operating leases	3.4		3.4
Finance leases	1.2		1.4
Weighted average discount rate
Operating Leases	3.3	%	3.2	%
Finance Leases	2.9	%	2.9	%


	Three Months Ended March 31,
Supplemental Disclosure of Cash Flows Information	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows related to operating leases	$	282,500	$	31,185
Operating cash outflows related to finance leases	$	3,060	$	0
Financing cash outflows related to finance leases	$	0	$	0

Operating Leases


Year	Amount

Remainder of 2021	$	886,020
2022	611,239
2023	190,315
2024	120,701
2025	94,506
Thereafter	266,910
Total undiscounted operating lease payments	$	2,169,691
Less: interest	(324,390)
Present value of operating lease liabilities	$	1,845,301

Finance Leases

Table of Contents

~~12)Included in real estate held for development in the accompanying consolidated balance sheets.~~

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)


Year	Amount

Remainder of 2021	$	9,180
2022	5,100
2023	0
2024	0
2025	0
Thereafter	0
Total undiscounted finance lease payments	$	14,280
Less: interest	(213)
Present value of finance lease liabilities	$	14,067

~~13)~~16.~~Included in total real estate, net in the accompanying consolidated balance sheets.~~Subsequent Events

~~14)Included in building and improvements in the accompanying consolidated balance sheets.~~Distributions Paid

~~15)Included in cumulative distributions and net losses in the accompanying consolidated balance sheets.~~

~~16)In connection with the Internalization Transaction, in exchange for acquiring the advisory, asset management and property management business of the Former Advisor and its affiliates,~~On April 1, 2021, the Company paid ~~its former sponsor, total consideration~~distributions of ~~$124,999,000~~$5,228,058, which ~~consists of $31,249,000 in cash consideration, 6,155,613.92 of Class B OP Units valued at $15.23 per unit or $93,750,000. The Class B OP Units are included within noncontrolling interests~~related to distributions declared for each day in the ~~accompanying consolidated balance sheets. In addition,~~period from March 1, 2021, through March 31, 2021, and consisted of cash distributions paid in the amount of $4,191,026 and $1,037,032 in shares issued pursuant to the DRP.

On May 3, 2021, the Company ~~purchased all~~paid distributions of $5,063,937, which related to distributions declared for each day in the ~~Class A convertible~~period from April 1, 2021 through April 30, 2021 and consisted of cash distributions paid in the amount of $4,043,827 and $1,020,110 in shares issued pursuant to the DRP.

Shares Repurchased

On April 30, 2021, the Company repurchased 158,225 shares of its common stock for a total repurchase value of $2,287,931, or $14.46 per share, pursuant to the ~~Company held by the Former Advisor for $1,000.~~Company’s share repurchase plan.

Investment Management Fee

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

investments, or the Company’s proportionate share thereof in the case of investments made through joint ventures. Following the completion of the Mergers and until the Internalization Closing, the Company paid the Former Advisor a monthly investment management fee, which iswas calculated on the same basis as described above, and payable 50% in cash and 50% in shares of the Company’s common stock. Investment management fees ~~of $4,328,191 and $8,367,340 pertaining to the 50% payable~~incurred in shares, included in fees to affiliates in the accompanying consolidated statements of ~~the Company common stock~~operations were ~~paid~~$0 and $1,187,351 for the three ~~and nine~~ months ended ~~September 30, 2020.~~March 31, 2021 and 2020, respectively.

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

Acquisition Fees and Expenses

Prior to the completion of the Mergers, the Company paid the Former Advisor an acquisition fee equal to 1.0% of the cost of investment, which includes the amount actually paid or budgeted to fund the acquisition, origination, development, construction or improvement (i.e. ~~value enhancement)~~value-enhancement) of any real property or real estate-related asset acquired. In addition to

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

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

Loan Coordination Fee

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

As compensation for services rendered in connection with any financing or the refinancing of any debt (in each case, other than at the time of the acquisition of a property), the Company also paid the Former Advisor or one of its affiliates, in the form of shares equal to such amount, a loan coordination fee equal to 0.5% of the amount refinanced or the Company’s proportionate share of the amount refinanced in the case of investments made through a joint venture. ~~Loan~~NaN loan coordination ~~fees of $0 and $1,116,700 were~~fee was paid in shares ofto the ~~Company common stock for~~Company’s Former Advisor during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020.

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

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

Property Management Fees and Expenses

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

majority of the independent directors. Each Property Management Agreement had an initial one-year term and continued thereafter on a month-to-month basis unless either party ~~gives~~gave 60-days’ prior notice of its desire to terminate the Property Management Agreement, provided that the Company could terminate the Property Management Agreement at any time upon a determination of gross negligence, willful misconduct or bad acts of the Former Property Manager or its employees or upon an uncured breach of the Property Management Agreement upon 30 days’ prior written notice to the Former Property Manager.

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

Construction Management Fees and Expenses

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

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

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

Development Services

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

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

Property Insurance

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

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

Other Operating Expense Reimbursement

The Charter limits the Company’s total operating expenses during any 4 fiscal quarters to the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income for the same period (the “2%/25% Limitation”). The Company was to reimburse the Former Advisor, at the end of each fiscal quarter, for operating expenses incurred by the Former Advisor; provided, however, that the Company did not reimburse the Former Advisor at the end of any fiscal quarter for operating expenses that exceed the 2%/25% Limitation unless the independent directors determined that such excess expenses were justified based on unusual and non-recurring factors. The Former Advisor was obligated to reimburse the Company for the amount by which the Company’s operating expenses for the preceding four fiscal quarters then ended exceeded the 2%/25% Limitation, unless approved by the independent directors. For purposes of determining the 2%/25% Limitation amount, “average invested assets” means the average monthly book value of the Company’s assets invested directly or indirectly in equity interests and loans secured by real estate during the 12-month period before deducting depreciation, bad ~~debts~~debt reserves or other non-cash reserves. “Total operating expenses” means all expenses paid or incurred by the Company that are in any way related to the Company’s operation, including the Company’s allocable share of Former Advisor overhead, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, listing and registration of shares of the Company’s common stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of the Company’s assets; (f) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that the Company does not close) and investment management fees; (g) real estate commissions on the resale of investments; and (h) other expenses connected with the acquisition, disposition, management and ownership of investments (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property).

As of ~~September 30, 2020,~~March 31, 2021, the Company’s total operating expenses, as defined above, did not exceed the 2%/25% Limitation.

Disposition Fee

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

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

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

~~Selling Commissions and Dealer Manager Fees~~

The Company entered into a Dealer Manager Agreement with Stira Capital Markets Group, LLC, an affiliate of SRI (the “Dealer Manager”), in connection with the Public Offering. The Company paid the Dealer Manager up to 7% and 3% of the gross offering proceeds from the Primary Offering as selling commissions and dealer manager fees, respectively. The Dealer Manager reallowed 100% of sales commissions earned to participating broker-dealers. The Dealer Manager could also reallow to any participating broker-dealer a portion of the dealer manager fee that was attributable to that participating broker-dealer for certain marketing costs of that participating broker-dealer. The Dealer Manager negotiated the reallowance of the dealer manager fee on a case-by-case basis with each participating broker-dealer subject to various factors associated with the cost of the marketing program. The Company allowed a participating broker-dealer to elect to receive the 7% selling commissions at the time of sale or elect to have the selling commission paid on a trailing basis. A participating broker-dealer that elected to receive a trailing selling commission is paid as follows: 3% at the time of sale and the remaining 4% paid ratably (1% per year) on each of the first ~~four~~ anniversaries of the sale. A reduced selling commission and dealer manager fee was paid in connection with volume discounts and certain other categories of sales. NaN selling commissions or dealer manager fee was paid with respect to shares of common stock issued pursuant to the DRP. The Company terminated the Public Offering on March 24, 2016, and as of September 30, 2020 and December 31, 2019, expects to pay trailing selling commissions of $21,236 and $71,287, respectively, which were charged to additional paid-in capital and included within amounts due to affiliates in the accompanying consolidated balance sheets.

Class A Convertible Stock

In connection with the Mergers, the Company and the Former Advisor exchanged the ~~then outstanding~~then-outstanding Convertible Stock for the new Class A Convertible Stock. The Class A Convertible Stock would convert into shares of the Company’s common stock if (1) the Company had made total Class A Distributions equal to the original issue price of the Common Equity, plus an aggregate 6.0% cumulative, non-compounded, annual return on the original issue price of those shares, (2) the Company listed its common stock for trading on a national securities exchange or entered into a merger whereby holders of the Company’s

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

Ancillary Internalization Transaction Agreements

Transition Services Agreement

SRI Property Management Agreements

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

fee equal to 2.0% of each property’s gross collections for such ~~month.~~month (“Gross Collections”). Each SRI Property Management Agreement has an initial one-year term and will continue thereafter on a month-to-month basis unless the ~~owner of the property~~Property Owner terminates the SRI Property Management Agreement with 60 days’ prior written notice or upon the determination of gross negligence, willful misconduct or bad acts of SRS or its employees with 30 days’ prior written notice to SRS. After the first one-year term, either party may terminate the SRI Property Management Agreement in the event of a material breach that remains uncured for a period of 30 days after written notification of such breach. As of ~~September 30, 2020,~~March 31, 2021, the Company recognized the SRI Property Management Agreements asset, net of ~~$744,628~~$339,580 within other assets on the accompanying consolidate balance sheets.

SRI Construction Management Agreements

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

Registration Rights Agreement

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

Non-Competition Agreement

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

Sub-Lease

In connection with the Internalization Transaction, SRS, an indirect subsidiary of the Company, entered into a sub-lease agreement (the “Sub-Lease”) with the Former Property Manager on September 1, 2020, for its headquarters in Irvine, California. The Sub-Lease also includes certain ~~fixtures~~furniture and ~~fittings,~~fixtures, that will become the property of SRS at the end of the lease term. As of ~~September 30, 2020,~~March 31, 2021, the Sub-Lease has a remaining lease term of 2014 months with no option to renew. The monthly sub-lease expense is recognized on a straight line basis over the remaining term of the ~~the~~ Sub-Lease. As of ~~September 30,~~March 31, 2021 and December 31, 2020, as it pertains to the Sub-Lease of the office space, the Company recorded an operating lease ROU asset, net of $1,107,099 and $1,339,591 and an operating lease liability, net of $1,119,776 and $1,346,835, respectively. As of March 31, 2021 and December 31, 2020, as it pertains to the Sub-Lease of the furniture and fixtures, the Company recognized a finance lease ROU asset, net of $13,785 and $16,845 and a finance lease liability, net of $14,067 and $17,020, respectively. For the three months ended March 31, 2021, the Sub-Lease expense related to the office space and the furniture and fixtures were $241,549 and $107, respectively. See Note 15 (Leases) for further details about the Company’s leases.

5147

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

$1,570,472 and an operating lease liability, net of $1,572,283. As of September 30, 2020, as it pertains to the Sub-Lease of the fixtures and fittings, the Company recognized a finance lease ROU asset, net of $19,905 and a finance lease liability, net of $19,952. For three and nine months ended September 30, 2020, the Sub-Lease expense related to the office space and the fixtures and fittings were $80,517 and $47, respectively. See Note 16 (Leases) for further details about the Company’s leases.

Certain Conflict Resolution Procedures

Every transaction that the Company enters into with its affiliates is subject to an inherent conflict of interest. The board of directors may encounter conflicts of interest in enforcing the ~~Company's~~Company’s rights against any affiliate in the event of a default by or disagreement with an affiliate or in invoking powers, rights or options pursuant to any agreement between the Company and the Company’s affiliates. As a general rule, any related party transaction must be approved by a majority of the directors (including a majority of independent directors) not otherwise interested in the transaction. In determining whether to approve or authorize a particular related party transaction, these persons will consider whether the transaction between the Company and the related party is fair and reasonable to the Company and has terms and conditions no less favorable to the Company than those available from unaffiliated third parties. ~~For a detailed list of the various restrictions in the Company’s charter, see the Company’s 2019 Annual Report on Form 10-K filed on March 12, 2020.~~

11. Incentive Award Plan and Independent Director Compensation

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

On September 15, 2020, the Company’s board of directors approved an amendment to the independent directors’ compensation plan, pursuant to which, each of the Company’s current independent directors is entitled to receive an annual retainer of $75,000 in cash and $75,000 in shares of restricted common stock upon election or ~~subsequent annual election~~re-election to the Company’s board of directors. On December 3, 2020, the Company granted 4,924 shares of restricted common stock to each of its 5 independent directors pursuant to the Incentive Award Plan at a fair value of $15.23 per share in connection with their re-election to the board of directors at the Company’s annual meeting of stockholders. These shares generally vest in ~~four~~two equal annual installments beginning on the first anniversary of the date of grant and ending on the ~~third~~second anniversary of the date of grant; provided, however, that the restricted stock will become fully vested on the earlier to occur of: (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company.

The Company recorded stock-based compensation expense of ~~$18,309~~$63,168 and ~~$81,692~~$42,455 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and $11,390 and $39,182 for the three and nine months ended September 30, 2019,~~ respectively, related to the independent directors’ restricted common stock.

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

for each board meeting attended in person, (ii) $1,500 for each committee meeting attended in person in such director’s capacity as a committee member, (iii) $1,000 for each board meeting attended via teleconference (not to exceed $4,000 for any one set of meetings attended on any given day). In connection with meetings of the ~~special committee,~~Special Committee, the independent directors

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

received $1,000 for each teleconference meeting and $1,500 for each in-person meeting. ~~The chairman of the special committee also received a $60,000 retainer and the other special committee members received a $50,000 retainer.~~ All directors also receive reimbursement of reasonable out of pocket expenses incurred in connection with attendance at meetings of the board of directors.

Director compensation is an operating expense of the Company that, prior to the Internalization Closing, was subject to the operating expense reimbursement obligation of the Former Advisor discussed in Note 10 (Related Party Arrangements). ~~The~~For the three months ended March 31, 2021 and 2020, the Company recorded an operating expense of ~~$228,750~~$269,250 and ~~$765,750 for the three and nine months ended September 30, 2020, and $94,750 and $346,750 for the three and nine months ended September 30, 2019,~~$68,750, respectively, related to the independent directors’ annual cash retainer and attending board and committee meetings, which is included in general and administrative expenses in the accompanying consolidated statements of operations. Upon signing the Merger Agreements, merger related acquisition expenses, including $0 and $3,000 for the three months ended March 31, 2021 and 2020, respectively, related to attending committee meetings, met the definition of capitalized expenses and were therefore capitalized in the accompanying consolidated balance sheets. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019, $228,750~~2020, $269,250 and ~~$61,750,~~$209,250, respectively, related to the independent directors’ annual retainer paid in cash and board and committee meetings attendance is included in accounts payable and accrued liabilities in the consolidated balance sheets.

In connection with the Internalization Transaction, on September 1, 2020, certain key employees of the Company were issued restricted stock grants under the terms of the Incentive Award Plan, which grants had been approved by the Special Committee and the board of directors. The grants to the key employees of the Company were made pursuant to a restricted stock grant agreement. See Note 8 (Stockholders’ Equity) for further details.

12. Commitments and Contingencies

Economic Dependency

Concentration of Credit Risk

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

Environmental

Legal Matters

13. Earnings Per Share


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Net loss attributable to common stockholders	Net loss attributable to common stockholders	$	(36,913,412)	$	(10,389,806)	$	(99,819,162)	$	(34,742,088)	Net loss attributable to common stockholders	$	(14,031,288)	$	(9,681,128)
Less:	Less:									Less:
Distributions related to unvested restricted stockholders(1)	Distributions related to unvested restricted stockholders(1)	(16,066)		(841)		(20,840)		(2,523)		Distributions related to unvested restricted stockholders(1)	(50,982)		(3,095)
Numerator for loss per common share — basic	Numerator for loss per common share — basic	$	(36,929,478)	$	(10,390,647)	$	(99,840,002)	$	(34,744,611)	Numerator for loss per common share — basic	$	(14,082,270)	$	(9,684,223)
Weighted average common shares outstanding — basic and diluted(2)	Weighted average common shares outstanding — basic and diluted(2)	109,663,583		52,279,878		95,714,116		52,096,357		Weighted average common shares outstanding — basic and diluted(2)	109,886,636		68,180,512

Loss per common share — basic and diluted	Loss per common share — basic and diluted	$	(0.34)	$	(0.20)	$	(1.04)	$	(0.67)	Loss per common share — basic and diluted	$	(0.13)	$	(0.14)

_____________________

14. Derivative Financial Instruments

September 30, 2020

March 31, 2021

Type

Maturity Date Range

Based on

Number of Instruments

Notional Amount

Variable Rate

Weighted Average Rate Cap

Fair Value

Type

Maturity Date Range

Based on

Number of Instruments

Notional Amount

Variable Rate

Weighted Average Rate Cap

Fair Value

Interest Rate Cap

12/1/2020 - 7/1/2023

One-Month LIBOR

543,703,350

0.15%

3.27%

16,955

Interest Rate Cap

6/1/2021 - 7/1/2023

One-Month LIBOR

352,300,350

0.11%

3.56%

30,872

December 31, 2019
Type Maturity Date Range Based on Number of Instruments Notional Amount Variable Rate Weighted Average Rate Cap Fair Value
Interest Rate Cap 1/1/2020 - 8/1/2021 One-Month LIBOR 9 $ 343,017,350 1.76% 3.45% $ 132

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

December 31, 2020

Type

Maturity Date Range

Based on

Number of Instruments

Notional Amount

Variable Rate

Weighted Average Rate Cap

Fair Value

Interest Rate Cap

1/1/2021 - 7/1/2023

One-Month LIBOR

407,935,350

0.14%

3.41%

7,852

The interest rate cap agreements are not designated as effective cash flow hedges. Accordingly, the Company records any changes in the fair value of the interest rate cap agreements as interest expense. The change in the fair value of the interest rate cap agreements for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, resulted in an unrealized (gain) loss of ~~$29,093~~$(10,820) and ~~$56,287, respectively, and for the three and nine months ended September 30, 2019, resulted in an unrealized loss of $24,144 and $223,867,~~$2,251, respectively, which is included in interest expense in the accompanying consolidated statements of operations. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company acquired an interest rate cap agreement of $12,200 and $0, and assumed, through the Mergers, interest rate cap agreements of ~~$20,000~~$0 and ~~$67,000 and $18,000 and $18,000, respectively, and did not receive settlement proceeds. The Company also acquired interest cap agreements of~~ $6,110, ~~during the nine months ended September 30, 2020, in connections with the Mergers.~~respectively. The fair value of the interest rate cap agreements of ~~$16,955~~$30,872 and ~~$132~~$7,852 as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, is included in other assets on the accompanying consolidated balance sheets.

15. ~~Fair Value Measurement~~

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

September 30, 2020
Fair Value Measurements Using
Level 1 Level 2 Level 3
Recurring Basis:
Assets:
Interest rate cap agreements(1)
$ 0 $ 16,955 $ 0

December 31, 2019
Fair Value Measurements Using
Level 1 Level 2 Level 3
Recurring Basis:
Assets:
Interest rate cap agreements(1)
$ 0 $ 132 $ 0

~~The following table reflects the Company’s assets required to be measured at fair value on a nonrecurring basis on the consolidated balance sheets:~~

September 30, 2020
Fair Value Measurements Using
Level 1 Level 2 Level 3
Nonrecurring Basis:
Assets:
Impaired real estate(2)
$ 0 $ 0 $ 32,425,732

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

~~___________~~

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

~~(2)~~During the fiscal quarter June 30, 2020, the Company impaired real estate assets that have been actively marketed for sale at a disposition price that is less than their carrying value. The valuation technique used for the fair value of all impaired real estate assets was the expected net sales proceeds. The Company determined that the valuation fall under Level 3 of the fair value hierarchy. The carrying value of impaired real estate assets may be subsequently increased or decreased after the measurement date due to capital improvements, depreciation, or sale. During the three months ended June 30, 2020, the Company recorded impairment charges of $5,039,937, of which $1,770,471 pertained Ansley on Princeton Lakes, that was sold on September 30, 2020. See Note 4 (Real Estate) for details.

The remaining impairment charge that was recorded during the fiscal quarter June 30, 2020 of $3,269,466 pertained to Montecito Apartments, which is treated as real estate held for sale on the accompanying consolidated balance sheets as of September 30, 2020. Montecito Apartments was sold subsequent to September 30, 2020. See Note 17 (Subsequent Events). NaN impairment charges were recorded during the three months ended September 30, 2020 or during the three and nine months ended September 30, 2019.

~~16.~~Leases

Lessee

The components of lease costs were as follows:


			Three Months Ended September 30,						Three Months Ended March 31,
Lease Cost	Lease Cost	Classification	2020		2019		Lease Cost	Classification	2021		2020
Operating Lease cost(1)	Operating Lease cost(1)	Operating, maintenance and management	$	11,340	$	1,462	Operating Lease cost(1)	Operating, maintenance and management	$	10,044	$	7,505
Operating Lease cost(1)	Operating Lease cost(1)	General and administrative	80,516		0		Operating Lease cost(1)	General and administrative	241,549		0
Finance lease cost	Finance lease cost						Finance lease cost
Amortization of leased assets	Amortization of leased assets	Depreciation and amortization	1,020		0		Amortization of leased assets	Depreciation and amortization	3,060		0
Accretion of lease liabilities	Accretion of lease liabilities	Interest expense	47		0		Accretion of lease liabilities	Interest expense	107		0

Total lease cost	Total lease cost		$	92,923	$	1,462	Total lease cost		$	254,760	$	7,505

			Nine Months Ended September 30,
Lease Cost		Classification	2020		2019
Operating Lease cost(1)		Operating, maintenance and management	$	27,867	$	1,528
Operating Lease cost(1)		General and administrative	80,516		0
Finance lease cost
Amortization of leased assets		Depreciation and amortization	1,020		0
Accretion of lease liabilities		Interest expense	47		0

Total lease cost			$	109,450	$	1,528

_____________________

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

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

~~_____________________~~

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

Other information related to leases was as follows:


Lease Term and Discount Rate	Lease Term and Discount Rate	September 30, 2020		December 31, 2019		Lease Term and Discount Rate	March 31, 2021		December 31, 2020
Weighted average remaining lease term (in years)	Weighted average remaining lease term (in years)					Weighted average remaining lease term (in years)
Operating leases	Operating leases	3.5		3.6		Operating leases	3.4		3.4
Finance leases	Finance leases	1.7		0.0		Finance leases	1.2		1.4
Weighted average discount rate	Weighted average discount rate					Weighted average discount rate
Operating Leases	Operating Leases	3.2	%	4.0	%	Operating Leases	3.3	%	3.2	%
Finance Leases	Finance Leases	2.9	%	0	%	Finance Leases	2.9	%	2.9	%


		Nine Months Ended September 30,					Three Months Ended March 31,
Supplemental Disclosure of Cash Flows Information	Supplemental Disclosure of Cash Flows Information	2020		2019		Supplemental Disclosure of Cash Flows Information	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows related to operating leases	Operating cash outflows related to operating leases	$	213,698	$	52,652	Operating cash outflows related to operating leases	$	282,500	$	31,185
Operating cash outflows related to finance leases	Operating cash outflows related to finance leases	$	1,020	$	0	Operating cash outflows related to finance leases	$	3,060	$	0
Financing cash outflows related to finance leases	Financing cash outflows related to finance leases	$	0	$	0	Financing cash outflows related to finance leases	$	0	$	0

Operating Leases

The following table sets forth as of ~~September 30, 2020,~~March 31, 2021, the undiscounted cash flows of the Company’s scheduled lease obligations for future minimum payments for the ~~three~~nine months ending December 31, ~~2020~~2021, and for each of the next four years ending December 31, and thereafter, as well as the reconciliation of those cash flows to operating lease liabilities on the Company’s accompanying consolidated balance sheets:


Year	Year	Amount		Year	Amount
Remainder of 2020		$	289,793
2021		1,172,439

Remainder of 2021				Remainder of 2021	$	886,020
2022	2022	611,239		2022	611,239
2023	2023	188,990		2023	190,315
2024	2024	122,026		2024	120,701
2025				2025	94,506
Thereafter	Thereafter	361,416		Thereafter	266,910
Total undiscounted operating lease payments	Total undiscounted operating lease payments	$	2,745,903	Total undiscounted operating lease payments	$	2,169,691
Less: interest	Less: interest	(398,303)		Less: interest	(324,390)
Present value of operating lease liabilities	Present value of operating lease liabilities	$	2,347,600	Present value of operating lease liabilities	$	1,845,301

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Item 1. Financial Statements (continued)~~

~~STEADFAST APARTMENT REIT, INC.~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2020~~

~~(unaudited)~~

Finance Leases

The following table sets forth as of ~~September 30, 2020,~~March 31, 2021, the undiscounted cash flows of the Company’s scheduled obligations for future minimum payments for the ~~three~~nine months ending December 31, ~~2020~~2021, and for each of the next four years ending December 31, and thereafter, as well as a reconciliation of those cash flows to finance lease liabilities:

Year Amount
Remainder of 2020 $ 3,065
2021 12,240
2022 5,100
2023 0
2024 0
Thereafter 0
Total undiscounted finance lease payments $ 20,405
Less: interest (453)
Present value of finance lease liabilities $ 19,952

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)


Year	Amount

Remainder of 2021	$	9,180
2022	5,100
2023	0
2024	0
2025	0
Thereafter	0
Total undiscounted finance lease payments	$	14,280
Less: interest	(213)
Present value of finance lease liabilities	$	14,067

~~17.~~16. Subsequent Events

Distributions Paid

On ~~October~~April 1, ~~2020,~~2021, the Company paid distributions of ~~$8,112,574,~~$5,228,058, which related to distributions declared for each day in the period from ~~September~~March 1, ~~2020~~2021, through ~~September 30, 2020~~March 31, 2021, and consisted of cash distributions paid in the amount of ~~$6,359,588~~$4,191,026 and ~~$1,752,986~~$1,037,032 in shares issued pursuant to the DRP.

On ~~November 2, 2020,~~May 3, 2021, the Company paid distributions of ~~$8,391,000,~~$5,063,937, which related to distributions declared for each day in the period from ~~October~~April 1, ~~2020~~2021 through ~~October 31, 2020~~April 30, 2021 and consisted of cash distributions paid in the amount of ~~$6,579,899~~$4,043,827 and ~~$1,811,101~~$1,020,110 in shares issued pursuant to the DRP.

Shares Repurchased

On ~~October~~April 30, ~~2020,~~2021, the Company repurchased ~~281,220~~158,225 shares of its common stock for a total repurchase value of ~~$4,000,000,~~$2,287,931, or ~~$14.22~~$14.46 per share, pursuant to the Company’s share repurchase plan.

Distributions Declared

On ~~October 14, 2020,~~April 22, 2021, the Company’s board of directors approved and authorized a daily distribution to stockholders of record as of the close of business on each day of the period commencing on ~~November~~May 1, ~~2020~~2021 and ending on ~~November~~May 31, ~~2020.~~2021. The distributions will be equal to ~~$0.002459~~$0.001438 per share of the Company’s common stock per day. The distributions for each record date in ~~November 2020~~May 2021 will be paid in ~~December 2020.~~June 2021. The distributions will be payable to stockholders from legally available funds therefor.

On ~~November 5, 2020,~~May 11, 2021, the Company’s board of directors approved and authorized a daily distribution to stockholders of record as of the close of business on each day of the period commencing on ~~December~~June 1, ~~2020~~2021 and ending on ~~December 31, 2020.~~June 30, 2021. The distributions will be equal to ~~$0.002459~~$0.001438 per share of the Company’s common stock per day. The distributions for each record date in ~~December 2020~~June 2021 will be paid in ~~January~~July 2021. The distributions will be payable to stockholders from legally available funds therefor.

Amendment to the SRI Property Management Agreements

On April 23, 2021, SRS entered into amendments to the SRI Property Management Agreements with affiliates of SRI to, among other things, (1) provide that SRS is responsible for providing accounting services for the properties owned by the Property Owners and (2) increase the property management fee from 2.0% of Gross Collections to 3.0% of Gross Collections.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

~~Sale~~Garrison Station Real Estate Placed in Service

Subsequent to March 31, 2021, 2 additional buildings comprised of ~~Montecito Apartments~~

On March 6, 2020, in connection with the SIR Merger, the Company acquired Montecito Apartments, a multifamily property located in Austin, Texas, containing 268 apartment homes. The purchase price of Montecito Apartments was $36,461,172. On October 29, 2020, the Company sold Montecito Apartments for $34,700,000, excluding selling costs of $395,883, resulting in a gain of $1,699,349, which includes reductions to the net book value of the property due to impairment and historical depreciation and amortization expense. The carrying value of Montecito Apartments as of the date of sale was $32,604,768. The purchaser of Montecito Apartments is not affiliated with the Company or its affiliates.

~~Purchases and Sale Agreement~~

On October 20, 2020, the Company entered into a Purchase and Sale Agreement to acquire Los Robles (the “Los Robles Property”) located in San Antonio, Texas, for a purchase price of $51,500,000, exclusive of closing costs. The Company intends to finance the acquisition of the Los Robles Property with cash proceeds from the disposition of Montecito Apartments in a tax-free exchange pursuant to Section 1031 of the Internal Revenue Code. The Los Robles Property contains 30641 apartment homes ~~consisting of 186 one-bedroom apartments and 120 two-bedroom apartments that average 909 square feet. The Company expects to complete~~were placed in service at the ~~acquisition of the Los Robles Property on November 19, 2020.~~Garrison Station development project.

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PART I — FINANCIAL INFORMATION (continued)

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

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

Forward-Looking Statements

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

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

Additional factors that could have a material adverse effect on our operations and future prospects include, but are not limited to:

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

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

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

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

•our ability to retain our key employees;

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

•the Internalization Transaction (defined ~~below)~~herein) may not be financially beneficial to us and our stockholders and our net income and funds from operations may decrease as a result of the Internalization Transaction;

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

•the availability of capital;

•changes in interest rates; and

•changes to generally accepted accounting principles, or ~~GAAP; and~~GAAP.

•~~the Internalization Transaction may not be accretive to our stockholders.~~

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements included in this ~~quarterly report.~~Quarterly Report. All forward-looking statements are made as of the date of this ~~quarterly report~~Quarterly Report and the risk that actual results will differ materially from the expectations expressed in this ~~quarterly report~~Quarterly Report will increase with the passage of time. Except as otherwise required by the federal securities laws, we

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

undertake no obligation to publicly update or revise any forward-looking statements after the date of this ~~quarterly report,~~Quarterly Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this ~~quarterly report,~~Quarterly Report, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this ~~quarterly report~~Quarterly Report will be achieved.

All forward looking statements included herein should be read in connection with the risks identified in the “Risk Factors” section of this Quarterly Report ~~on Form 10-Q~~ and our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, filed with the Securities and Exchange Commission, or the SEC, on March 12, ~~2020, and subsequent quarterly reports.~~2021.

Overview

We were formed on August 22, 2013, as a Maryland corporation that elected to be taxed as, and qualifies as, a REIT. As of ~~September 30, 2020,~~March 31, 2021, we owned and managed a diverse portfolio of 69 multifamily properties ~~comprising a total~~comprised of ~~21,529~~21,591 apartment homes and three parcels of land held for the development of apartment homes. We may acquire additional multifamily properties or pursue multifamily development projects in the future.

COVID-19 Impact

We are carefully monitoring the ongoing COVID-19 pandemic and its impact on our business. During the quarter ended June 30, 2020, we instituted payment plans for our residents that were experiencing hardship due to COVID-19, which we refer to as the “COVID-19 Payment Plan.” Pursuant to the COVID-19 Payment Plan, we allowed qualifying residents to defer their rent, which is collected by us in monthly installment payments over the duration of the current lease or renewal term (which may not exceed 12 months). Additionally, for the months of May and June 2020, we ~~began providing~~provided certain qualifying residents with a one-time concession to incentivize their performance under the payment plan. If the qualifying resident failed to make payments pursuant to the COVID-19 Payment Plan, the concession was immediately terminated, and the qualifying resident was required to immediately repay the amount of the concession. WeDue to reduced demand, we did not offer residents aany other payment ~~plan~~plans during ~~July 2020 due to~~ the ~~reduced demand in May and June~~remaining months of 2020. In the aggregate, approximately ~~$1.7 million~~$2,025,092 in rent billed was subject to the COVID-19 Payment Plan, with ~~$321,357~~$53,500 still due as of ~~September 30, 2020.~~March 31, 2021.

In January 2021, we began offering an extension to the COVID-19 Payment Plan, or the Extension Plan, that allows eligible residents to defer their rent, which is collected by us in monthly installment payments over the lesser of the duration of the current lease term or a maximum of three months (with the exception of certain states that allow a maximum of six months deferral). Under the Extension Plan, no concessions are offered for residents with a payment plan duration of two months or less and residents who opted for the COVID-19 Payment Plan are not eligible to participate in the Extension Plan unless they paid off the amounts due under the COVID-19 Payment Plan. As of May 1, 2021, the number of qualifying residents who opted for the Extension Plan were 41 and approximately $43,277 in rent was subject to the Extension Plan.

During the quarter ended September 30, 2020, we initiated a debt forgiveness program for certain of our residents that were experiencing hardship due to COVID-19 and who were in default ofon their lease payments, which we refer to as the “Debt Forgiveness ~~Program”.~~Program.” Pursuant to the Debt Forgiveness Program, we ~~are offering~~offered qualifying residents an opportunity to terminate the lease without being liable for any unpaid rent and penalties. We determined that accounts receivable related to the Debt Forgiveness Program are not probable of collection and therefore included these accounts in our reserve. In the aggregate, ~~$263,044~~$298,576 of rent was written off as of ~~September 30, 2020.~~March 31, 2021. As of ~~September 30, 2020,~~March 31, 2021, approximately 5255 of ~~169~~304 residents that qualified for the Debt Forgiveness Program, vacated their apartment homes, terminating their lease resulting in the forgiveness and write off of their debt. We may in the future continue to offer various types of payment plans or rent relief depending on the ongoing impact of the COVID-19 pandemic.

During ~~July, August and September 2020,~~the three months ended March 31, 2021, we collected ~~95%, 96% and~~ 96% in rent due pursuant to our leases. We collected ~~96%~~97% in rent due pursuant to our leases during ~~October 2020.~~April 2021. We have reserved approximately ~~$1,860,000~~$2,728,971 of accounts receivable which we consider not probable for collection. Although the COVID-19 pandemic has not materially impacted our rent collections, the future impact of COVID-19 is still unknown. ~~At this time~~We are currently working with residents at our communities to obtain rental relief assistance pursuant to the ~~government has not extended additional financial relief to individuals and businesses impacted~~Emergency Rental Assistance Program adopted by ~~COVID-19.~~the U.S. Department of Treasury.

We expect the significance of the COVID-19 pandemic, including the extent of its effect on our financial and operational results, to be dictated by, among other things, its duration, the success of efforts to contain it and the impact of actions taken in response. For instance, ~~future~~recent government action to provide substantial financial support could provide helpful mitigation for us; its ultimate impact, however, is not yet clear. ~~While we are not able at this time to estimate the impact of the COVID-19 pandemic on our financial and operational results, it could be material.~~

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Winter Storm

In February 2021, certain regions of the United States experienced winter storms and extreme cold temperatures, including in the states where we own and operate multifamily properties. The impact of the storms and the extreme cold temperatures resulting in power outages and freezing water pipes negatively impacted some of our properties. Our properties are fully insured, and we expect the costs to be fully recoverable by insurance proceeds, less the plan’s deductible. During the three months ended March 31, 2021, we wrote off $15,459,862 of the carrying value of our fixed assets and recorded $11,948,789 of estimated repair expenses, with a corresponding increase in general and administrative expenses and an increase in our accounts payable and accrued liabilities. We also recorded insurance recoveries of $27,407,651 for the estimated insurance claims proceeds in the amount of total losses incurred (as described above) as an increase in rents and other receivables with a corresponding decrease to general and administrative expenses. As a result, while our net loss for the three months ended March 31, 2021, was not impacted, we experienced a decrease in the carrying value of our real estate held for investment, net and increases to rents and other receivables and accounts payable and accrued liabilities in the consolidated balance sheets for three months ended March 31, 2021.

Public Offering

On December 30, 2013, we commenced our initial public offering of up to 66,666,667 shares of common stock at an initial price of $15.00 per share and up to 7,017,544 shares of common stock pursuant to our distribution reinvestment plan at an initial price of $14.25 per share. On March 24, 2016, we terminated our initial public offering. As of March 24, 2016, we had sold 48,625,651 shares of common stock for gross offering proceeds of $724,849,631, including 1,011,561 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $14,414,752. Following the termination of our initial public offering, we continue to offer shares of our common stock pursuant to our distribution reinvestment plan. ~~On May 4, 2020, we registered up to 10,000,000 shares of common stock for sale pursuant to our DRP at an initial price of $15.23.~~ As of ~~September 30, 2020,~~March 31, 2021, we had sold ~~111,316,079~~111,967,192 shares of common stock for gross offering proceeds of $~~1,712,713,882,~~1,722,630,330, including ~~7,685,999~~8,337,112 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of ~~$114,984,724.~~$124,901,172 and 56,016,053 shares of common stock issued in connection with the Mergers (as defined below).

On ~~April 17, 2020,~~March 9, 2021, our board of directors determined an estimated value per share of our common stock of ~~$15.23~~$15.55 as of ~~March 6, 2020. Additional information on our estimated value per share can be found on our Current Report in Form 8-K filed with the SEC on April 20,~~December 31, 2020. In connection with the determination of an estimated value per share, our board of directors determined a purchase price per share for the distribution reinvestment plan of ~~$15.23,~~$15.55, effective ~~May~~April 1, ~~2020.~~2021. In the future, our board of directors may, in its sole discretion and from time to time, change the price at which we offer shares pursuant to our distribution reinvestment plan to reflect changes in our estimated value per share and other factors that our board of directors deems relevant.

Merger with Steadfast Income REIT, Inc.

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

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

Merger with Steadfast Apartment REIT III, Inc.

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

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

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Combined Company

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

Pre-Internalization Operating Partnerships Merger

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

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

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~~PART I — FINANCIAL INFORMATION (continued)~~

On August 28, 2020, SIR OP changed its name to “Steadfast Apartment REIT Operating Partnership, L.P.”, which is referred to herein as the “Current Operating ~~Partnership”.~~Partnership.” In addition, on August 28, 2020, prior to completion of the Operating Partnership Mergers, we acquired STAR III Merger Sub. On August 28, 2020, SIR Merger Sub, as the initial general partner of the Current Operating Partnership, transferred all of its general partnership interests to us, and we were admitted as a substitute general partner of the Current Operating Partnership.

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

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

subsidiary.

Internalization Transaction

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

as a self-managed company.

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

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on our Current Report in Form 8-K filed with the SEC on September 3, 2020. See also Note 3 (Internalization Transaction) to our ~~condensed~~ consolidated ~~unaudited~~ financial statements in this ~~quarterly report.~~Quarterly Report.

The Former Advisor

Prior to the Internalization Transaction, our ~~business was~~day-to-day operations were externally managed by the Former Advisor, pursuant to the Amended and Restated Advisory Agreement effective as of March 6, 2020, by and between us and the Former Advisor, as ~~may be~~ amended, the “Advisory Agreement”. On August 31, 2020, prior to the Internalization Closing, we, the Former Advisor and the Current Operating Partnership entered into a Joinder Agreement, pursuant to which the Current Operating Partnership became a party to the Advisory Agreement. On August 31, 2020, prior to the Internalization Closing, we and the Former Advisor ~~and the Company~~ entered into the First Amendment to Amended and Restated Advisory Agreement in order to remove certain restrictions in the Advisory Agreement related to business combinations and to provide that any amounts accrued to the Former Advisor commencing on September 1, 2020 ~~will be~~were paid in cash to the Former Advisor by the Current Operating Partnership. In connection with the Internalization Transaction, STAR REIT Services, LLC, our subsidiary, or SRS, assumed the rights and obligations of the Advisory Agreement from the Former Advisor. ~~The current term of the Advisory Agreement expires on March 6, 2021, and is subject to annual renewal by the Company’s board of directors.~~

The Current Operating Partnership

Substantially all of our business is conducted through the Current Operating Partnership. We are the sole general partner of the Current Operating Partnership. As a condition to the Internalization Closing, on August 31, 2020, we, as the general partner and parent of the Current Operating Partnership, SRI and VV&M entered into a Third Amended and Restated Agreement of Limited

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~~PART I — FINANCIAL INFORMATION (continued)~~

Partnership of the Operating Partnership, ~~or the Third A&R Partnership Agreement~~which is referred to herein as the “Operating Partnership ~~Agreement”,~~Agreement,” to restate the Second A&R Partnership Agreement in order to, among other things, remove references to the limited partner interests previously held by SIR Advisor and STAR III Advisor, reflect the consummation of the Contribution, and designate Class B OP Units that were issued as the OP Unit Consideration.

The Operating Partnership Agreement provides that the Current Operating Partnership will be operated in a manner that will enable us to (1) satisfy the requirements for being classified as a REIT for federal income tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Current Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code, which classification could result in the Current Operating Partnership being taxed as a corporation, rather than as a disregarded entity. In addition to the administrative and operating costs and expenses incurred by the Current Operating Partnership in acquiring and operating our investments, the Current Operating Partnership will pay all of our administrative costs and expenses, and such expenses will be treated as expenses of the Current Operating Partnership.

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

Market Outlook

The global COVID-19 pandemic and resulting shut down of large components of the U.S. economy has created significant uncertainty and enhanced investment risk across many asset classes, including real estate. We expect that the disruptions in the U.S. economy as a result of COVID-19 will have an adverse impact on our results of operations for the remainder of 2020 as we expect to experience lower occupancies and higher default rates. The degree to which our business is impacted by the COVID-19 pandemic will depend on a number of variables, including access to testing and vaccines, the reimposition of “shelter in place” orders, new strains of the virus and the continuation inof new COVID-19 cases throughout the spike of COVID-19 cases. It was recently announced that the U.S. economy contracted at an annualized rate of 4.8% and 31.4% in the first and second quarters of 2020, respectively, the steepest contraction since the last recession. Although the increase in unemployment has slowed, there is still concern of a potential “second wave” of the pandemic. There is no assurance as to when and to what extent the U.S. economy will return to normalized growth.world.

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

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PART I — FINANCIAL INFORMATION (continued)

Our Real Estate Portfolio

As of ~~September 30, 2020,~~March 31, 2021, we owned the 69 multifamily apartment communities and three parcels of land held for the development of apartment homes listed below:


									Average Monthly Occupancy(1)				Average Monthly Rent(2)												Average Monthly Occupancy(1)				Average Monthly Rent(2)
		Property Name	Location	Purchase Date	Number of Homes	Purchase Price		Mortgage Debt Outstanding(3)	Sep 30, 2020		Dec 31, 2019		Sep 30, 2020		Dec 31, 2019			Property Name	Location	Purchase Date	Number of Homes	Purchase Price		Mortgage Debt Outstanding(3)	Mar 31, 2021		Dec 31, 2020		Mar 31, 2021		Dec 31, 2020
1	1	Villages at Spring Hill Apartments	Spring Hill, TN	5/22/2014	176	$	14,200,000	(4)	97.7	%	96.0	%	$	1,078	$	1,120	1	Villages at Spring Hill Apartments	Spring Hill, TN	5/22/2014	176	$	14,200,000	(4)	96.6	%	95.5	%	$	1,093	$	1,093
2	2	Harrison Place Apartments	Indianapolis, IN	6/30/2014	307	27,864,250		(4)	95.4	%	94.1	%	958		992		2	Harrison Place Apartments	Indianapolis, IN	6/30/2014	307	27,864,250		(4)	96.7	%	96.1	%	988		967
3	3	The Residences on McGinnis Ferry	Suwanee, GA	10/16/2014	696	98,500,000		(4)	96.7	%	96.0	%	1,327		1,344		3	The Residences on McGinnis Ferry	Suwanee, GA	10/16/2014	696	98,500,000		(4)	95.5	%	95.1	%	1,337		1,331
4																	4	The 1800 at Barrett Lakes	Kennesaw, GA	11/20/2014	500	49,000,000		40,664,224	95.6	%	95.4	%	1,113		1,089
5																	5	The Oasis	Colorado Springs, CO	12/19/2014	252	40,000,000		39,535,415	95.2	%	94.4	%	1,426		1,411
6																	6	Columns on Wetherington	Florence, KY	2/26/2015	192	25,000,000		(4)	94.8	%	95.3	%	1,198		1,134
7																	7	Preston Hills at Mill Creek	Buford, GA	3/10/2015	464	51,000,000		(4)	96.8	%	96.6	%	1,196		1,193
8																	8	Eagle Lake Landing Apartments	Speedway, IN	3/27/2015	277	19,200,000		(4)	96.0	%	91.3	%	873		826
9																	9	Reveal on Cumberland	Fishers, IN	3/30/2015	220	29,500,000		20,871,059	97.7	%	96.8	%	1,134		1,125
10																	10	Heritage Place Apartments	Franklin, TN	4/27/2015	105	9,650,000		8,601,462	100.0	%	96.2	%	1,129		1,132
11																	11	Rosemont at East Cobb	Marietta, GA	5/21/2015	180	16,450,000		13,272,161	96.7	%	95.6	%	1,080		1,071
12																	12	Ridge Crossings Apartments	Hoover, AL	5/28/2015	720	72,000,000		57,729,139	93.1	%	95.1	%	1,029		1,008
13																	13	Bella Terra at City Center	Aurora, CO	6/11/2015	304	37,600,000		(4)	94.4	%	95.1	%	1,172		1,153
14																	14	Hearthstone at City Center	Aurora, CO	6/25/2015	360	53,400,000		(4)	93.3	%	93.3	%	1,237		1,149
15																	15	Arbors at Brookfield	Mauldin, SC	6/30/2015	702	66,800,000		(4)	93.3	%	94.7	%	914		901
16																	16	Carrington Park	Kansas City, MO	8/19/2015	298	39,480,000		(4)	95.3	%	95.0	%	1,068		1,063
17																	17	Delano at North Richland Hills	North Richland Hills, TX	8/26/2015	263	38,500,000		31,866,344	97.7	%	97.0	%	1,450		1,492
18																	18	Meadows at North Richland Hills	North Richland Hills, TX	8/26/2015	252	32,600,000		26,626,703	95.2	%	97.2	%	1,443		1,417
19																	19	Kensington by the Vineyard	Euless, TX	8/26/2015	259	46,200,000		33,538,682	95.4	%	96.5	%	1,469		1,470
20																	20	Monticello by the Vineyard	Euless, TX	9/23/2015	354	52,200,000		41,135,827	94.9	%	95.2	%	1,345		1,315

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Average Monthly Occupancy(1)
Average Monthly Rent(2)
Property Name Location Purchase Date Number of Homes Purchase Price
Mortgage Debt Outstanding(3)
Sep 30, 2020 Dec 31, 2019 Sep 30, 2020 Dec 31, 2019
4 The 1800 at Barrett
Lakes Kennesaw,
GA 11/20/2014 500 $ 49,000,000 $ 40,643,954 93.2 % 92.4 % $ 1,063 $ 1,076
5 The Oasis Colorado
Springs, CO 12/19/2014 252 40,000,000 39,518,663 96.4 % 94.8 % 1,412 1,424
6 Columns on
Wetherington Florence, KY 2/26/2015 192 25,000,000 (4) 90.6 % 91.7 % 1,120 1,220
7 Preston Hills at
Mill Creek Buford, GA 3/10/2015 464 51,000,000 (4) 97.2 % 91.6 % 1,197 1,192
8 Eagle Lake
Landing
Apartments Speedway, IN 3/27/2015 277 19,200,000 (4) 92.1 % 96.8 % 795 905
9 Reveal on
Cumberland Fishers, IN 3/30/2015 220 29,500,000 20,853,826 96.8 % 95.0 % 1,125 1,144
10 Heritage Place
Apartments Franklin, TN 4/27/2015 105 9,650,000 8,592,550 96.2 % 97.1 % 1,143 1,145
11 Rosemont at East
Cobb Marietta, GA 5/21/2015 180 16,450,000 13,262,431 96.7 % 96.7 % 1,088 1,100
12 Ridge Crossings
Apartments Hoover, AL 5/28/2015 720 72,000,000 57,698,549 95.8 % 92.8 % 1,019 1,012
13 Bella Terra at City
Center Aurora, CO 6/11/2015 304 37,600,000 (4) 95.7 % 96.1 % 1,174 1,221
14 Hearthstone at City
Center Aurora, CO 6/25/2015 360 53,400,000 (4) 96.4 % 95.0 % 1,189 1,257
15 Arbors at
Brookfield Mauldin, SC 6/30/2015 702 66,800,000 (4) 94.4 % 92.7 % 896 923
16 Carrington Park Kansas City, MO 8/19/2015 298 39,480,000 (4) 95.6 % 95.3 % 1,046 1,011
17 Delano at North
Richland Hills North Richland
Hills, TX 8/26/2015 263 38,500,000 31,845,806 98.1 % 95.8 % 1,472 1,486
18 Meadows at North
Richland Hills North Richland
Hills, TX 8/26/2015 252 32,600,000 26,608,361 95.2 % 94.4 % 1,407 1,392
19 Kensington by the
Vineyard Euless, TX 8/26/2015 259 46,200,000 33,886,748 93.8 % 95.8 % 1,500 1,507
20 Monticello by the
Vineyard Euless, TX 9/23/2015 354 52,200,000 41,272,454 95.5 % 96.3 % 1,332 1,344
21 The Shores Oklahoma City,
OK 9/29/2015 300 36,250,000 23,426,174 95.3 % 94.7 % 1,019 1,016
22 Lakeside at Coppell Coppell, TX 10/7/2015 315 60,500,000 47,916,862 96.5 % 96.8 % 1,714 1,716
23 Meadows at River
Run Bolingbrook, IL 10/30/2015 374 58,500,000 41,946,026 94.9 % 90.1 % 1,422 1,364
24 PeakView at
T-Bone Ranch Greeley, CO 12/11/2015 224 40,300,000 (4) 94.6 % 93.3 % 1,298 1,373
25 Park Valley
Apartments Smyrna, GA 12/11/2015 496 51,400,000 48,623,874 95.0 % 94.4 % 1,063 1,068
26 PeakView by
Horseshoe Lake Loveland, CO 12/18/2015 222 44,200,000 38,041,668 96.8 % 93.7 % 1,399 1,396
27 Stoneridge Farms Smyrna, TN 12/30/2015 336 47,750,000 45,366,524 96.1 % 95.2 % 1,254 1,196
28 Fielder’s Creek Englewood, CO 3/23/2016 217 32,400,000 (4) 94.0 % 96.3 % 1,211 1,219
29 Landings of
Brentwood Brentwood, TN 5/18/2016 724 110,000,000 — 96.5 % 96.8 % 1,243 1,262
30 1250 West
Apartments Marietta, GA 8/12/2016 468 55,772,500 (4) 96.4 % 93.6 % 1,055 1,061
31 Sixteen50 @ Lake
Ray Hubbard Rockwall, TX 9/29/2016 334 66,050,000 (4) 95.8 % 96.4 % 1,514 1,492
32
Garrison Station
(Victory)(5)
Murfreesboro,
TN 5/30/2019 — 18,056,928 2,205,999 — % — % — —


									Average Monthly Occupancy(1)				Average Monthly Rent(2)
	Property Name	Location	Purchase Date	Number of Homes	Purchase Price		Mortgage Debt Outstanding(3)		Mar 31, 2021		Dec 31, 2020		Mar 31, 2021		Dec 31, 2020
21	The Shores	Oklahoma City, OK	9/29/2015	300	$	36,250,000	$	23,270,706	95.3	%	96.3	%	$	1,029	$	1,031
22	Lakeside at Coppell	Coppell, TX	10/7/2015	315	60,500,000		47,938,751		95.2	%	94.9	%	1,624		1,708
23	Meadows at River Run	Bolingbrook, IL	10/30/2015	374	58,500,000		41,598,867		93.0	%	95.2	%	1,421		1,421
24	PeakView at T-Bone Ranch	Greeley, CO	12/11/2015	224	40,300,000		(4)		95.1	%	94.2	%	1,340		1,340
25	Park Valley Apartments	Smyrna, GA	12/11/2015	496	51,400,000		48,655,260		95.0	%	96.4	%	1,045		1,051
26	PeakView by Horseshoe Lake	Loveland, CO	12/18/2015	222	44,200,000		38,066,676		95.0	%	95.5	%	1,418		1,396
27	Stoneridge Farms	Smyrna, TN	12/30/2015	336	47,750,000		45,389,412		94.9	%	94.6	%	1,257		1,239
28	Fielder’s Creek	Englewood, CO	3/23/2016	217	32,400,000		(4)		96.8	%	94.9	%	1,214		1,180
29	Landings of Brentwood	Brentwood, TN	5/18/2016	724	110,000,000		—		96.0	%	95.4	%	1,252		1,252
30	1250 West Apartments	Marietta, GA	8/12/2016	468	55,772,500		(4)		94.2	%	96.4	%	1,107		1,051
31	Sixteen50 @ Lake Ray Hubbard	Rockwall, TX	9/29/2016	334	66,050,000		(4)		95.2	%	96.4	%	1,480		1,485
32	Garrison Station(5)	Murfreesboro, TN	5/30/2019	24	26,370,157		10,849,189		8.3	%	—	%	—		—
33	Eleven10 @ Farmers Market	Dallas, TX	1/28/2020	313	62,063,929		35,355,991		93.6	%	94.2	%	1,348		1,379
34	Patina Flats at the Foundry	Loveland, CO	2/11/2020	155	45,123,782		(4)		94.8	%	93.5	%	1,286		1,275
35	Clarion Park Apartments(6)	Olathe, KS	3/6/2020	220	21,121,795		12,659,963		95.0	%	93.6	%	820		843
36	Spring Creek Apartments(6)	Edmond, OK	3/6/2020	252	28,186,894		17,056,696		94.8	%	96.0	%	899		895
37	Montclair Parc Apartment Homes(6)	Oklahoma City, OK	3/6/2020	360	40,352,125		(7)		94.7	%	96.1	%	904		905
38	Hilliard Park Apartments(6)	Columbus, OH	3/6/2020	201	28,599,225		11,762,680		98.0	%	97.0	%	1,170		1,149
39	Sycamore Terrace Apartments(6)	Terre Haute, IN	3/6/2020	250	34,419,259		23,014,253		96.8	%	94.8	%	1,186		1,155
40	Hilliard Summit Apartments(6)	Columbus, OH	3/6/2020	208	31,087,442		14,223,166		96.2	%	95.7	%	1,260		1,260
41	Forty 57 Apartments(6)	Lexington, KY	3/6/2020	436	63,030,831		33,715,809		95.0	%	95.2	%	966		964
42	Riverford Crossing Apartments(6)	Frankfort, KY	3/6/2020	300	38,139,145		19,231,866		96.3	%	95.7	%	1,031		1,002
43	Hilliard Grand Apartments(6)	Dublin, OH	3/6/2020	314	50,549,232		23,851,716		95.2	%	94.3	%	1,291		1,280

6461

Table of Contents

PART I — FINANCIAL INFORMATION (continued)


										Average Monthly Occupancy(1)				Average Monthly Rent(2)													Average Monthly Occupancy(1)				Average Monthly Rent(2)
		Property Name	Location	Purchase Date	Number of Homes	Purchase Price		Mortgage Debt Outstanding(3)		Sep 30, 2020		Dec 31, 2019		Sep 30, 2020		Dec 31, 2019			Property Name	Location	Purchase Date	Number of Homes	Purchase Price		Mortgage Debt Outstanding(3)		Mar 31, 2021		Dec 31, 2020		Mar 31, 2021		Dec 31, 2020
33		Eleven10 @ Farmers Market	Dallas, TX	1/28/2020	313	$	62,063,929	$	35,710,580	94.6	%	—	%	$	1,421	$	—
34		Patina Flats at the Foundry	Loveland, CO	2/11/2020	155	45,123,782		(4)		94.8	%	—	%	1,281		—
35		Arista at Broomfield(6)	Broomfield, CO	3/13/2020	—	8,405,742		—		—	%	—	%	—		—
36		VV&M Apartments	Dallas, TX	4/21/2020	310	59,969,074		45,404,651		94.8	%	—	%	1,407		—
37		Flatirons Apartments(7)	Broomfield, CO	6/19/2020	—	8,720,602		—		—	%	—	%	—		—
38		Clarion Park Apartments(8)	Olathe, KS	3/6/2020	220	21,121,795		12,705,549		94.5	%	—	%	862		—
39		Spring Creek Apartments(8)	Edmond, OK	3/6/2020	252	28,186,894		17,220,609		97.2	%	—	%	880		—
40		Montclair Parc Apartment Homes(8)	Oklahoma City, OK	3/6/2020	360	40,352,125		(9)		96.7	%	—	%	896		—
41		Hilliard Park Apartments(8)	Columbus, OH	3/6/2020	201	28,599,225		11,934,452		97.5	%	—	%	1,111		—
42		Sycamore Terrace Apartments(8)	Terre Haute, IN	3/6/2020	250	34,419,259		23,010,804		97.2	%	—	%	1,145		—
43		Hilliard Summit Apartments(8)	Columbus, OH	3/6/2020	208	31,087,442		14,428,604		99.0	%	—	%	1,247		—
44	44	Forty 57 Apartments(8)	Lexington, KY	3/6/2020	436	63,030,831		34,119,045		97.2	%	—	%	950		—		44	Deep Deuce at Bricktown(6)	Oklahoma City, OK	3/6/2020	294	$	52,519,973	$	33,381,171	95.2	%	95.2	%	$	1,231	$	1,242
45	45	Riverford Crossing Apartments(8)	Frankfort, KY	3/6/2020	300	38,139,145		19,469,520		98.0	%	—	%	1,008		—		45	Retreat at Quail North(6)	Oklahoma City, OK	3/6/2020	240	31,945,162		13,515,176		97.1	%	97.1	%	998		986
46	46	Montecito Apartments(8)	Austin, TX	3/6/2020	268	36,461,172		19,334,554		94.4	%	—	%	1,027		—		46	Tapestry Park Apartments(6)	Birmingham, AL	3/6/2020	354	68,840,769		48,698,085		95.5	%	97.2	%	1,388		1,380
47	47	Hilliard Grand Apartments(8)	Dublin, OH	3/6/2020	314	50,549,232		23,965,234		94.3	%	—	%	1,233		—		47	BriceGrove Park Apartments(6)	Canal Winchester, OH	3/6/2020	240	27,854,616		(7)		95.4	%	94.6	%	956		936
48	48	Deep Deuce at Bricktown(8)	Oklahoma City, OK	3/6/2020	294	52,519,973		33,462,011		94.6	%	—	%	1,248		—		48	Retreat at Hamburg Place(6)	Lexington, KY	3/6/2020	150	21,341,085		(7)		94.7	%	97.3	%	1,014		1,026
49	49	Retreat at Quail North(8)	Oklahoma City, OK	3/6/2020	240	31,945,162		13,578,192		94.6	%	—	%	1,005		—		49	Villas at Huffmeister(6)	Houston, TX	3/6/2020	294	41,720,117		27,285,952		96.6	%	97.6	%	1,177		1,190
50	50	Tapestry Park Apartments(8)	Birmingham, AL	3/6/2020	354	68,840,769		48,694,633		97.5	%	—	%	1,379		—		50	Villas of Kingwood(6)	Kingwood, TX	3/6/2020	330	54,428,708		34,711,888		94.5	%	95.5	%	1,195		1,207
51	51	BriceGrove Park Apartments(8)	Canal Winchester, OH	3/6/2020	240	27,854,616		(9)		97.5	%	—	%	914		—		51	Waterford Place at Riata Ranch(6)	Cypress, TX	3/6/2020	228	28,278,262		(7)		97.8	%	95.2	%	1,129		1,122
52	52	Retreat at Hamburg Place(8)	Lexington, KY	3/6/2020	150	21,341,085		(9)		97.3	%	—	%	1,014		—		52	Carrington Place(6)	Houston, TX	3/6/2020	324	42,258,525		(7)		93.5	%	95.7	%	1,027		1,059
53	53	Villas at Huffmeister(8)	Houston, TX	3/6/2020	294	41,720,117		27,276,387		96.3	%	—	%	1,206		—		53	Carrington at Champion Forest(6)	Houston, TX	3/6/2020	284	37,280,704		(7)		95.1	%	94.7	%	1,093		1,103
54	54	Villas of Kingwood(8)	Kingwood, TX	3/6/2020	330	54,428,708		34,701,641		94.5	%	—	%	1,207		—		54	Carrington Park at Huffmeister(6)	Cypress, TX	3/6/2020	232	33,032,451		20,861,057		96.1	%	97.0	%	1,191		1,179
55	55	Waterford Place at Riata Ranch(8)	Cypress, TX	3/6/2020	228	28,278,262		(9)		96.1	%	—	%	1,137		—		55	Heritage Grand at Sienna Plantation(6)	Missouri City, TX	3/6/2020	240	32,796,345		14,133,098		95.0	%	95.4	%	1,073		1,104
56	56	Carrington Place(8)	Houston, TX	3/6/2020	324	42,258,525		(9)		95.1	%	—	%	1,078		—		56	Mallard Crossing Apartments(6)	Loveland, OH	3/6/2020	350	52,002,345		(7)		94.9	%	94.9	%	1,152		1,150
57	57	Carrington at Champion Forest(8)	Houston, TX	3/6/2020	284	37,280,704		(9)		95.4	%	—	%	1,134		—		57	Reserve at Creekside(6)	Chattanooga, TN	3/6/2020	192	24,522,910		15,043,836		97.4	%	95.8	%	1,134		1,096
58	58	Carrington Park at Huffmeister(8)	Cypress, TX	3/6/2020	232	33,032,451		20,944,748		95.7	%	—	%	1,170		—		58	Oak Crossing Apartments(6)	Fort Wayne, IN	3/6/2020	222	32,391,032		21,607,510		97.3	%	94.6	%	1,061		1,026
59	59	Heritage Grand at Sienna Plantation(8)	Missouri City, TX	3/6/2020	240	32,796,345		14,200,462		95.8	%	—	%	1,135		—		59	Double Creek Flats(6)	Plainfield, IN	3/6/2020	240	35,490,439		23,620,915		95.8	%	95.8	%	1,078		1,075
60																		60	Jefferson at Perimeter Apartments(6)	Dunwoody, GA	3/6/2020	504	113,483,898		72,995,856		95.6	%	96.2	%	1,344		1,334
61																		61	Bristol Village Apartments(6)	Aurora, CO	3/6/2020	240	62,019,009		35,002,200		97.5	%	96.7	%	1,404		1,400
62																		62	Canyon Resort at Great Hills Apartments(6)	Austin, TX	3/6/2020	256	48,319,858		31,641,477		93.8	%	95.3	%	1,371		1,371
63																		63	Reflections on Sweetwater Apartments(6)	Lawrenceville, GA	3/6/2020	280	47,727,470		30,855,744		97.1	%	97.5	%	1,152		1,148
64																		64	The Pointe at Vista Ridge(6)	Lewisville, TX	3/6/2020	300	51,625,394		31,047,597		96.0	%	96.0	%	1,286		1,282
65																		65	Belmar Villas(6)	Lakewood, CO	3/6/2020	318	79,351,923		47,054,300		95.0	%	94.7	%	1,356		1,355
66																		66	Sugar Mill Apartments(6)	Lawrenceville, GA	3/6/2020	244	42,784,645		24,952,002		97.5	%	96.7	%	1,174		1,154

6562

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Average Monthly Occupancy(1)
Average Monthly Rent(2)
Property Name Location Purchase Date Number of Homes Purchase Price
Mortgage Debt Outstanding(3)
Sep 30, 2020 Dec 31, 2019 Sep 30, 2020 Dec 31, 2019
60
Mallard Crossing
   Apartments(8)
Loveland,
OH 3/6/2020 350 $ 52,002,345 (9) 96.9 % — % $ 1,137 $ —
61
Reserve at
   Creekside(8)
Chattanooga,
TN 3/6/2020 192 24,522,910 15,046,309 98.4 % — % 1,089 —
62
Oak Crossing
   Apartments(8)
Fort Wayne,
IN 3/6/2020 222 32,391,032 21,684,045 97.7 % — % 1,039 —
63
Double Creek
   Flats(8)
Plainfield, IN 3/6/2020 240 35,490,439 23,719,044 96.2 % — % 1,073 —
64
Jefferson at
   Perimeter
    Apartments(8)
Dunwoody,
GA 3/6/2020 504 113,483,898 72,947,375 96.2 % — % 1,351 —
65
Bristol Village
   Apartments(8)
Aurora, CO 3/6/2020 240 62,019,009 35,044,603 96.3 % — % 1,399 —
66
Canyon Resort at
   Great Hills
    Apartments(8)
Austin, TX 3/6/2020 256 48,319,858 31,635,174 96.9 % — % 1,385 —
67
Reflections on
   Sweetwater
    Apartments(8)
Lawrenceville,
GA 3/6/2020 280 47,727,470 30,893,053 97.1 % — % 1,139 —
68
The Pointe at Vista
   Ridge(8)
Lewisville,
TX 3/6/2020 300 51,625,394 31,096,312 96.3 % — % 1,300 —
69
Belmar Villas(8)
Lakewood,
CO 3/6/2020 318 79,351,923 47,532,602 95.0 % — % 1,363 —
70
Sugar Mill
   Apartments(8)
Lawrenceville,
GA 3/6/2020 244 42,784,645 25,057,625 97.1 % — % 1,142 —
71
Avery Point
   Apartments(8)
Indianapolis,
IN 3/6/2020 512 55,706,852 31,560,121 95.1 % — % 842 —
72
Cottage Trails at
   Culpepper
    Landing(8)
Chesapeake,
VA 3/6/2020 183 34,657,950 23,304,467 98.9 % — % 1,383 —
21,529 $ 3,148,934,369 $ 1,401,392,875 95.9 % 94.6 % $ 1,172 $ 1,200


									Average Monthly Occupancy(1)				Average Monthly Rent(2)
	Property Name	Location	Purchase Date	Number of Homes	Purchase Price		Mortgage Debt Outstanding(3)		Mar 31, 2021		Dec 31, 2020		Mar 31, 2021		Dec 31, 2020
67	Avery Point Apartments(6)	Indianapolis, IN	3/6/2020	512	$	55,706,852	$	31,423,110	95.9	%	95.3	%	$	853	$	841
68	Cottage Trails at Culpepper Landing(6)	Chesapeake, VA	3/6/2020	183	34,657,950		23,186,180		96.7	%	97.8	%	1,432		1,410
69	Arista at Broomfield(8)	Broomfield, CO	3/13/2020	—	8,731,725		—		—	%	—	%	—		—
70	VV&M Apartments	Dallas, TX	4/21/2020	310	59,969,074		45,354,179		94.5	%	92.6	%	1,345		1,363
71	Flatirons Apartments(9)	Broomfield, CO	6/19/2020	—	8,903,070		—		—	%	—	%	—		—
72	Los Robles	San Antonio, TX	11/19/2020	306	51,620,836		—		93.8	%	90.5	%	1,177		1,261

				21,591	$	3,172,915,713	$	1,386,853,350	95.3	%	95.4	%	$	1,180	$	1,173

~~________________~~_____________________

(1)As of ~~September 30, 2020,~~March 31, 2021, our portfolio was approximately ~~97.4%~~96.9% leased, calculated using the number of occupied and contractually leased apartment homes divided by total apartment homes. As of March 31, 2021, no single residence accounted for greater than 10% of our 2021 gross annualized revenues.

(2)Average monthly rent is based upon the effective rental income for the month of ~~September 2020~~March 2021 after considering the effect of vacancies, concessions and write-offs.

(3)Mortgage debt outstanding is net of deferred financing costs, net and premiums and discounts, net associated with the loans for each individual property listed above but excludes the principal balance of $750,477,000 and associated deferred financing costs of ~~$5,828,784~~$5,404,112 related to the refinancings pursuant to ~~the Master Credit Facility Agreement, or MCFA,~~our credit facilities and ~~the PNC Master Credit Facility Agreement, or PNC MCFA.~~revolver, each as described herein.

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

(5)We acquired the Garrison Station property on May 30, 2019, which included unimproved land, currently zoned as a planned unit development, or PUD. The current zoning permits the development of the property into a multifamily community ~~including~~with 176 ~~units~~apartment homes of 1, 2 and 3-bedrooms with a typical mix for this market. On October 16, 2019, ~~the Company~~we obtained a loan from PNC Bank, National Association, or PNC Bank, in an amount up to a maximum principal balance of $19,800,000 to finance a portion of the development and construction. As of March 31, 2021, one building comprising of 24 apartment homes was placed into service and was 31.8% leased, and is included within total real estate held for investment, net in the accompanying consolidated balance sheets.

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

~~(7)~~We acquired the Flatirons property on June 19, 2020, which included unimproved land, currently zoned as a PUD. The current zoning permits the development of the property into a multifamily community including 296 units of studio, 1 and 2-bedrooms with a typical mix for this market.

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~(8)~~We acquired 36 real estate properties in the Mergers on March 6, 2020, for an aggregate purchase price of $1,575,891,924, which represents the fair value of the acquired real estate assets including capitalized transaction costs.

~~(9)~~(7)Properties secured under the terms of the Master Credit Facility Agreement with PNC Bank, or the PNC MCFA.

~~Property Disposition~~

~~Terrace Cove Apartment Homes~~

~~On August 28, 2014, we, through an indirect wholly-owned subsidiary,~~(8)We acquired ~~Terrace Cove Apartment Homes,~~the Arista at Broomfield property on March 13, 2020, which included unimproved land, currently zoned as a ~~multifamily property located in Austin, Texas, containing 304 apartment homes.~~PUD. The purchase price of Terrace Cove Apartment Homes was $23,500,000, exclusive of closing costs. On February 5, 2020, we sold Terrace Cove Apartment Homes for $33,875,000, resulting in a gain of $11,384,599, which includes reductions tocurrent zoning permits the ~~net book value~~development of the property ~~due to historical depreciation and amortization expense. The purchaser of Terrace Cove Apartment Homes is not affiliated with us or our Former Advisor.~~

~~Ansley at Princeton Lakes~~

~~On March 6, 2020, in connection with the STAR III Merger, we acquired Ansley at Princeton Lakes,~~into a multifamily community with 325 apartment homes of 1, 2 and 3-bedrooms with a typical mix for this market.

(9)We acquired the Flatirons property ~~located in Atlanta, Georgia, containing 306 apartment homes.~~on June 19, 2020, which included unimproved land, currently zoned as a PUD. The purchase price of Ansley at Princeton Lakes was $51,564,357, including closing costs. On September 30, 2020, we sold Ansley at Princeton Lakes for $49,500,000, resulting in a gain of $1,392,434, which includes reductions tocurrent zoning permits the ~~net book value~~development of the property ~~due to impairment~~into a multifamily community with 296 units of studio, 1 and ~~historical depreciation and amortization expense. The purchaser of Ansley at Princeton Lakes is not affiliated~~2-bedrooms with ~~us or our Former Advisor.~~a typical mix for this market.

Critical Accounting Policies

The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. ~~A discussion of the~~Our critical accounting policies ~~that management considers critical~~are described in ~~that they involve significant management judgments, assumptions~~more detail in the section entitled “Management’s Discussion and ~~estimates is included~~Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K, ~~for the year ended December 31, 2019,~~ filed with the SEC on March 12, ~~2020.~~2021. There have been no significant changes toin our critical accounting policies ~~during~~from those reported in our Annual Report, or the ~~period covered by this report,~~Annual Report, except ~~as discussed in Note 2 (Summary~~for the accounting policy regarding casualty loss, which is described below. With respect to these critical accounting policies, we believe that the application of ~~Significant Accounting Policies)~~judgments and assessments is consistently applied and produces financial information that fairly depicts the results of operations for all periods presented.

Casualty loss

We carry liability insurance to mitigate our ~~condensed consolidated unaudited financial statements in this quarterly report.~~

~~Real Estate Purchase Price Allocation~~

~~Upon~~exposure to certain losses, including those relating to property damage and business interruption. We record the ~~acquisition~~estimated amount of ~~real estate properties, we evaluate whether the acquisition is a business combination or~~expected insurance proceeds for property damage and other losses incurred as an asset ~~acquisition under ASC 805,~~ ~~Business Combinations,~~ ~~or ASC 805. For both business combinations~~(typically a receivable from the insurer) and ~~asset acquisitions we allocate~~income up to the ~~purchase price of properties to acquired tangible assets, consisting of land, buildings and improvements, and acquired intangible assets and liabilities, consisting~~amount of the ~~value~~losses incurred when receipt of ~~above-market and below-market leases and the value~~insurance proceeds is deemed probable. Any amount of in-place leases. For asset acquisitions, we capitalize transaction costs and allocate the purchase price using a relative fair value method allocating all accumulated costs. For business combinations, we expense transaction costs incurred and allocate the purchase price based on the estimated fair value of each separately identifiable asset and liability. Acquisition fees and costs associated with transactions determined to be asset acquisitions are capitalizedinsurance recovery in ~~total real estate, net in the accompanying consolidated balance sheets.~~

~~The fair values~~excess of the tangible assets of an acquired property (which includes land, buildings and improvements) are determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land and buildings and improvements based on management’s determinationamount of the ~~relative fair value of these assets. Management determines~~losses incurred is considered a gain contingency and is recorded in other income when the ~~as-if-vacant fair value of a~~proceeds are received. During the three months ended March 31, 2021, we incurred property using methods similar to those used by independent appraisers. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases, including leasing commissionsdamage and other ~~related costs. In estimating carrying costs, management includes real estate taxes,~~losses of $27,408,651, which was recorded as general and administrative expenses, with a corresponding insurance ~~and other operating expenses during the expected lease-up periods based on current market conditions.~~

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

The fair values of above-market and below-market in-place leases are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuantrecoveries income up to the ~~in-place leases~~amount of losses incurred (as described above) within general and (ii) an estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease including any fixed rate bargain renewal periods, with respect to a below-market lease. The above-market and below-market lease values are capitalized as intangible lease assets or liabilities. Above-market lease values are amortized as an adjustment of rental revenue over the remaining terms of the respective leases. Below-market leases are amortized as an adjustment of rental revenue over the remaining terms of the respective leases, including any fixed rate bargain renewal periods. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of above-market and below-market in-place lease values related to that lease would be recorded as an adjustment to rental revenue.

~~Impairment of Real Estate Assets~~

~~We account for our real estate assets~~administrative expenses in ~~accordance with ASC 360,~~ ~~Property, Plant and Equipment,~~ or ASC 360. ASC 360 requires us to continually monitor events and changes in circumstances that could indicate that the carrying amounts of our real estate and related intangible assets may not be recoverable. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, we assess the recoverability of the assets by estimating whether we will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition. Based on this analysis, if we do not believe that we will be able to recover the carrying value of the real estate and related intangible assets and liabilities, we record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities. If any assumptions, projections or estimates regarding an asset changes in the future, we may have to record an impairment to reduce the net book value of such individual asset. We continue to monitor events in connection with the recent outbreak of the COVID-19 pandemic and evaluate any potential indicators that could suggest that the carrying value of our real estate investments and related intangible assets and liabilities may not be recoverable.

~~Noncontrolling interests~~

Noncontrolling interests represent the portion of equity that we do not own in an entity that is consolidated. Our noncontrolling interests are comprised of Class A-2 operating partnership units, or Class A-2 OP Units, in STAR III

~~OP, our then- indirect subsidiary, which has now merged with and into the Current Operating Partnership, pursuant~~

~~to the OP Merger described in Note 1 (Organization and Business), and Class B operating partnership units, or Class B OP~~

~~Units, in SIR OP, now known as the Current Operating Partnership. We account for noncontrolling interests in~~

~~accordance with ASC 810,~~ ~~Consolidation, or ASC 810. In accordance with ASC 810, we report noncontrolling~~

~~interests in subsidiaries within equity in the consolidated financial statements, but separate from stockholders’ equity. In~~

~~accordance with ASC 480,~~ ~~Distinguishing Liabilities from Equity, or ASC 480, noncontrolling interests that are determined to~~

~~be redeemable are carried at their fair value or redemption value as of the balance sheet date and reported as liabilities or~~

~~temporary equity depending on their terms. A noncontrolling interest that fails to qualify as permanent equity will be~~

~~reclassified as a liability or temporary equity. As of September 30, 2020, our noncontrolling interests qualified as~~

~~permanent equity. There were no noncontrolling interests in 2019. For more information on the Company’s noncontrolling~~

~~interest, see Note 9 (Noncontrolling Interest) to our condensed consolidated unaudited financial statements in this quarterly report for details for details.~~

~~Investments in Unconsolidated Joint Ventures~~

We account for investments in unconsolidated joint venture entities in which we may exercise significant influence over, but do not control, using the equity method of accounting. Under the equity method, the investment is initially recorded at cost including an outside basis difference, which represents the difference between the purchase price we paid for our investment in the joint venture and the book value of our equity in the joint venture, and subsequently adjusts it to reflect additional contributions or distributions, our proportionate share of equity in the joint venture’s earnings (loss) and amortization of the

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outside basis difference. We recognize our proportionate share of the ongoing income or loss of the unconsolidated joint venture as equity in earnings (loss) of unconsolidated joint venture on the consolidated statements of operations. On a quarterly basis, we evaluate our investment in an unconsolidated joint venture for other-than-temporary impairments. We recorded an other-than-temporary impairment, or OTTI, on our investment in unconsolidated joint venture during the nine months ended September 30, 2020. No OTTI was recorded in the three and nine months ended September 30, 2019. See Note 5 (Investment in Unconsolidated Joint Venture) to our condensed consolidated unaudited financial statements in this quarterly report for details. We have elected the cumulative earnings approach to classify cash receipts from the unconsolidated joint venture on the accompanying consolidated statements of ~~cash flows.~~

~~Revenue recognition - operating leases~~

~~The majority of our revenue is derived from rental revenue, which is accounted for in accordance with ASC 842,~~operations. ~~Leases,~~ orASC 842. We lease apartment homes under operating leases with terms generally of one year or less. Generally, credit investigations are performed for prospective residents and security deposits are obtained. In accordance with ASC 842, we recognize minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectability is probable and records amounts expected to be received in later years as deferred rent receivable. For lease arrangements when it is not probable that we will collect all or substantially all of the remaining lease payments under the term of the lease, rental revenue is limited to the lesser of the rental revenue that would be recognized on a straight-line basis (as applicable) or the lease payments that have been collected from the lessee. Differences between rental revenue recognized and amounts contractually due under the lease agreements are credited or charged to straight-line rent receivable or straight-line rent liability, as applicable. Tenant reimbursements for common area maintenance and other recoverable expenses, are recognized when the services are provided and the performance obligations are satisfied. Tenant reimbursements for common area maintenance are accounted for as variable lease payments and are recorded as rental income on our statement of operations

~~Rents and Other receivables~~

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

~~Residents’ payment plans due to COVID-19~~

~~In April, 2020, the Financial Accounting Standards Board, or FASB, issued a FASB Staff Q&A related to ASC 842:~~ ~~Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic, or~~ the ASC 842 Q&A, to respond to some frequently asked questions about accounting for lease concessions related to the effects of the COVID-19 pandemic. Under ASC 842, subsequent changes to lease payments that are not stipulated in the original lease contract are generally accounted for as lease modifications, which may affect the economics of the lease for the remainder of the lease term. Some contracts may contain explicit or implicit enforceable rights and obligations that require lease concessions if certain circumstances arise that are beyond the control of the parties to the contract. If a lease contract provides enforceable rights and obligations for concessions in the contract and no changes are made to that contract, the concessions are not accounted for under the lease modification guidance in ASC 842. If concessions granted by lessors are beyond the enforceable rights and obligations in the contract, entities would generally account for those concessions in accordance with the lease modification guidance in ASC 842.

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

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original contract, the FASB allows entities to account for the concessions as if no changes to the lease contract were made. Under this method, a lessor would increase its lease receivable and continue to recognize income.

We elected not to evaluate whether the COVID-19 Payment Plans and the Debt Forgiveness Program are lease modifications and therefore our policy is to account for the lease contracts with COVID-19 Payment Plans and Debt Forgiveness Program as if no lease modifications occurred. Under this accounting method, a lessor with an operating lease may account for the concession by continuing to recognize a lease receivable until the rental payment is received from the lessee at the revised payment date. If it is determined that the lease receivable is not collectable, we would treat that lease contract on a cash basis as defined in ASC 842.

~~Lessee Accounting~~

~~In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842)”, or ASU 2016-02,~~

~~which requires leases with original lease terms of more than 12 months to be recorded on the balance sheet. For leases with~~

~~terms greater than 12 months, a right-of-use, or ROU, lease asset and a lease liability are recognized on the balance sheet at~~

~~commencement date based on the present value of lease payments over the lease term.~~

~~Lease renewal or termination options are included in the lease asset and lease liability only if it is reasonably certain that the~~

~~option to extend would be exercised or the option to terminate would not be exercised. As the implicit rate in most leases are~~

~~not readily determinable, our incremental borrowing rate for each lease at commencement date is used to determine~~

~~the present value of lease payments. Consideration is given to our recent debt financing transactions, as well as~~

~~publicly available data for instruments with similar characteristics, adjusted for the respective lease term, when estimating~~

~~incremental borrowing rates. Lease expense is recognized over the lease term based on an effective interest method for finance~~

~~leases and on a straight-line basis for operating leases. On January 1, 2019, we adopted ASU 2016-02 and its related~~

~~amendments, or collectively, ASC 842, using the modified retrospective method. We elected the package of practical~~

~~expedients permitted under the transition guidance, which allowed to carry forward our original assessment of (1) whether~~

~~contracts are or contain leases, (2) lease classification and (3) initial direct costs. We also elected the practical~~

~~expedient that allows lessees the option to account for lease and non-lease components together as a single component for all~~

~~classes of underlying assets. See Note 16 (Leases) to our condensed consolidated unaudited financial statements in this quarterly report for details for details.~~

~~Goodwill~~

~~Goodwill represents the excess of consideration paid over the fair value of underlying identifiable net assets of a business~~

acquired. This allocation is based upon management’s determination of the value of the acquired assets and assumed liabilities, which requires judgment and some of the estimates involve complex calculations. These allocation assessments have a direct impact on our results of operations. Our goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Such evaluation could involve estimated future cash flows which is highly subjective and is based in part on assumptions regarding future events. We take a qualitative approach to consider whether an impairment of goodwill exists prior to quantitatively determining the fair value of the reporting unit in step one of the impairment test. We performed our annual assessment on October 1st.

~~Income Taxes~~

We have elected to be taxed as a REIT under the Internal Revenue Code and have operated as such commencing with the taxable year ended December 31, 2014. To continue to qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to our stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax to the extent we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate income tax rates and generally would not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to stockholders. However, we believe we are organized and operate in such a manner as to qualify for treatment as a REIT.

We follow the income tax guidance under GAAP to recognize, measure, present and disclose in our consolidated financial statements uncertain tax positions that we have taken or expect to take on a tax return. As of September 30, 2020 and December 31, 2019, we did not have any liabilities for uncertain tax positions that we believe should be recognized in our

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consolidated financial statements. We have not been assessed material interest or penalties by any major tax jurisdictions. Our evaluation was performed for all open tax years through December 31, 2019.

Distributions

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

Distributions declared (1) accrued daily to our stockholders of record as of the close of business on each day, (2) are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month and (3) were calculated at a rate of ~~$0.002459 and~~ $0.002466 per share per day during the ~~three and nine months ended September 30, 2020 and 2019,~~month of January 2021, which if paid each day over a ~~366-day period and~~ 365-day period, ~~respectively,~~ is equivalent to $0.90 per share, and were calculated at a rate of $0.001438 per share per day commencing on February 1, 2021 through March 31, 2021, which if paid each day over a 365-day period, is equivalent to $0.525 per share.

The distributions declared and paid during the first fiscal quarter ended ~~September 30, 2020,~~March 31, 2021, along with the amount of distributions reinvested pursuant to the distribution reinvestment plan were as follows:

Distributions Paid(3)
Sources of Distributions Paid
Period
Distributions Declared(1)
Distributions Declared Per Share(1)(2)
Cash Reinvested Total Cash Flow From Operations Funds Equal to Amounts Reinvested in our Distribution Reinvestment Plan Net Cash Provided by Operating Activities
1st Quarter 2020 $ 15,391,533 $ 0.224 $ 6,716,712 $ 5,084,155 $ 11,800,867 $ 5,191,753 $ 6,609,114 $ 5,191,753
2nd Quarter 2020 24,588,408 0.224 19,313,315 5,399,458 24,712,773 20,875,797 3,836,976 20,875,797
3rd Quarter 2020 25,490,638 0.226 19,712,608 5,373,636 25,086,244 16,117,777 8,968,467 16,117,777
$ 65,470,579 $ 0.674 $ 45,742,635 $ 15,857,249 $ 61,599,884 $ 42,185,327 $ 19,414,557 $ 42,185,327


					Distributions Paid(3)						Sources of Distributions Paid
Period	Distributions Declared(1)		Distributions Declared Per Share(1)(2)		Cash		Reinvested		Total		Cash Flow From Operations		Funds Equal to Amounts Reinvested in our Distribution Reinvestment Plan		Net Cash Provided by Operating Activities
First Quarter 2021	$	18,909,212	$	0.161	$	18,012,522	$	4,600,603	$	22,613,125	$	4,040,865	$	18,572,260	$	4,040,865

____________________

(1)Distributions during the ~~3rd quarter of 2020,~~month ended January 2021 were based on daily record dates and calculated at a rate of ~~$0.002459~~$0.002466 per share per day. ~~Beginning on March 6, 2020 through September 30, 2020, distributions for~~On January 12, 2021, our board of directors determined to reduce the ~~former SIR and STAR III stockholders were based on daily record dates and calculated at a~~distribution rate ~~of $0.002459~~to

$0.001438 per share per ~~day.~~day commencing on February 1, 2021 and ending February 28, 2021, which was extended

through March 31, 2021, and which if paid each day over a 365-day period is equivalent to $0.525 per share.

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

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

For the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, we paid aggregate distributions of ~~$25,086,244 and $61,599,884, including $19,712,608 and $45,742,635~~$22,613,125, which was comprised of $18,012,522 of distributions paid in cash and ~~352,832 and 1,023,791~~302,075 shares of our common stock issued pursuant to our distribution reinvestment plan for ~~$5,373,636 and $15,857,249, respectively.~~$4,600,603. For the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, our net loss was ~~$37,758,065 and $100,500,501,~~$14,809,563, we had funds

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from operations, or FFO, of ~~$8,430,520 and $24,993,259~~$18,841,765 and net cash provided by operations of ~~$16,117,777 and $42,185,327, respectively.~~$4,040,865. For the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, we funded ~~$16,117,777 and $42,185,327,~~$4,040,865, or ~~64% and 68%~~18%, of total distributions paid, including shares issued pursuant to our distribution reinvestment plan, from net cash provided by operating activities and ~~$8,968,467 and $19,414,557,~~$18,572,260, or ~~36% and 32%~~82%, from funds equal to our distribution reinvestment ~~plan, respectively.~~plan. Since inception, of the ~~$260,192,385~~$309,010,185 in total distributions paid through ~~September 30, 2020,~~March 31, 2021, including shares issued pursuant to our distribution reinvestment plan, ~~70%~~65% of such amounts were funded from cash flow from operations, ~~20%~~28% were funded from funds equal to amounts reinvested in our distribution reinvestment plan and ~~10%~~7% were funded from net public offering proceeds. For information on how we calculate FFO and the reconciliation of FFO to net loss, see “—Funds from Operations and Modified Funds from Operations.”

Our long-term policy is to pay distributions solely from cash flow from operations. Because we may receive income from interest or rents at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period, and we expect to pay these distributions in advance of our actual receipt of these funds. In these instances, our board of directors has the authority under

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our organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings or offering ~~proceeds or advances and the deferral of fees and expense reimbursements by our Former Advisor, in its sole discretion.~~proceeds. We have not established a limit on the amount of proceeds we may use from sources other than cash flow from operations to fund distributions. If we pay distributions from sources other than cash flow from operations, we will have fewer funds available for investments.

We continue to monitor the ~~outbreak of the~~ COVID-19 pandemic and its impact on our liquidity. The magnitude and duration of the pandemic and its impact on our operations and liquidity has not materially adversely affected us as of the filing date of this quarterly report. However, if the outbreak continues on its current trajectory, such impacts could grow and become material. Our operations could be materially negatively affected if the ~~economic downturn~~pandemic is prolonged, which could adversely affect our operating results and therefore our ability to pay our distributions.

Inflation

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

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

As of ~~September 30, 2020,~~March 31, 2021, we had not entered into any material leases as a lessee, except for a sub-lease entered into in connection with the Internalization Transaction on September 1, 2020. See Note ~~3 (Internalization Transaction)~~10 (Related Party Arrangements) to our ~~condensed~~ consolidated ~~unaudited~~ financial statements in this ~~quarterly report for~~Quarterly Report for details.

REIT Compliance

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

Liquidity and Capital Resources

We use secured borrowings, and intend to use in the future secured and unsecured borrowings. At ~~September 30, 2020,~~March 31, 2021, our debt was approximately ~~62%~~57% of the value of our properties, as determined by the most recent valuations performed by an independent third-party ~~appraiser.~~appraiser as of December 31, 2020. Going forward, we expect that our borrowings (after debt amortization) will be approximately 55% to 60% of the value of our properties and other real estate-related assets. Under our charter, we are prohibited from borrowing in excess of 300% of the value of our net assets, which generally approximates to 75% of the aggregate cost of our assets, though we may exceed this limit only under certain circumstances.

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

•unrestricted cash balance, which was ~~$311,515,756~~$242,291,317 as of ~~September 30, 2020;~~March 31, 2021;

•various forms of secured and unsecured financing;

•equity capital from joint venture partners; and

•proceeds from our distribution reinvestment plan.

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

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

We continue to monitor the outbreak of the COVID-19 pandemic and its impact on our liquidity. The magnitude and duration of the pandemic and its impact on our operations and liquidity has not materially adversely affected us as of the filing date of this quarterly report. However, if the outbreak continues on its current trajectory, such impacts could grow and become material. To the extent that our residents continue to be impacted by the COVID-19 outbreak or by the other risks disclosed in this Quarterly Report on Form 10-Q, this could materially disrupt our business operations and liquidity.

Credit Facilities

Master Credit Facility

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

PNC Master Credit Facility

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

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PART I — FINANCIAL INFORMATION (continued)

Revolving Credit Loan Facility

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

We have the option to select the interest rate in respect of the outstanding unpaid principal amount of ~~the~~each Revolver ~~Loans~~Loan from the following options: (1) a fluctuating rate per annum equal to the sum of the daily LIBOR rate plus the daily LIBOR rate spread or (2) a fluctuating rate per annum equal to the base rate plus the alternate rate spread.

~~Table of Contents~~ No amounts were outstanding on the Revolver at March 31, 2021.

~~PART I — FINANCIAL INFORMATION (continued)~~

As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the advances obtained and certain financing costs incurred under the MCFA, PNC MCFA and the Revolver, which is included in credit facilities, net, in the accompanying consolidated balance sheets, are summarized in the following table.


		Amount of Advance as of					Amount of Advances as of
		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Principal balance on MCFA, gross	Principal balance on MCFA, gross	$	592,137,000	$	551,669,000	Principal balance on MCFA, gross	$	592,137,000	$	592,137,000
Principal balance on PNC MCFA, gross	Principal balance on PNC MCFA, gross	158,340,000		—		Principal balance on PNC MCFA, gross	158,340,000		158,340,000
Principal balance on Revolver, gross		—		—
Deferred financing costs, net on MCFA(1)	Deferred financing costs, net on MCFA(1)	(3,555,957)		(3,208,770)		Deferred financing costs, net on MCFA(1)	(3,320,332)		(3,436,850)
Deferred financing costs, net on PNC MCFA(2)	Deferred financing costs, net on PNC MCFA(2)	(1,736,067)		—		Deferred financing costs, net on PNC MCFA(2)	(1,644,807)		(1,689,935)
Deferred financing costs, net on Revolver(3)	Deferred financing costs, net on Revolver(3)	(536,761)		—		Deferred financing costs, net on Revolver(3)	(438,973)		(487,329)
Credit facilities, net	Credit facilities, net	$	744,648,215	$	548,460,230	Credit facilities, net	$	745,072,888	$	744,862,886

~~___________~~_________________

(3)As of March 31, 2021 and December 31, 2020, the principal outstanding balance on the Revolver was $0 and $0, respectively.

~~(3)~~ Accumulated amortization related to deferred financing costs in respect of the Revolver as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, was ~~$52,118~~$149,905 and ~~$0,~~$101,549, respectively.

Construction loan

On October 16, 2019, we entered into an agreement with PNC Bank, for a construction loan related to the development of Garrison Station, a development project in Murfreesboro, TN, in an aggregate principal amount not to exceed $19,800,000 for a thirty-six month initial term and two twelve month mini-perm extensions. The rate of interest on the construction loan is at daily LIBOR plus 2.00%, which then reduces to ~~the~~ daily LIBOR plus 1.80% upon achieving completion as defined in the construction loan agreement and at a debt service coverage ratio of 1.15x. The loan includes a 0.4% fee at closing, a 0.1% fee upon exercising the mini-perm and a 0.1% fee upon extending the mini-perm, each payable to PNC Bank. There is an exit fee of 1% which will be waived if permanent financing is secured through PNC Bank or one of ~~their~~its affiliates. As of ~~September 30,~~March 31, 2021 and December 31, 2020, the principal outstanding balance on the construction loan was ~~$2,205,999. No amounts were outstanding on this construction loan at December 31, 2019.~~$10,849,189 and $6,264,549, respectively.

Assumed Debt as a Result of the Completion of Mergers

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

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

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

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


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

Reference Rate Reform

In July 2017, the Financial Conduct Authority announced it intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021. We are monitoring the market transition from the LIBOR and other inter bank offered rates to alternative reference rates, such as the secured overnight financing rate, or SOFR, which we refer to as reference rate reform. For more information on reference rate reform, see Note 2 (Summary of Significant Accounting Pronouncements) to our consolidated financial statements in this Quarterly Report for details. We identified the instruments influenced by LIBOR to be our variable rate mortgage notes payable and interest rate cap agreements, a majority of which, are expected to continue to use LIBOR through June 2023 or beyond until lenders and other market participants finalize their transition plans. Once transition plans are finalized, it is expected that SOFR will be used. Given the nature of the expected changes to our interest rate cap agreements (all of which mature by July 1 , 2023 and are not expected to transition to SOFR) and variable rate mortgage notes payable, we expect to meet the conditions of the practical expedients provided by the FASB and elect to not apply the modification accounting requirements to its contracts affected by the reference rate reform within the permitted period of December 31, 2022.

Cash Flows Provided by Operating Activities

During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, net cash provided by operating activities was ~~$42,185,327,~~$4,040,865 compared to ~~$18,793,335~~cash provided by operating activities of $5,191,753 for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. The ~~increase~~decrease in our net cash provided by operating activities iswas primarily due to an increase in ~~accounts payable~~cash outflows from changes in operating assets and ~~accrued~~ liabilities ~~an increase in rental revenues from the acquisition of 39 multifamily properties, inclusive of 36 multifamily properties acquired in the Mergers,~~ partially offset by a decrease in ~~fees to affiliates compared to the same prior year period.~~net loss adjusted for non-cash items.

Cash Flows (Used in) Provided by Investing Activities

During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, net cash used in investing activities was $10,150,230 compared to net cash provided by investing activities ~~was $57,369,417, compared to $6,841,975~~ of ~~net cash provided by investing activities~~$51,575,593 during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. The ~~increase~~decrease in net cash provided by investing activities was primarily due to the ~~net proceeds received from the sale of two real estate properties and the investment in unconsolidated joint venture during the nine months ended September 30, 2020, and the increase~~decrease in cash and restricted cash acquired in connection with the Mergers, net of transaction costs, an increase in capital projects and a decrease in net proceeds received from the sale of a real estate property partially offset by the ~~acquisition of assets~~decrease in ~~connection with the Internalization Transaction,~~ the acquisition of ~~three~~ multifamily properties, ~~and~~ the decrease in acquisition ~~of two parcels~~ of land held for the development of apartment homes and the decrease of escrow deposits for pending real estate transactions, during the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, compared to the same prior year period. Net cash ~~provided by~~used in investing activities during the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, consisted of the following:

•$~~98,283,732 of cash and restricted cash acquired in Mergers, net of transaction costs;~~

•~~$29,486,646 of cash used for the acquisition of assets in connection with the Internalization Transaction;~~

•~~$69,914,948 of cash used for the acquisition of real estate investments;~~

•~~$14,321,851 of cash used for the acquisition of real estate held for development;~~

•~~$17,205,299~~4,818,069 of cash used for improvements to real estate investments;

•$~~10,687,626~~5,732,099 of cash used for additions to real estate held for development;

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

•~~$67,000 of cash used for interest rate cap agreements;~~

•~~$81,208,213 of net proceeds from the sale of real estate investments;~~

• ~~$19,022,280 of net proceeds from the sale of our investment in unconsolidated joint venture;~~

•~~$1,452,262~~412,138 of cash provided by proceeds from insurance claims; and

•$~~86,300~~12,200 of ~~net~~ cash ~~provided by the investment in an unconsolidated joint venture.~~used for interest rate cap agreements.

Cash Flows (Used in) Provided by Financing Activities

During the ~~nine~~three months ended ~~September 30, 2020 and 2019,~~March 31, 2021, net cash used in financing activities was $19,462,847 compared to net cash provided by financing activities ~~was $106,044,570, compared to $23,703,932~~ of ~~net cash provided by financing activities~~$28,434,479 during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. The ~~increase~~decrease in net cash provided by financing activities was primarily due to the decrease in proceeds received from borrowing on ~~the~~our MCFA, and PNC MCFA and a decrease in payments on our mortgage notes payable during the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, partially offset by an increase in payment of deferred financing costs, a decrease in proceeds from issuance of mortgage notes payable and an increase in distributions paid to common stockholders ~~during the nine months ended September 30, 2020, compared~~due to the ~~same prior year period. Net cash provided by financing activities during the nine months ended September 30, 2020, consisted of the following:~~

•~~$198,808,000 of proceeds received from borrowings on our MCFA and PNC MCFA;~~

•~~$40,061,917 of net cash used to pay for~~Mergers, an increase in principal payments on mortgage notes payable and an increase in repurchases of ~~$35,190,503, deferred financing costs of $6,753,413 and payment of debt extinguishment costs of $324,000, net of~~our common stock during the three months ended March 31, 2021, compared to the three months ended March 31, 2020, partially offset by an increase in proceeds received from ~~the~~ issuance of a mortgage ~~notes payable of $2,205,999;~~

•~~$50,051 of payments of commissions on sales of common stock;~~

•~~$1,000 of cash paid for the repurchase of Class A convertible stock;~~note

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payable and a decrease in payment of deferred financing costs during the three months ended March 31, 2021, compared to the same prior year period. Net cash used in financing activities during the three months ended March 31, 2021, consisted of the following:

•$~~45,742,635~~2,549,675 of net cash proceeds from issuance of a mortgage notes payable after a payment of $2,034,966 of principal payments on mortgage notes payable;

•$18,012,522 of net cash distributions to our stockholders, after giving effect to distributions reinvested by stockholders of ~~$15,857,249;~~$4,600,603; and

•$~~6,907,827~~4,000,000 of cash paid for the repurchase of common stock.

Contractual Commitments and Contingencies

As of ~~September 30, 2020,~~March 31, 2021, we had indebtedness totaling ~~$2,146,041,091,~~$2,131,926,238, comprised of an aggregate principal amount of ~~$2,154,303,475,~~$2,140,356,568, net deferred financing costs of ~~$12,943,336~~$11,822,175 and net premiums of ~~$4,680,952.~~$3,391,845. The following is a summary of our contractual obligations as of ~~September 30, 2020:~~March 31, 2021:


				Payments due by period											Payments due by period
Contractual Obligations	Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Interest payments on outstanding debt obligations(1)	Interest payments on outstanding debt obligations(1)	$	643,555,623	$	20,256,655	$	161,639,784	$	154,384,354	$	307,274,830	Interest payments on outstanding debt obligations(1)	$	597,361,351	$	60,561,414	$	156,794,326	$	145,673,292	$	234,332,319
Principal payments on outstanding debt obligations(2)	Principal payments on outstanding debt obligations(2)	2,154,303,475		1,654,287		45,771,249		118,811,262		1,988,066,677		Principal payments on outstanding debt obligations(2)	2,140,356,568		6,620,798		106,361,568		255,783,712		1,771,590,490
Total	Total	$	2,797,859,098	$	21,910,942	$	207,411,033	$	273,195,616	$	2,295,341,507	Total	$	2,737,717,919	$	67,182,212	$	263,155,894	$	401,457,004	$	2,005,922,809

________________

(1)Scheduled interest payments on outstanding debt obligations are based on the outstanding principal amounts and interest rates in effect at ~~September 30, 2020.~~March 31, 2021. We incurred interest expense of ~~$20,628,159 and $54,734,431~~$19,807,678 during the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, including amortization of deferred financing costs totaling ~~$573,078 and $1,382,954,~~$548,781, net unrealized ~~loss~~gain from the change in fair value of interest rate cap agreements of ~~$29,093 and $56,287,~~$10,820, amortization of net loan premiums and discounts of ~~$(431,387) and $(959,827) and costs associated with the refinancing~~$417,889, credit facility commitment fees of ~~debt of $0 and $42,881, net of capitalized interest of $313,902 and $576,521,~~$34,575 and imputed interest on the finance lease portion of the sublease of ~~$47 and $47, respectively.~~$107, net of capitalized interest of $315,244. The capitalized interest is included in real estate on the consolidated balance sheets.

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

Our debt obligations contain customary financial and non-financial debt covenants. As of ~~September 30, 2020,~~March 31, 2021 and December 31, ~~2019,~~2020, we were in compliance with all debt covenants.

Results of Operations

Overview

The discussion that follows is based on our consolidated results of operations for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020. The ability to compare one period to another is primarily affected by ~~(1)~~ the ~~net increase~~acquisition and disposition of 39 multifamily properties inclusive of (1) 36 multifamily properties acquired in the Mergers ~~and~~during the three months ended March 31, 2020, the acquisition of two multifamily properties since March 31, 2020, the disposition of ~~three~~two multifamily properties since ~~September 30, 2019~~March 31, 2020, and to a lesser extent, placing into service 24 apartment homes previously held for development during the three months ended March 31, 2021 and the (2) ~~the~~ closing of the Internalization Transaction. ~~The number of multifamily properties wholly-owned by us increased to 69 as of September 30, 2020, from 34 as of September 30, 2019.~~ As of ~~September 30, 2020,~~March 31, 2021, we owned 69 multifamily properties and three parcels of land held for the development of apartment homes. Our results of operations were also affected by our value-enhancement activity completed through ~~September 30, 2020.~~March 31, 2021.

Our results of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019,~~ are not indicative of those expected in future periods. We continued to perform value-enhancement projects, which may have an impact on our future results of operations. As a result of the Internalization Transaction, we are ~~now~~ a self-managed REIT and no longer bear the costs of the various fees and expense reimbursements previously paid to our Former Advisor and its ~~affiliates; however,~~affiliates. However, our expenses include the

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compensation and benefits of our officers, employees and consultants, as well as overhead previously paid by our Former Advisor and its affiliates. ~~Due to~~

Additionally, the outbreak of COVID-19 in the U.S. and globally impacted our residents’ ability to pay rent, ~~has been impacted,~~ which in turn could impact our future revenues and expenses. The impact of COVID-19 on our future results could be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information, which may emerge concerning the severity of ~~a “second wave”~~“future waves” of COVID-19 outbreaks,

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the success of actions taken to contain or treat COVID-19, access to testing ~~the reimposition of “shelter in place” orders,~~and vaccines, and reactions by consumers, companies, governmental entities and capital markets.

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

Consolidated Results of Operations for the Three Months Ended ~~September 30, 2020,~~March 31, 2021 Compared to the Three Months Ended ~~September 30, 2019~~March 31, 2020

The following table summarizes the consolidated results of operations for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:


		For the Three Months Ended September 30,								$ Change Due to Acquisitions or Dispositions(1)			$ Change Due to Properties Held Throughout Both Periods and Corporate Level Activity(2)				For the Three Months Ended March 31,												$ Change Due to Acquisitions or Dispositions(1)			$ Change Due to Properties Held Throughout Both Periods and Corporate Level Activity(2)
		2020		2019		Change $		Change %						2021				2020			Change $			Change %
Total revenues	Total revenues	$	83,670,508	$	44,190,840	$	39,479,668	89	%		$	38,539,026			$	940,642	Total revenues		$	83,157,817		$	53,713,939		$	29,443,878		55		%	$	28,530,970	$	912,908
Operating, maintenance and management	Operating, maintenance and management	(21,497,606)		(11,802,969)		(9,694,637)		(82)	%	(10,142,587)			447,950	Operating, maintenance and management			(20,765,034)			(12,496,559)			(8,268,475)			(66)	%		(7,175,476)			(1,092,999)
Real estate taxes and insurance	Real estate taxes and insurance	(12,935,004)		(6,086,781)		(6,848,223)		(113)	%	(6,807,966)			(40,257)	Real estate taxes and insurance			(13,856,893)			(8,743,446)			(5,113,447)			(58)	%		(5,151,977)			38,530
Fees to affiliates	Fees to affiliates	(8,449,715)		(6,917,303)		(1,532,412)		(22)	%	(4,076,691)			2,544,279	Fees to affiliates			(4,287)			(8,427,296)			8,423,009			100	%		1,923,216			6,499,793
Depreciation and amortization	Depreciation and amortization	(47,564,706)		(18,632,477)		(28,932,229)		(155)	%	(28,870,880)			(61,349)	Depreciation and amortization			(33,874,505)			(28,575,896)			(5,298,609)			(19)	%		(6,057,099)			758,490
Interest expense	Interest expense	(20,628,159)		(12,562,978)		(8,065,181)		(64)	%	(9,086,469)			1,021,288	Interest expense			(19,807,678)			(14,390,954)			(5,416,724)			(38)	%		(6,164,160)			747,436
General and administrative expenses	General and administrative expenses	(11,775,591)		(2,216,129)		(9,559,462)		(431)	%	(295,092)			(9,264,370)	General and administrative expenses			(11,325,410)			(2,430,299)			(8,895,111)			(366)	%		(14,664)			(8,880,447)

Gain on sale of real estate, net	Gain on sale of real estate, net	1,392,434		3,329,078		(1,936,644)		(58)	%	(1,936,644)			—	Gain on sale of real estate, net			—			11,384,599			(11,384,599)			(100)	%		(11,384,599)			—
Interest income	Interest income	165,495		252,227		(86,732)		(34)	%	28,295			(115,026)	Interest income			105,019			253,254			(148,235)			(59)	%		(46,109)			(102,126)
Insurance proceeds in excess of losses incurred	Insurance proceeds in excess of losses incurred	112,342		56,686		55,656		98	%	29,427			26,229	Insurance proceeds in excess of losses incurred			103,487			66,723			36,764			55	%		92,774			(56,010)
Equity in loss from unconsolidated joint venture	Equity in loss from unconsolidated joint venture	(16,711)		—		(16,711)		100	%	(16,711)			—	Equity in loss from unconsolidated joint venture			—			(35,193)			35,193			100	%		35,193			—
Fees and other income from affiliates	Fees and other income from affiliates	390,099		—		390,099		100	%	—			390,099	Fees and other income from affiliates			1,457,921			—			1,457,921			100	%		—			1,457,921

Loss on debt extinguishment		(621,451)		—		(621,451)		100	%	(621,451)			—

Net loss	Net loss	$	(37,758,065)	$	(10,389,806)	$	(27,368,259)	(263)	%					Net loss			$	(14,809,563)		$	(9,681,128)		$	(5,128,435)		(53)	%

NOI(3)	NOI(3)	$	46,519,021	$	24,117,366	$	22,401,655	93	%					NOI(3)			$	48,537,519		$	30,125,025		$	18,412,494		61	%
FFO(4)	FFO(4)	$	8,430,520	$	4,912,689	$	3,517,831	72	%					FFO(4)			$	18,841,765		$	7,678,383		$	11,163,382		145	%
MFFO(4)	MFFO(4)	$	15,217,316	$	5,624,394	$	9,592,922	171	%					MFFO(4)			$	18,905,269		$	7,692,860		$	11,212,409		146	%

~~______________~~_________________

(1)Represents the favorable (unfavorable) dollar amount change for the three months ended ~~September 30, 2020,~~March 31, 2021, compared to the three months ended ~~September 30, 2019,~~March 31, 2020, related to multifamily properties acquired, or disposed of, or placed in service, on or after ~~July~~January 1, ~~2019.~~2020.

(2)Represents the favorable (unfavorable) dollar amount change for the three months ended ~~September 30, 2020,~~March 31, 2021, compared to the three months ended ~~September 30, 2019,~~March 31, 2020, related to multifamily properties and corporate level entities owned by us throughout both periods presented.

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(3)NOI is a non-GAAP financial measure used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings. However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs, certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of our properties and

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other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs, all of which are significant economic costs. For additional information on how we calculate NOI and a reconciliation of NOI to net loss, see “—Net Operating Income.”

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

Net loss

For the three months ended ~~September 30, 2020,~~March 31, 2021, we had a net loss of ~~$37,758,065~~$14,809,563 compared to ~~a net loss of $10,389,806~~$9,681,128 for the three months ended ~~September 30, 2019.~~March 31, 2020. The increase in net loss of ~~$27,368,259~~$5,128,435 over the comparable prior year period was primarily due to the increase in operating, maintenance and management expenses of $9,694,637, the increase in real estate taxes and insurance of $6,848,223, the increase in fees to affiliates of $1,532,412, the increase in depreciation and amortization expense of $28,932,229, the increase in interest expense of $8,065,181, the increase in general and administrative expenses of $9,559,462, thea decrease in gain on sale of real estate, ~~assets,~~ net of ~~$1,936,644, the~~$11,384,599, increases in general and administrative expenses of $8,895,111, operating, maintenance and management expenses of $8,268,475, interest expense of $5,416,724, depreciation and amortization expense of $5,298,609, real estate taxes and insurance of $5,113,447, and a decrease in interest income of ~~$86,732, the increase in loss from unconsolidated joint venture of $16,711 and the increase in loss on debt extinguishment of $621,451,~~$148,235, partially offset by ~~the increase~~increases in total revenues of ~~$39,479,668, the increase in~~$29,443,878, insurance proceeds in excess of losses incurred of ~~$55,656 and the increase in~~$36,764, fees and other income from affiliates of ~~$390,099.~~$1,457,921, decreases in fees to affiliates of $8,423,009 and equity in loss from unconsolidated joint venture of $35,193.

Total revenues

Total revenues were ~~$83,670,508~~$83,157,817 for the three months ended ~~September 30, 2020,~~March 31, 2021, compared to ~~$44,190,840~~$53,713,939 for the three months ended ~~September 30, 2019.~~March 31, 2020. The increase of ~~$39,479,668~~$29,443,878 was primarily due to the increase in total revenues of $28,530,970 due to the increase in the number of properties in our portfolio, as a result of the acquisition of 38 multifamily properties, 36 of which were acquired through the Mergers, partially offset by the disposition of two multifamily properties subsequent to ~~September 30, 2019.~~March 31, 2020. We ~~also~~ experienced an increase of ~~$940,642~~$912,908 in total revenues at the multifamily properties held throughout both periods as a result of ordinary monthly rent increases, increase in occupancy and the completion of value-enhancement projects.

Operating, maintenance and management expenses

Operating, maintenance and management expenses were $20,765,034 for the three months ended ~~September 30, 2020, were $21,497,606~~March 31, 2021, compared to ~~$11,802,969~~$12,496,559 for the three months ended ~~September 30, 2019.~~March 31, 2020. The increase of ~~$9,694,637~~$8,268,475 was primarily due to the increase in the number of properties in our portfolio, partially offset by the disposition of two multifamily properties subsequent to ~~September 30, 2019. In addition, we~~March 31, 2020. We experienced ~~a decrease~~an increase of ~~$447,950~~$1,092,999 in operating, maintenance and management expenses at the multifamily properties held throughout both ~~periods.~~periods primarily due to increases in payroll, information technology related expenses and repairs and maintenance.

Real estate taxes and insurance

Real estate taxes and insurance expenses were ~~$12,935,004~~$13,856,893 for the three months ended ~~September 30, 2020,~~March 31, 2021, compared to ~~$6,086,781~~$8,743,446 for the three months ended ~~September 30, 2019.~~March 31, 2020. The increase of ~~$6,848,223~~$5,113,447 was primarily due to the increase in the number of properties in our portfolio, partially offset by the disposition of two multifamily properties subsequent to ~~September 30, 2019. In addition, we~~March 31, 2020. We experienced ~~an increase~~a decrease of ~~$40,257~~$38,530 in real estate taxes and insurance expenses at the multifamily properties held throughout both periods.

~~Fees to affiliates~~

Fees to affiliates were $8,449,715 for the three months ended September 30, 2020, compared to $6,917,303 for the three months ended September 30, 2019. The net increase of $1,532,412 was primarily due to an increase in investment management fees, property management fees and the reimbursement of onsite personnel during the three months ended September 30, 2020, due to the increase in the number of properties in our portfolio subsequent to September 30, 2019, predominately as a result of the net increase of 39 multifamily properties, the decrease in loan coordination fees during the three months ended September 30, 2020 compared to the three months ended September 30, 2019 and the reduction in fees to affiliates as a result of cost savings in connection with the Internalization Transaction. We experienced a decrease of $2,544,279 in fees to affiliates at the

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PART I — FINANCIAL INFORMATION (continued)

~~multifamily properties held throughout both periods~~Fees to affiliates

Fees to affiliates were $4,287 for the three months ended March 31, 2021, compared to $8,427,296 for the three months ended March 31, 2020. The decrease of $8,423,009 was primarily due to ~~the fact that we no longer incur such~~a decrease in investment management fees, property management fees, loan coordination fees and ~~expense reimbursements that were previously paid to our Former Advisor and its affiliates~~the reimbursement of onsite personnel as a result of ~~the Internalization Transaction. We expect these amounts to decrease in future periods as a result of costs savings in connection with~~ the Internalization Transaction.

Depreciation and amortization

Depreciation and amortization expenses were ~~$47,564,706~~$33,874,505 for the three months ended ~~September 30, 2020,~~March 31, 2021, compared to ~~$18,632,477~~$28,575,896 for the three months ended ~~September 30, 2019.~~March 31, 2020. The increase of ~~$28,932,229~~$5,298,609 was primarily due to the net increase in depreciable assets of ~~$1,452,145,682, due~~$6,949,426 subsequent to March 31, 2020, as a result of the gross increase in ~~the number of properties~~depreciable assets in our portfolio ~~including the increase in tenant origination and absorption costs of $1,976,514~~ subsequent to ~~September 30, 2019. In addition, we~~March 31, 2020 of $23,926,299, net of the impact of the write off of fixed assets damaged in the winter storm (described below) of $15,459,862. We experienced an increase of ~~$61,349~~$758,490 in depreciation expenses at the properties held throughout both periods. We expect these amounts to increase slightly in future periods as a result of anticipated future enhancements to our real estate portfolio.

Interest expense

Interest expense for the three months ended ~~September 30, 2020,~~March 31, 2021, was ~~$20,628,159~~$19,807,678 compared to ~~$12,562,978~~$14,390,954 for the three months ended ~~September 30, 2019.~~March 31, 2020. The increase of ~~$8,065,181~~$5,416,724 was primarily due to the increase in the notes payable, net, of ~~$1,045,876,168~~$155,132,680 since ~~September 30, 2019.~~March 31, 2020. The increase in notes payable, net ~~consists~~primarily consisted of the ~~following: (1) $791,020,471 that relates to the assumption~~$158,340,000 of notes payable pursuant to the Mergers, (2) $9,148,000 that relates to the refinancings that occurred subsequent to September 30, 2019, experiencing a full quarter of interest expense in the three months ended September 30, 2020, (3) $81,315,122 that relates to the debt assumed on the acquisitions of two multifamily properties subsequent to September 30, 2019, (4) $198,808,000 that relates to the increase in borrowings pursuant to the ~~MCFA and~~ PNC MCFA subsequent to September 30, 2019, (5) $5,864,652 that relates to deferred financing costs, net of accumulated amortization subsequent to September 30, 2019, (6) $4,680,950 that relates to debt premiums, net of accumulated amortization and debt discounts, net of accretion, (7) $3,077,724 that relates to the payment of principal on existing debt since September 30, 2019, (8) $32,360,000 that relates to the payoff of principal debt in connection with the sale of one multifamily property in the three months ended September 30, 2020, and (9) $2,205,999 that relates to proceeds from the issuance of mortgage notes payable in the three months ended September 30, 2020.MCFA.

Included in interest expense is the amortization of deferred financing costs of ~~$573,078~~$548,781 and ~~$256,547,~~$327,470, net unrealized ~~loss~~(gains) losses from the change in fair value of interest rate cap agreements of ~~$29,093~~$(10,820) and ~~$24,144, interest on capital leases of $47 and $0,~~$2,251, amortization of net loan premiums and discounts of ~~$(431,387)~~$417,889 and $114,582, credit facility commitment fees of $34,575 and $0, ~~and~~ costs associated with the refinancing of debt of $0 and ~~$219,813,~~$31,397, imputed interest on the finance lease portion of the sublease of $107 and $0, net of capitalized interest of ~~$313,902~~$315,244 and ~~$49,068,~~$69,569, for the three months ended ~~September 30,~~March 31, 2021 and 2020, and 2019, respectively. The capitalized interest is included in real estate on the consolidated balance sheets. Our interest expense in future periods will vary based on the impact of changes to LIBOR or the adoption of a replacement to LIBOR, our level of future borrowings, which will depend on the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.

~~General and administrative expenses~~

General and administrative expenses for the three months ended September 30, 2020, were $11,775,591 compared to $2,216,129 for the three months ended September 30, 2019. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees and independent director compensation. The increase of $9,559,462 was primarily due to an increase of $9,264,370 in general and administrative expenses predominantly due to legal costs and professional services fees incurred in connection with the Internalization Transaction and payroll costs for the acquired personnel as a result of the Internalization Transaction. In addition, we experienced an increase of $295,092 in general and administrative costs due to the increase in the number of properties in our portfolio subsequent to September 30, 2019, as a result of the acquisition of 39 multifamily properties subsequent to September 30, 2019.

~~Gain on sale of real estate~~

Gain on sale of real estate for the three months ended September 30, 2020, was $1,392,434 compared to $3,329,078 for the three months ended September 30, 2019. The gain on sale of real estate consisted of the gain recognized on the disposition of one multifamily property at a sales price of $49,500,000 during the three months ended September 30, 2020, compared to the disposition of one multifamily property at a sales price of $31,000,000 during the three months ended September 30, 2019. Our gain on sales of real estate, computed as the sales price, net of the carrying value of the real estate, selling expenses, and other ancillary costs, will vary in future periods based on the opportunity to sell properties and real estate-related investments.

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~~PART I — FINANCIAL INFORMATION (continued)~~

~~Interest income~~

Interest income for the three months ended September 30, 2020, was $165,495 compared to $252,227 for the three months ended September 30, 2019. Interest income consisted of interest earned on our cash, cash equivalents and restricted cash deposits. In general, we expect interest income to fluctuate with the change in our cash, cash equivalents and restricted cash deposits.

~~Insurance proceeds in excess of losses incurred~~

Insurance proceeds in excess of losses incurred for the three months ended September 30, 2020, was $112,342 compared to $56,686 for the three months ended September 30, 2019. The increase of $55,656 was primarily due to an increase in the number of insurance claims resulting in excess proceeds.

~~Equity in loss from unconsolidated joint venture~~

Equity in loss from unconsolidated joint venture for the three months ended September 30, 2020, was $16,711 compared to $0 for the three months ended September 30, 2019. During the three months ended September 30, 2020, we sold our investment in unconsolidated joint venture and in the prior quarter we determined that our investment in the joint venture was other-than-temporarily impaired due to the decrease in the fair value of the joint venture as evidenced by the cash consideration agreed upon pursuant to an agreement to sell the joint venture on July 16, 2020. See Note 4 (Investment in Unconsolidated Joint Venture) to our condensed consolidated unaudited financial statements in this quarterly report for details.

~~Fees and other income from affiliates~~

Fees and other income from affiliates for the three months ended September 30, 2020, was $390,099 compared to $0 for the three months ended September 30, 2019. The increase of $390,099 was primarily income earned pursuant to the SRI Property Management Agreements entered into in connection with the Internalization Transaction. See Note 10 (Related Party Arrangements) to our condensed consolidated unaudited financial statements in this quarterly report for details.

~~Loss on debt extinguishment~~

Loss on debt extinguishment for the three months ended September 30, 2020, was $621,451 compared to $0 for the three months ended September 30, 2019. These expenses consisted of prepayment penalty and the expenses of the unamortized deferred financing costs related to the repayment and extinguishment of the debt in connection with the sale of one of our multifamily properties during the three months ended September 30, 2020. The loss on debt extinguishment will vary in future periods if we repay the remaining outstanding principal our notes payable prior to the scheduled maturity date.

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

~~Consolidated Results of Operations for the Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019~~

~~The following table summarizes the consolidated results of operations for the nine months ended September 30, 2020 and 2019:~~

For the Nine Months Ended September 30,
$ Change Due to Acquisitions or Dispositions(1)
$ Change Due to Properties Held Throughout Both Periods and Corporate Level Activity(2)
2020 2019 Change $ Change %
Total revenues $ 217,680,042 $ 129,990,894 $ 87,689,148 67 % $ 84,803,246 $ 2,885,902
Operating, maintenance and management (53,713,931) (32,370,752) (21,343,179) (66) % (21,374,921) 31,742
Real estate taxes and insurance (35,346,220) (19,111,364) (16,234,856) (85) % (15,487,868) (746,988)
Fees to affiliates (30,586,344) (19,248,909) (11,337,435) (59) % (11,712,034) 374,599
Depreciation and amortization (129,596,268) (55,430,404) (74,165,864) (134) % (72,609,774) (1,556,090)
Interest expense (54,734,431) (36,962,055) (17,772,376) (48) % (19,508,182) 1,735,806
General and administrative expenses (19,478,747) (5,881,278) (13,597,469) (231) % (922,908) (12,674,561)
Impairment of real estate (5,039,937) — (5,039,937) (100) % (5,039,937) —
Gain on sale of real estate, net 12,777,033 3,329,078 9,447,955 284 % 9,447,955 —
Interest income 553,011 592,792 (39,781) (7) % 146,648 (186,429)
Insurance proceeds in excess of losses incurred 236,754 391,519 (154,765) (40) % 29,994 (184,759)
Equity in loss from unconsolidated joint venture (3,020,111) — (3,020,111) 100 % (3,020,111) —
Fees and other income from affiliates 390,099 — 390,099 100 % — 390,099
Loss on debt extinguishment (621,451) (41,609) (579,842) 1,394 % (621,451) 41,609
Net loss $ (100,500,501) $ (34,742,088) $ (65,758,413) (189) %
NOI(3)
$ 120,351,797 $ 72,327,776 $ 48,024,021 66 %
FFO(4)
$ 24,993,259 $ 17,358,334 $ 7,634,925 44 %
MFFO(4)
$ 33,162,084 $ 19,119,839 $ 14,042,245 73 %

~~______________~~

(1) Represents the favorable (unfavorable) dollar amount change for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, related to multifamily properties acquired or disposed of on or after January 1, 2019.

(2) Represents the favorable (unfavorable) dollar amount change for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, related to multifamily properties and corporate level entities owned by us throughout both periods presented.

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

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

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~~PART I — FINANCIAL INFORMATION (continued)~~

~~Net loss~~

For the nine months ended September 30, 2020, we had a net loss of $100,500,501 compared to $34,742,088 for the nine months ended September 30, 2019. The increase in net loss of $65,758,413 over the comparable prior year period was due to increase in operating, maintenance and management expenses of $21,343,179, an increase real estate taxes and insurance of $16,234,856, an increase in fees to affiliates of $11,337,435, an increase in depreciation and amortization expense of $74,165,864, an increase in interest expense of $17,772,376, an increase in general and administrative expenses of $13,597,469, an increase in impairment of real estate of $5,039,937, a decrease in interest income of $39,781, an increase in equity in loss from unconsolidated joint venture of $3,020,111, a decrease in insurance proceeds in excess of losses incurred of $154,765 and an increase in loss on debt extinguishment of $579,842, partially offset by an increase in total revenues of $87,689,148, an increase in gain on sale of real estate, net of $9,447,955 and an increase in fees and other income from affiliates of $390,099.

~~Total revenues~~

~~Total revenues were $217,680,042 for the nine months ended September 30, 2020, compared to $129,990,894 for the nine months ended September 30, 2019~~. The increase of $87,689,148 was primarily due to the increase in total revenues of $84,803,246 due to the increase in the number of properties in our portfolio subsequent to September 30, 2019. In addition, we experienced an increase of $2,885,902 in total revenues at the multifamily properties held throughout both periods as a result of ordinary monthly rent increases and the completion of value-enhancement projects.

~~Operating, maintenance and management expenses~~

Operating, maintenance and management expenses were $53,713,931 for the nine months ended September 30, 2020, compared to $32,370,752 for the nine months ended September 30, 2019. The increase of $21,343,179 was primarily due to the increase in the number of properties in our portfolio subsequent to September 30, 2019. In addition, we experienced a decrease of $31,742 in operating, maintenance and management expenses at the multifamily properties held throughout both periods.

~~Real estate taxes and insurance~~

Real estate taxes and insurance expenses were $35,346,220 for the nine months ended September 30, 2020, compared to $19,111,364 for the nine months ended September 30, 2019. The increase of $16,234,856 was primarily due to the increase in the number of properties in our portfolio subsequent to September 30, 2019. In addition, we experienced an increase of $746,988 in real estate taxes and insurance expenses at the multifamily properties held throughout both periods.

~~Fees to affiliates~~

Fees to affiliates were $30,586,344 for the nine months ended September 30, 2020, compared to $19,248,909 for the nine months ended September 30, 2019. The increase of $11,337,435 was primarily due to an increase in investment management fees, property management fees, loan coordination fees and the reimbursement of onsite personnel during the nine months ended September 30, 2020, primarily due to the increase in the number of properties in our portfolio subsequent to September 30, 2019. We expect these amounts to decrease in future periods as a result of costs savings in connection with the Internalization Transaction.

~~Depreciation and amortization~~

Depreciation and amortization expenses were $129,596,268 for the nine months ended September 30, 2020, compared to $55,430,404 for the nine months ended September 30, 2019. The increase of $74,165,864 was primarily due to the net increase in depreciable assets of $1,452,145,682, including the increase in tenant origination and absorption costs of $1,976,514 subsequent to September 30, 2019, due to the increase in the number of properties in our portfolio subsequent to September 30, 2019. In addition, we experienced an increase of $1,556,090 in depreciation expenses at the properties held throughout both periods. We expect these amounts to increase slightly in future periods as a result of anticipated future enhancements to our real estate portfolio.

~~Interest expense~~

Interest expense for the nine months ended September 30, 2020, was $54,734,431 compared to $36,962,055 for the nine months ended September 30, 2019. The increase of $17,772,376 was primarily due to the increase in the notes payable, net, of $1,045,876,168 since September 30, 2019. The increase in notes payable, net consists of the following: (1) $791,020,471 that relates to the assumption of notes payable pursuant to the Mergers, (2) $9,148,000 which relates to the refinancings that occurred subsequent to September 30, 2019, experiencing a full period of interest expense in the nine months ended September 30, 2020, (3) $81,315,122 that relates to the debt assumed on the acquisitions of two multifamily properties

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~~PART I — FINANCIAL INFORMATION (continued)~~

subsequent to September 30, 2019, (4) $198,808,000 that relates to the increase in borrowings pursuant to the MCFA and PNC MCFA subsequent to September 30, 2019, (5) $5,864,652 that relates to deferred financing costs, net of accumulated amortization subsequent to September 30, 2019, (6) $4,680,950 that relates to debt premiums, net of accumulated amortization and debt discounts, net of accretion, (7) $3,077,724 that relates to the payment of principal on existing debt since September 30, 2019, (8) $32,360,000 that relates to payoff of principal debt in connection with the sale of a real estate asset in the nine months ended September 30, 2020, and (9) $2,205,999 that relates to proceeds from the issuance of mortgage notes payable in the nine months ended September 30, 2020.

Included in interest expense is the amortization of deferred financing costs of $1,382,954 and $750,751, net, unrealized loss on derivative instruments of $56,287 and $223,867, amortization of net debt premiums of $(959,827) and $0, interest on capital leases of $47 and $0, closing costs associated with the refinancing of debt of $42,881 and $219,813, credit facility commitment fees of $0 and $2,137, net of capitalized interest of $576,521 and $49,068, respectively, for the six months ended September 30, 2020 and 2019, respectively. The capitalized interest is included in real estate held for development on the consolidated balance sheets. Our interest expense in future periods will vary based on the impact of changes to LIBOR or the adoption of a replacement to LIBOR, our level of future borrowings, which will depend on the availability and cost of debt financing, and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.

General and administrative expenses

General and administrative expenses for the ~~nine~~three months ended ~~September 30, 2020, were $19,478,747~~March 31, 2021, was $11,325,410 compared to ~~$5,881,278~~$2,430,299 for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. These general and administrative expenses consisted primarily of payroll costs, legal fees, insurance premiums, audit fees, other professional fees and independent director compensation. The increase of ~~$13,597,469~~$8,895,111 was primarily due to an increase of ~~$12,674,561~~$8,880,447 in general and administrative expenses primarily due to ~~legal costs and professional services fees incurred in connection with the Internalization Transaction and~~ payroll costs for the acquired personnel as a result of the Internalization Transaction. In addition, we experienced an increase of ~~$922,908~~$14,664 in general and administrative costs due to the increase in the number of properties in our portfolio subsequent to ~~September 30, 2019.~~

~~Impairment~~March 31, 2020. Also included within general and administrative expenses is the write off of ~~real estate~~fixed assets

~~Impairment charges~~ of ~~real estate assets for~~$15,459,862 and estimated repair expenses amounting to $11,948,789 related to the ~~nine months ended September 30, 2020, were $5,039,937 compared~~damage caused to ~~$0 for the nine months ended September 30, 2019. The impairment charge of $5,039,937 resulted from~~ our ~~efforts to actively market two~~ multifamily properties ~~for sale at disposition prices~~impacted by the winter storm that ~~are less than their carrying values. See Note 4 (Real Estate) to our condensed consolidated unaudited financial statements~~took place in ~~this quarterly report for details.~~February 2021. The estimated insurance claims proceeds were also recorded in general and administrative expenses.

Gain on sale of real estate

Gain on sale of real estate for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, was ~~$12,777,033~~$0 compared to ~~$3,329,078~~$11,384,599 for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. The decrease in gain on sale of real estate ~~consisted of~~was due to the ~~gain recognized on the disposition of two~~fact there were no multifamily ~~properties~~property dispositions during the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021 compared to ~~the~~one disposition ~~of one multifamily property~~ during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. Our gain on ~~sale~~sales of real estate in future periods will vary based on the opportunity to sell properties and real estate-related investments.

Interest income

Interest income for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, was ~~$553,011~~$105,019 compared to ~~$592,792~~$253,254 for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. Interest income consisted of interest earned on our cash, cash equivalents and restricted cash deposits. In general, we expect interest income to fluctuate with the change in our cash, cash equivalents and restricted cash deposits.

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PART I — FINANCIAL INFORMATION (continued)

Insurance proceeds in excess of losses incurred

Insurance proceeds in excess of losses incurred for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, was ~~$236,754~~$103,487 compared to ~~$391,519~~$66,723 for the ~~nine~~three months ended ~~September 30, 2019. The decrease of $154,765 was primarily due to a decrease in the number of~~March 31, 2020. In general, we expect insurance ~~claims’~~ proceeds in excess of losses ~~incurred.~~incurred to be correlated to the volume and severity of insurance related incidents at our multifamily properties.

Equity in loss from unconsolidated joint venture

Equity in loss from unconsolidated joint venture for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, was ~~$3,020,111~~$0 compared to $0$35,193 for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. Upon consummation of the SIR Merger on March 6, 2020, we acquired a 10% interest in a joint venture. Our investment in the joint venture ~~has~~had been accounted for as an unconsolidated joint venture under the equity method of accounting. ~~During the prior quarter,~~On July 16, 2020, we ~~determined that~~sold our ~~investment in the~~ joint venture ~~was~~

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

other-than-temporarily impaired due to the decrease in the fair value of the joint venture as evidenced by the cash consideration agreed upon pursuant to an agreement to sell the joint venture on July 16, 2020. In the nine months ended September 30, 2020, we recorded an OTTI of $0.interest. See Note 5 (Investment in Unconsolidated Joint Venture) to our ~~condensed~~ consolidated ~~unaudited~~ financial statements in this ~~quarterly report~~Quarterly Report for details.

Fees and other income from affiliates

Fees and other income from affiliates for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, was ~~$390,099~~$1,457,921 compared to $0 for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. The increase of ~~$390,099~~$1,457,921 was ~~solely~~ due to income earned pursuant to the ~~SRI~~ Property Management Agreements and Construction Management Agreements with affiliates of our former sponsor and the Transition Services Agreement entered into in connection with the Internalization Transaction. See Note 10 (Related Party Arrangements) to our ~~condensed~~ consolidated ~~unaudited~~ financial statements in this ~~quarterly report for details~~Quarterly Report for details.

~~Loss~~For information on ~~debt extinguishment~~

~~Loss on debt extinguishment~~our results of operations for the ~~nine~~three months ended ~~September 30,~~March 31, 2020, ~~was $621,451~~ compared to ~~$41,609 for~~ the ~~nine~~three months ended September 30, 2019. The expenses incurred during the nine months ended September 30, 2020 consisted of prepayment penalty and the expenses of the unamortized deferred financing costs related to the repayment and extinguishment of the debt in connectionMarch 31, 2019, see our Quarterly Report on Form 10-Q filed with the ~~sale of one multifamily property during the nine months ended September 30,~~SEC on May 14, 2020. ~~The loss on debt extinguishment will vary in future periods if we repay the remaining outstanding principal prior to the scheduled maturity dates of the notes payable.~~

Property Operations for the Three Months Ended ~~September 30, 2020,~~March 31, 2021 Compared to the Three Months Ended ~~September 30, 2019~~March 31, 2020

For purposes of evaluating comparative operating performance, we categorize our properties as “same-store” or “non-same-store.” A “same-store” property is a property that was owned at ~~July~~January 1, ~~2019.~~2020. A “non-same-store” property is a property that was acquired, placed into service or disposed of after ~~July~~January 1, ~~2019.~~2020. As of ~~September 30, 2020,~~March 31, 2021, 31 of our properties were categorized as same-store properties.

The following table presents the same-store and non-same-store results from operations for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:


		For the Three Months Ended September 30,									For the Three Months Ended March 31,
		2020		2019		Change $		Change %			2021		2020		Change $		Change %
Same-store properties:	Same-store properties:									Same-store properties:
Revenues	Revenues	$	42,638,583	$	41,697,941	$	940,642	2.3	%	Revenues	$	42,777,530	$	41,864,622	$	912,908	2.2	%
Operating expenses(1)	Operating expenses(1)	17,761,918		18,730,939		(969,021)		(5.2)	%	Operating expenses(1)	16,984,696		17,942,636		(957,940)		(5.3)	%
Net operating income	Net operating income	24,876,665		22,967,002		1,909,663		8.3	%	Net operating income	25,792,834		23,921,986		1,870,848		7.8	%

Non-same-store properties:	Non-same-store properties:									Non-same-store properties:
Net operating income	Net operating income	21,642,356		1,150,364		20,491,992				Net operating income	22,744,685		6,203,039		16,541,646

Total Net operating income(2)		$	46,519,021	$	24,117,366	$	22,401,655
Total net operating income(2)										Total net operating income(2)	$	48,537,519	$	30,125,025	$	18,412,494

________________

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

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

~~Table of Contents~~

~~PART I — FINANCIAL INFORMATION (continued)~~

Net Operating Income

Same-store net operating income for the three months ended ~~September 30, 2020,~~March 31, 2021, was ~~$24,876,665~~$25,792,834 compared to ~~$22,967,002~~$23,921,986 for the three months ended ~~September 30, 2019.~~March 31, 2020. The ~~8.3%~~7.8% increase in same-store net operating income was a result of a ~~5.2%~~2.2% increase in same-store rental revenues and a 5.3% decrease in same-store operating ~~expenses and an a 2.3% increase in same-store rental revenues.~~expenses.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Revenues

Same-store revenues for the three months ended ~~September 30, 2020,~~March 31, 2021, were ~~$42,638,583~~$42,777,530 compared to ~~$41,697,941~~$41,864,622 for the three months ended ~~September 30, 2019.~~March 31, 2020. The ~~2.3%~~2.2% increase in same-store revenues was primarily ~~a result of an~~due to the increase in same-store occupancy from ~~94.4%~~93.9% for the same-store properties as of ~~September 30, 2019,~~March 31, 2020 to ~~96.7%~~95.2% as of ~~September 30, 2020 and ordinary monthly rent increases and monthly rent increases from the completion of value-enhancement projects.~~March 31, 2021.

Operating Expenses

Same-store operating expenses for the three months ended ~~September 30, 2020,~~March 31, 2021, were ~~$17,761,918~~$16,984,696 compared to ~~$18,730,939~~$17,942,636 for the three months ended ~~September 30, 2019.~~March 31, 2020. The 5.3% decrease in same-store operating expenses was primarily attributable to a net decrease in ~~property~~affiliate management fees ~~in connection with~~as a result of the Internalization Transaction ~~in addition~~and, to a ~~decreases~~lesser extent, the net decrease in ~~payroll costs, property related~~property-level general and administrative ~~expenses,~~costs and property taxes, partially offset by an increase in repairs and maintenance expenses, utilities expenses and turnover expenses ~~during~~across the ~~three months ended September 30, 2020, compared to the three months ended September 30, 2019.~~same-store properties.

Net Operating Income

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

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

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

NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income (loss) as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income (loss) computed in accordance with GAAP and discussions elsewhere in “—Results of Operations” regarding the components of net income (loss) that are eliminated in the calculation of NOI. Other companies may

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use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.

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The following is a reconciliation of our NOI to net loss for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ computed in accordance with GAAP:


		For the Three Months Ended September 30,				For the Nine Months Ended September 30,					For the Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Net loss	Net loss	$	(37,758,065)	$	(10,389,806)	$	(100,500,501)	$	(34,742,088)	Net loss	$	(14,809,563)	$	(9,681,128)
Fees to affiliates(1)	Fees to affiliates(1)	5,648,468		4,733,579		21,143,650		13,067,907		Fees to affiliates(1)	—		5,843,389
Depreciation and amortization	Depreciation and amortization	47,564,706		18,632,477		129,596,268		55,430,404		Depreciation and amortization	33,874,505		28,575,896
Interest expense	Interest expense	20,628,159		12,562,978		54,734,431		36,962,055		Interest expense	19,807,678		14,390,954
Loss on debt extinguishment		621,451		—		621,451		41,609

General and administrative expenses	General and administrative expenses	11,775,591		2,216,129		19,478,747		5,881,278		General and administrative expenses	11,325,410		2,430,299

Gain on sale of real estate	Gain on sale of real estate	(1,392,434)		(3,329,078)		(12,777,033)		(3,329,078)		Gain on sale of real estate	—		(11,384,599)
Other gains(2)	Other gains(2)	(277,837)		(308,913)		(789,765)		(984,311)		Other gains(2)	(208,506)		(319,977)
Adjustments for investment in unconsolidated joint venture(3)	Adjustments for investment in unconsolidated joint venture(3)	163,001				1,816,220		—		Adjustments for investment in unconsolidated joint venture(3)	—		270,191
Other-than-temporary impairment of investment in unconsolidated joint venture(4)		—		—		2,442,411		—
Impairment of real estate(5)		—		—		5,039,937		—

Fees and other income from affiliates~~(6)~~(4)	Fees and other income from affiliates~~(6)~~(4)	(390,099)		—		(390,099)		—		Fees and other income from affiliates~~(6)~~(4)	(1,457,921)		—
Property-level workers’ comp expenses(7)		(69,893)		—		(69,893)		—

Affiliated rental revenue~~(8)~~(5)	Affiliated rental revenue~~(8)~~(5)	5,973		—		5,973		—		Affiliated rental revenue~~(8)~~(5)	5,916		—
Net operating income	Net operating income	$	46,519,021	$	24,117,366	$	120,351,797	$	72,327,776	Net operating income	$	48,537,519	$	30,125,025

~~____________________~~________________

(1)Fees to affiliates for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, exclude property management fees of ~~$1,618,611~~$4,287 and ~~$5,484,468~~$1,496,370 and other reimbursements of ~~$1,182,636~~$0 and ~~$3,958,226,~~$1,087,537, respectively, ~~that~~which are included in NOI. Fees to affiliates for the three and nine months ended September 30, 2019, exclude property management fees of $1,276,621 and $3,756,048 and other reimbursements of $907,103 and $2,424,954, respectively, that are included in NOI.

(2)Other gains for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ include non-recurring insurance claim recoveries and interest income ~~that~~which are not included in NOI.

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

(4) Reflects adjustment to add back OTTI of $2,442,411 in the nine months ended September 30, 2020 related to our investment in the Joint Venture. See Note 5 (Investment in Unconsolidated Joint Venture) to our condensed consolidated unaudited financial statements in this quarterly report for details.

(5) Reflects adjustments to add back impairment charges in the three and nine months ended September 30, 2020 related to two of our real estate assets. See Note 4 (Real Estate) to our condensed consolidated unaudited financial statements in this quarterly report for details.

~~(6)~~ Reflects adjustment to add back income earned pursuant to the Transition Services Agreement with SIP and Property Management Agreements and Construction Management Agreements between SRS and affiliates of our former sponsor, entered into in connection with the Internalization Transaction.

~~(7) Reflects adjustment to reflect workers’ comp expenses incurred by the properties.~~

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~~(8)~~ Reflects adjustment to add back rental revenue earned from a consolidated entity following the Internalization Transaction ~~that~~which represent intercompany ~~transaction that is~~transactions eliminated in consolidation.

Funds from Operations and Modified Funds from Operations

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

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

In calculating FFO, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying, or book value, exceeds

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the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. We adopted Accounting Standards Update, or ASU, 2016-02, Leases, or ASU 2016-02 on January 1, 2019, which requires us, as a lessee, to recognize a liability for obligations under a lease contract and a right-of-use, ~~asset. ASU 2017-01 now forms part of Accounting Standards Codification,~~ or ~~ASC 805,~~ ~~Business Combinations, or ASC 805.~~ROU, asset. The carrying amount of the ~~right-of-use~~ROU asset is amortized over the term of the lease. Because we have no ownership rights (current or residual) in the underlying asset, NAREIT concluded that the amortization of the ~~right-of-use~~ROU asset should not be added back to GAAP net income (loss) in calculating FFO. This amortization expense is included in FFO. The White Paper also states that non-real estate depreciation and amortization such as computer software, company office improvements, furniture and fixtures, and other items commonly found in other industries are required to be recognized as expenses by GAAP in the calculation of net income and, similarly, should be included in FFO.

However, FFO, and MFFO as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method

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utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

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

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

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with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our offering has been completed and properties have been acquired, as it excludes acquisition costs that have a negative effect on our operating performance during the periods in which properties are acquired.

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

Our MFFO calculation complies with the ~~IPA’s~~ Practice Guideline described above, except with respect to certain acquisition fees and expenses as discussed below. In calculating MFFO, we exclude acquisition related expenses, amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Historically under GAAP, acquisition fees and expenses were characterized as operating expenses in determining operating net income. However, ~~following the publication of ASU 2017-01, which now forms part of~~pursuant to Accounting Standards Codification, or ASC 805-50, Business Combinations — Related Issues, or ASC 805, acquisition fees and expenses are capitalized and depreciated under certain conditions. ~~These~~Prior to the completion of the Internalization Transaction, these expenses ~~are~~were paid in cash by us. All paid ~~and accrued~~ acquisition fees and expenses ~~will have~~had negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties ~~are~~were generated to cover the purchase price of the property, these fees and

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expenses and other costs related to such property. The acquisition of properties, and the corresponding acquisition fees and expenses, iswas the key operational feature of our business plan to generate operational income and cash flow to fund distributions to its stockholders. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of derivatives and gains and losses from dispositions of assets as non-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective of on-going operations and are therefore typically adjusted for when assessing operating performance.

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

Presentation of this information is intended to provide useful information to investors as they compare the operating performance to that of other public, non-listed REITs, although it should be noted that not all public, non-listed REITs calculate FFO and MFFO the same way, so comparisons with other public, non-listed REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash

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needs, including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. MFFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining MFFO.

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

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Our calculation of FFO and MFFO is presented in the following table for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:


		For the Three Months Ended September 30,				For the Nine Months Ended September 30,					For the Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Reconciliation of net loss to MFFO:	Reconciliation of net loss to MFFO:									Reconciliation of net loss to MFFO:
Net loss	Net loss	$	(37,758,065)	$	(10,389,806)	$	(100,500,501)	$	(34,742,088)	Net loss	$	(14,809,563)	$	(9,681,128)
Depreciation of real estate assets	Depreciation of real estate assets	33,055,972		18,631,573		89,122,949		55,429,500		Depreciation of real estate assets	33,044,052		22,751,822
Amortization of lease-related costs(1)	Amortization of lease-related costs(1)	14,431,485		—		40,392,592		—		Amortization of lease-related costs(1)	607,276		5,822,805
Gain on sale of real estate, net	Gain on sale of real estate, net	(1,392,434)		(3,329,078)		(12,777,033)		(3,329,078)		Gain on sale of real estate, net	—		(11,384,599)
Impairment of real estate(2)		—		—		5,039,937		—
Impairment of unconsolidated joint venture(3)		—		—		2,442,411		—
Adjustments for investment in unconsolidated joint venture(4)		93,562		—		1,272,904		—

Adjustments for investment in unconsolidated joint venture(2)										Adjustments for investment in unconsolidated joint venture(2)	—		169,483
FFO	FFO	8,430,520		4,912,689		24,993,259		17,358,334		FFO	18,841,765		7,678,383
Acquisition fees and expenses~~(6)~~(4)	Acquisition fees and expenses~~(6)~~(4)	6,137,923		687,561		7,495,352		1,496,029		Acquisition fees and expenses~~(6)~~(4)	75,995		13,148
Unrealized loss on derivative instruments		29,093		24,144		56,287		223,867
Unrealized (gain) loss on derivative instruments										Unrealized (gain) loss on derivative instruments	(10,820)		2,251

Loss on debt extinguishment		621,451		—		621,451		41,609

Amortization of below market leases	Amortization of below market leases	(1,671)		—		(4,265)		—		Amortization of below market leases	(1,671)		(922)
MFFO	MFFO	$	15,217,316	$	5,624,394	$	33,162,084	$	19,119,839	MFFO	$	18,905,269	$	7,692,860

~~________________~~_________________

(1)Amortization of lease-related costs for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ exclude amortization of operating lease ~~right-of-use~~ROU assets of $3,367 and ~~$6,845 and $904 and $904,~~$1,269, respectively, and the amortization of Property Management Agreements acquired in connection with the Internalization Transaction of ~~$71,392 and $71,392~~$206,811 and $0, ~~and $0, respectively, that is~~which are included in FFO, respectively.

(2)Reflects adjustments to add back impairment charges in the three and nine months ended September 30, 2020 related to two of our real estate assets. See Note 4 (Real Estate) to our condensed consolidated unaudited financial statements in this quarterly report for details.

~~(3)~~Reflects adjustments to add back impairment charges in the three and nine months ended September 30, 2020 related to our investment in our unconsolidated joint venture. See Note 5 (Investment in Unconsolidated Joint Venture) to our condensed consolidated unaudited financial statements in this quarterly report for details.

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

~~(5)~~(3)By excluding expensed acquisition costs that are not capitalized, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our ~~former advisor~~Former Advisor or third ~~parties. Historically under GAAP, acquisition fees~~parties and expenses were considered operating expenses and as expenses included in the determination of net income (loss) and income (loss) from continuing operations, both of which are performance measures under GAAP. Following the publication of ASU 2017-01, which now forms part of ASC 805, acquisition fees and expenses are capitalized and depreciated under certain conditions. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to its stockholders.

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~~(6)~~(4)Acquisition fees and expenses for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019~~ include acquisition expenses of ~~$6,137,923~~$75,995 and ~~$7,495,352 and $687,561 and $1,496,029,~~$13,148, respectively, ~~that~~which did not meet the criteria for capitalization under ~~ASU 2017-01, which now forms part of~~ ASC 805, and were recorded in general and administrative expenses in the accompanying consolidated statements of operations. These expenses largely pertained to professional services fees incurred in connection with the ~~proposed internalization~~ongoing pursuit of ~~management~~strategic alternatives and ~~to a lesser extent,~~ the then-proposed SIR Merger and STAR III Merger and were incurred and expensed through the date of the Merger Agreement. Upon signing the Merger Agreement, merger related acquisition expenses met the definition of capitalized expenses and were therefore capitalized in the accompanying consolidated balance sheets thereby not impacting MFFO. Also included in expensed acquisition expenses are acquisition expenses related to real estate projects ~~that~~which did not come to fruition.

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

~~Off-Balance Sheet Arrangements~~

As of September 30, 2020, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Related-Party Transactions and Agreements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We may be exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund the acquisition, expansion and refinancing of our real estate investment portfolio and operations. We may be also exposed to the effects of changes in interest rates as a result of the acquisition and origination of mortgage, mezzanine, bridge and other loans. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We have managed and will continue to manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that floating rate exposure is kept at an acceptable level. In addition, we may utilize a variety of financial instruments, including interest rate caps, collars, floors and swap agreements, in order to limit the effects of changes in interest rates on our operations. When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for distributions to holders of our common stock and that the losses may exceed the amount we invested in the instruments.

We borrow funds and make investments at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. At ~~September 30, 2020,~~March 31, 2021, the fair value of our fixed rate debt was ~~$2,030,246,920~~$1,941,195,233 and the carrying value of our fixed rate debt was ~~$1,877,022,100.~~$1,854,566,101. The fair value estimate of our fixed rate debt was estimated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated at ~~September 30, 2020.~~March 31, 2021. As we expect to hold our fixed rate instruments to maturity and the amounts due under such instruments would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instruments, would have a significant impact on our operations.

Conversely, movements in interest rates on our variable rate debt will change our future earnings and cash flows, but not significantly affect the fair value of those instruments. However, changes in required risk premiums will result in changes in the fair value of floating rate instruments. At ~~September 30, 2020,~~March 31, 2021, the fair value of our variable rate debt was ~~$258,931,725~~$272,519,098 and the

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~~PART I — FINANCIAL INFORMATION (continued)~~

carrying value of our variable rate debt was ~~$269,018,991.~~$277,360,137. Based on interest rates as of ~~September 30, 2020,~~March 31, 2021, if interest rates are 100 basis points higher during the 12 months ending ~~September 30, 2021,~~March 31, 2022, interest expense on our variable rate debt would increase by ~~$2,767,325~~$2,854,691 and if interest rates are 100 basis points lower during the 12 months ending ~~September 30, 2021,~~March 31, 2022, interest expense on our variable rate debt would decrease by ~~$396,398.~~$300,628.

At ~~September 30, 2020,~~March 31, 2021, the weighted-average interest rate of our fixed rate debt and variable rate debt was 3.95% and ~~2.15%~~2.11%, respectively. The weighted-average interest rate of our blended fixed and variable rates was ~~3.72%~~3.71% at ~~September 30, 2020.~~March 31, 2021. The weighted-average interest rate represents the actual interest rate in effect at ~~September 30, 2020~~March 31, 2021 (consisting of the contractual interest rate), using interest rate indices as of ~~September 30, 2020,~~March 31, 2021, where applicable.

We may also be exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and, therefore, do not have credit risk. We will seek to minimize the credit risk in derivative instruments by entering into transactions with high-quality counterparties. As of ~~September 30, 2020,~~March 31, 2021, we did not have counterparty risk on our interest rate cap agreements as the underlying variable rates for each of our interest rate cap agreements as of ~~September 30, 2020~~March 31, 2021 were not in excess of the capped rates. See also Note 14 (Derivative Financial Instruments) to our ~~unaudited~~ consolidated financial statements included in this ~~quarterly report.~~Quarterly Report.

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PART I — FINANCIAL INFORMATION (continued)

Item 4. Controls and Procedures

Disclosure Controls and Procedures

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

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, an evaluation as of ~~September 30, 2020,~~March 31, 2021, was conducted under the supervision and with the participation of our management, including our chief executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and principal financial officer concluded that our disclosure controls and procedures, as of ~~September 30, 2020,~~March 31, 2021, were effective at the reasonable assurance level.

Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended ~~September 30, 2020,~~March 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

PART II

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

~~Except as noted below, there~~There have been no material changes to the risk factors contained in Part I, Item 1A set forth in our Annual Report on Form 10-K filed with the SEC on March 12, ~~2020.~~

~~We are newly self-managed.~~

As a result of the Internalization Transaction, we are a self-managed REIT. We no longer bear the costs of the various fees and expense reimbursements previously paid to the Former Advisor and its affiliates; however, our expenses include the compensation and benefits of our officers, employees and consultants, as well as overhead previously paid by the Former Advisor and its affiliates. Our employees provide services historically provided by the Former Advisor and its affiliates. We are subject to potential liabilities that are commonly faced by employers, such as workers’ disability and compensation claims, potential labor disputes, and other employee-related liabilities and grievances, and we bear the cost of the establishment and maintenance of any employee compensation plans. In addition, we have not previously operated as a self-managed REIT and may encounter unforeseen costs, expenses, and difficulties associated with providing these services on a self-advised basis. If we incur unexpected expenses as a result of our self-management, our results of operations could be lower than they otherwise would have been.

The current outbreak of COVID-19 has caused severe disruptions in the U.S. and global economy and will likely have an adverse impact on our financial condition and results of operations. This impact could be materially adverse to the extent the current COVID-19 outbreak, or future pandemics, cause residents to be unable to pay their rent, or cause other impacts described below.

In December 2019, a novel strain of COVID-19 was reported to have surfaced in Wuhan, China. COVID-19 has since spread to over 100 countries, including the United States. COVID-19 has also spread to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19.

The outbreak of COVID-19 in many countries, including the United States, continues to adversely impact global economic activity and has contributed to volatility and negative pressure in financial markets. The global impact of the outbreak rapidly evolved and, as cases of the virus continued to be identified in additional countries, many countries, including the United States, reacted by instituting shelter in place orders, quarantines and restrictions on travel. During the third quarter of 2020, businesses reopened with certain capacity limits in place. During the same period the rate of unemployment fell. However, there are currently concerns of a “second wave” of the pandemic that could lead to increased economic uncertainty.

The COVID-19 outbreak has had, and future pandemics could have, an adverse impact on economic and market conditions of economies around the world, including the United States, and has triggered a period of global economic slowdown or global recession.

~~The effects of COVID-19 or another pandemic could adversely affect us and/or our residents due to, among other factors:~~

•the unavailability of personnel, including executive officers and other leaders that are part of the management team, and the inability to recruit, attract and retain skilled personnel, to the extent management or personnel are impacted in significant numbers by the outbreak of pandemic or epidemic disease and are not available or allowed to conduct work-business and operating results may be negatively impacted;

•difficulty accessing debt and equity capital on attractive terms, or at all, a severe disruption and instability in the global financial markets or deterioration in credit and financing conditions may affect our ability to access capital necessary to fund business operations or replace or renew maturing liabilities on a timely basis, and may adversely affect the valuation of financial assets and liabilities, any of which could affect our ability to meet liquidity and capital expenditure requirements or have a material adverse effect on our business, financial condition, results of operations and cash flows;

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~~PART II — OTHER INFORMATION (continued)~~

•~~an inability to operate in affected areas, or delays in the supply of products or services from the vendors that are needed to operate effectively;~~

•residents’ inability to pay rent on their leases or our inability to re-lease space that is or becomes vacant, which inability, if extreme, could cause us to: (i) no longer be able to pay distributions at our current rates or at all in order to preserve liquidity and (ii) be unable to meet our debt obligations to lenders, which could cause us to lose title to the properties securing such debt, trigger cross-default provisions, or could cause us to be unable to meet debt covenants, which could cause us to have to sell properties or refinance debt on unattractive terms;

•~~an inability to ensure business continuity in the event our continuity of operations plan is not effective or improperly implemented or deployed during a disruption;~~

•~~our inability to deploy capital due to slower transaction volume which may be dilutive to shareholders; and~~

•~~our inability to satisfy repurchase requests and preserve liquidity, if demand for repurchases exceeds the limits of our share repurchases program or ability to fund repurchases.~~

Because our property investments are located in the United States, COVID-19 has, and will likely, continue to impact our properties and operating results, leading to potential reductions in occupancy, increases in costs of operation and limited hours or closure of such properties. In addition, future quarantines, states of emergencies and other measures taken to curb the spread of COVID-19 may negatively impact the ability of such properties to continue to obtain necessary goods and services or provide adequate staffing, which may also adversely affect our properties and operating results.

Residents and potential residents of the properties we own operate in industries that are being adversely affected by the disruption to business caused by this global outbreak. Residents or operators have been, and may in the future be, required to suspend operations at our properties for what could be an extended period of time. For residents impacted by COVID-19, we have agreed to provide certain rent relief. We continue to evaluate the impact of our rent relief programs and the appropriate accounting policy elections to be applied to the COVID-19 Payment Plans.

The ongoing impact of COVID-19 could lead to increased rent delinquencies and/or defaults under leases, a lower demand for rentable space leading to increased concessions or lower occupancy, and/or tenant improvement expenditures, or reduced rental rates to maintain occupancies. Our operations could be materially negatively affected if the economic downturn is prolonged, which could adversely affect our operating results, ability to pay our distributions, our ability to repay or refinance our debt, and the value of our shares.

The continued fluidity of this situation precludes any prediction as to the ultimate impact of COVID-19. The full extent of the impact and effects of COVID-19 on our future financial performance, as a whole, and, specifically, on our real estate investments are uncertain at this time. The impact will depend on future developments, including, among other factors, the duration and spread of the outbreak, along with related travel advisories and restrictions and the uncertainty with respect to the duration of the global economic slowdown. COVID-19 and the current financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect to our performance, financial condition, results of operations, cash flows, and value of our shares.

The current outbreak of COVID-19 and resulting impacts on the U.S. economy and financial markets has created extreme uncertainty and volatility with respect to the current and future values of real estate, and therefore our estimated value per share, as well as the market value of our debt. As a result, our estimated value per share may not reflect the actual realizable value of our underlying properties at any given time or the market value of our debt.

The current outbreak of COVID-19 and the resulting impacts on the U.S. economy and financial markets have created uncertainty and volatility with respect to the current and future values of real estate and real estate-related assets, borrowings and hedges. The COVID-19 pandemic is expected to continue to have a significant impact on local, national and global economies. The ultimate fallout from the ongoing pandemic on our investments is uncertain. In addition, slower transaction volume has resulted in less data for assessing real estate values. This increases the risk that our estimated value per share may not reflect the actual realizable value of our underlying properties at any given time, as valuations and appraisals of our properties and real estate-related assets are only estimates of market value as of March 6, 2020, and may not reflect the changes in values resulting from the COVID-19 pandemic, as this impact is occurring rapidly and is not immediately quantifiable. To the extent real estate values decline after the date we disclose our estimated value, whether due to the COVID-19 outbreak or otherwise, (i) we may overpay to repurchase our shares, and (ii) investors investing in our distribution reinvestment plan may overpay for their investment in our common stock, which would heighten their risk of loss. Furthermore, because we generally do not mark to market our property-level mortgages and corporate-level credit facilities that are intended to be held to maturity

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~~PART II — OTHER INFORMATION (continued)~~

or our associated interest rate cap agreements that are intended to be held to maturity, the realizable value of our company or our assets that are encumbered by debt may be higher or lower than the value used in the calculation of our estimated net assets value. This risk may be exacerbated by the current market volatility, which can lead to large and sudden swings in the fair value of our assets and liabilities.

~~Legislative or regulatory action could adversely affect the returns to our investors.~~

In recent years, numerous legislative, judicial and administrative changes have been made to the U.S. federal income tax laws applicable to investments in real estate and REITs, including the passage of the Tax Cuts and Jobs Act of 2017. Federal legislation intended to ameliorate the economic impact of the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, has been enacted that makes technical corrections to, or modifies on a temporary basis, certain of the provisions of the Tax Cut and Jobs Act of 2017, and it is possible that additional such legislation may be enacted in the future. The full impact of the Tax Cuts and Jobs Act of 2017 and the CARES Act may not become evident for some period of time. In addition, there can be no assurance that future changes to the U.S. federal income tax laws or regulatory changes will not be proposed or enacted that could impact our business and financial results. The REIT rules are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department, which may result in revisions to regulations and interpretations in addition to statutory changes. If enacted, certain of such changes could have an adverse impact on our business and financial results.

Although REITs generally receive better tax treatment than entities taxed as regular corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be treated for U.S. federal income tax purposes as a regular corporation. As a result, our charter provides our board of directors with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a regular corporation, without the vote of our stockholders. Our board of directors has fiduciary duties to us and could only cause such changes in our tax treatment if it determines in good faith that such changes are in our best interests.

We urge you to consult with your own tax advisor with respect to the status of any legislative, regulatory or administrative developments and proposals and their potential effect on an investment in shares of our common stock.2021.

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

On July 1, 2020, we issued 93,796 shares of common stock to our Former Advisor as payment for monthly investment management fees for the month of June 2020, pursuant to the advisory agreement with our former advisor. The above shares were issued in transactions exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

On August 3, 2020, we issued 97,533.61 shares of common stock to our Former Advisor as payment for monthly investment management fees for the month of July 2020, pursuant to the advisory agreement with our former advisor. The above shares were issued in transactions exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

On September 1, 2020, we issued 92,792.17 shares of common stock to our Former Advisor as payment for monthly investment management fees for the month of August 2020, pursuant to the advisory agreement with our former advisor. The above shares were issued in transactions exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

~~On September 1, 2020,~~March 15, 2021, we granted ~~187,130.67~~97,235 shares of restricted stock to our key employees. The grants to key employees were made pursuant to restricted stock grant agreements. The above shares were issued in transactions exempt from registration pursuant to Section 4(a)(2) of the Securities Act. The grants vest ~~50% on the second anniversary of~~ratably over three years following the grant date, ~~and 50% on the third anniversary of the grant date.~~

~~On September 1, 2020, we issued 6,155,613.92 Class B OP Units of limited partnership interests in the Current Operating Partnership to SRI pursuant~~subject to the ~~Internalization Transaction. The above shares were issued in transactions exempt from registration pursuant to Section 4(a)(2) of~~executive’s continuous employment through the ~~Securities Act.~~

~~On September 29, 2020, we issued 67.14 shares of common stock to our Former Advisor as an adjustment for the August 2020 monthly investment management fees, pursuant to the advisory agreement~~applicable vesting dates, with ~~our former advisor. The above shares were issued in transactions exempt from registration pursuant to Section 4(a)(2) of the Securities Act.~~

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~~PART II — OTHER INFORMATION (continued)~~

certain exceptions.

During the three months ended ~~September 30, 2020,~~March 31, 2021, we fulfilled repurchase requests and repurchased shares of our common stock pursuant to our share repurchase plan as follows:

Total Number of Shares Requested to be Repurchased(1)
Total Number of Shares Repurchased
Average Price Paid per Share(2)(3)
Approximate Dollar Value of Shares Available That May Yet Be Repurchased Under the Program
July 2020 794,050 282,483 14.16 (4)
August 2020 447,866 — — (4)
September 2020 326,992 — — (4)
1,568,908 282,483


	Total Number of Shares Requested to be Repurchased(1)	Total Number of Shares Repurchased	Average Price Paid per Share(2)(3)		Approximate Dollar Value of Shares Available That May Yet Be Repurchased Under the Program
January 2021	45,098	282,477	$	14.16	(4)
February 2021	55,737	—	—		(4)
March 2021	57,390	—	—		(4)
	158,225	282,477

____________________

(1)We generally repurchase shares approximately 30 days following the end of the applicable quarter in which requests were received. ~~As of September 30, 2020,~~At March 31, 2021, we had ~~$4,000,000,~~$2,287,931, representing ~~281,220~~158,225 shares of outstanding and unfulfilled repurchase requests, all of which were fulfilled on ~~October~~April 30, ~~2020.~~2021.

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

(3)From inception through ~~September 30, 2020,~~March 31, 2021, our share repurchases have been funded exclusively from the net proceeds we received from the sale of shares under our distribution reinvestment plan.

(4)We are not obligated to repurchase shares of our common stock under the share repurchase plan. In no event will repurchases under the share repurchase plan exceed 5% of the weighted average number of shares of common stock outstanding during the prior calendar year or the ~~$2,000,000~~$3,000,000 limit for any ~~quarter, which increased~~quarter. Share repurchases are only available to ~~$4,000,000 beginning with April 30, 2020 repurchase date and set the repurchase price in all instances (ordinary and~~ qualifying death or ~~disability) to an amount equal to 93% of~~disability requests, beginning with the ~~most recent publicly disclosed estimated value per share.~~April 30, 2021 repurchase date.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

~~Item5. Other Information~~

~~None.~~

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PART II — OTHER INFORMATION (continued)

Item5. Other Information

None.

Item 6. Exhibits

EXHIBIT LIST


Exhibit						Description
2.1						Agreement and Plan of Merger, dated as of August 5, 2019, by and among Steadfast Apartment REIT, Inc., Steadfast Apartment REIT Operating Partnership, L.P., SI Subsidiary, LLC, Steadfast Income REIT, Inc. and Steadfast Income REIT Operating Partnership, L.P. (included as Exhibit 2.1 to the Company’s Current Report on Form 8-K (File No. 000-55428) filed with the SEC on August 6, 2019, and incorporated herein by reference).
2.2						Agreement and Plan of Merger, dated as of August 5, 2019, by and among Steadfast Apartment REIT, Inc., Steadfast Apartment REIT Operating Partnership, L.P., SIII Subsidiary, LLC, Steadfast Apartment REIT III, Inc. and Steadfast Apartment REIT III Operating Partnership, L.P. (included as Exhibit 2.2 to the Company’s Current Report on Form 8-K (File No. 000-55428) filed with the SEC on August 6, 2019, and incorporated herein by reference).
2.3						Agreement and Plan of Merger dated as of August 28, 2020, by and between Steadfast Income REIT Operating Partnership, L.P. and Steadfast Apartment REIT Operating Partnership, L.P. (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K (File No. 000-55428) filed with the SEC on September 3, 2020).
~~2.2~~2.4						Agreement and Plan of Merger dated as of August 28, 2020, by and between Steadfast Apartment REIT Operating Partnership, L.P. f/k/a Steadfast Income REIT Operating Partnership, L.P. and Steadfast Apartment REIT III Operating Partnership, L.P. 2020 (incorporated by reference to Exhibit 2.2 to the Registrant’s Current Report on Form 8-K (File No. 000-55428) filed with the SEC on September 3, 2020).
~~2.3~~2.5						Contribution and Purchase Agreement by and among Steadfast Apartment REIT Operating Partnership, L.P., as Contributee, Steadfast Apartment REIT, Inc. and Steadfast REIT Investments, LLC, as Contributor, dated as of August 31, 2020 (incorporated by reference to Exhibit 2.3 to the Registrant’s Current Report on Form 8-K (File No. 000-55428) filed with the SEC on September 3, 2020).
3.1						Articles of Amendment and Restatement of Steadfast Apartment REIT, Inc. (incorporated by reference to Exhibit 3.1 to ~~Pre-Effective~~ Amendment No. 3 to the Registrant’s Registration Statement on Form S-11, filed December 16, 2013, Commission File No. ~~333-191049)~~333-191049 (“Form S-11 Amendment No. 3”))
3.2						Bylaws of Steadfast Apartment REIT, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form S-11, filed September 6, 2013, Commission File No. 333-191049)
4.1						Form of Subscription Agreement (incorporated by reference to Appendix B to the prospectus, dated April 15, 2015, of the Registrant)
4.2						Form of Distribution Reinvestment Plan (incorporated by reference to Appendix C to the prospectus, dated April 15, 2015, of the Registrant)

~~4.2~~4.3						Form of Redemption Request Form (incorporated by reference to Appendix D to the prospectus, dated April 15, 2015, of the Registrant)
~~4.3~~4.4						Form of Application for Transfer (incorporated by reference to Appendix E to the prospectus, dated April 15, 2015, of the Registrant)
4.5						Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Exhibit 4.1 to Post-Effective Amendment No. 12 to Form S-11 on Form S-3, filed April 5, 2016, Commission File No. ~~333-191049~~333-191049)
4.6						Account Update Form (incorporated by reference to Appendix A to Post-Effective Amendment No. 12 to Form S-11 on Form S-3, filed April 5, 2016, Commission File No. 333-191049)
4.7*						Form of Restricted Stock Award Agreement



















10.1						~~Second Amended~~Amendment No. 1 to Transition Services Agreement, by and ~~Restated Limited Partnership of~~between Steadfast Apartment REIT, ~~Operating Partnership, L.P.~~Inc. and Steadfast Investment Properties, Inc., dated as of ~~August 28, 2020~~March 22, 2021 (included as Exhibit 10.1 to the ~~Registrant~~’sRegistrant’s Current Report on Form 8-K (File No. 000-55428) filed with the SEC on ~~September 3, 2020,~~March 25, 2021, and incorporated herein by reference).
10.2						~~Joinder~~Form of Indemnification Agreement made and entered into as of August 31, 2020, by and among Steadfast Apartment Advisor, LLC, Steadfast Apartment REIT, Inc. and Steadfast Apartment REIT Operating Partnership, L.P. f/k/a Steadfast Income REIT Operating Partnership, L.P. (included as Exhibit 10.2 to the ~~Registrant~~’sRegistrant’s Current Report on Form 8-K (File No. 000-55428) filed with the SEC on ~~September 3, 2020,~~March 25, 2021, and incorporated herein by reference).
~~10.3~~						Amendment No. 1 to the Amended and Restated Advisory Agreement made and entered into as of August 31, 2020, by and among Steadfast Apartment REIT, Inc., Steadfast Apartment Advisor, LLC, and Steadfast Apartment REIT Operating Partnership, L.P. f/k/a Steadfast Income REIT Operating Partnership, L.P. (included as Exhibit 10.3 to the Registrant ’~~s Current Report on Form 8-K (File No. 000-55428) filed with the SEC on September 3, 2020, and incorporated herein by reference)~~
~~10.4~~						~~Transition Services Agreement, by and between Steadfast Apartment REIT, Inc. and Steadfast Income Properties, Inc., dated as of August 31, 2020 (included as Exhibit 10.4 to the Registrant~~’~~s Current Report on Form 8-K (File No. 000-55428) filed with the SEC on September 3, 2020, and incorporated herein by reference)~~

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~~PART II — OTHER INFORMATION (continued)~~


~~10.5~~						Registration Rights Agreement, dated as of August 31, 2020, by and among Steadfast Apartment REIT, Inc., Steadfast Apartment REIT Operating Partnership, L.P. and Steadfast REIT Investments, LLC (included as Exhibit 10.5 to the Registrant ’~~s Current Report on Form 8-K (File No. 000-55428) filed with the SEC on September 3, 2020, and incorporated herein by reference)~~
~~10.6~~						Non-Competition Agreement, dated as of August 31, 2020, by and among Rodney F. Emery, STAR REIT Services, LLC, Steadfast Apartment REIT, Inc. and Steadfast Apartment REIT Operating Partnership, L.P. (included as Exhibit 10.6 to the Registrant ’~~s Current Report on Form 8-K (File No. 000-55428) filed with the SEC on September 3, 2020, and incorporated herein by reference)~~
~~10.7~~						Third Amended and Restated Limited Partnership Agreement of Steadfast Apartment REIT Operating Partnership, L.P. f/k/a Steadfast Income REIT Operating Partnership, L.P., dated as of August 31, 2020 (included as Exhibit 10.7 to the Registrant ’~~s Current Report on Form 8-K (File No. 000-55428) filed with the SEC on September 3, 2020, and incorporated herein by reference)~~
~~10.8~~						~~Form of Property Management Agreement (included as Exhibit 10.8 to the Registrant~~’~~s Current Report on Form 8-K (File No. 000-55428) filed with the SEC on September 3, 2020, and incorporated herein by reference)~~
~~10.9~~						~~Offer Letter from STAR REIT Services, LLC to Rodney F. Emery, dated as of September 1, 2020 (included as Exhibit 10.9 to the Registrant~~’~~s Current Report on Form 8-K (File No. 000-55428) filed with the SEC on September 3, 2020, and incorporated herein by reference)~~
~~10.10~~						~~Form of Employment Agreement (included as Exhibit 10.10 to the Registrant~~’~~s Current Report on Form 8-K (File No. 000-55428) filed with the SEC on September 3, 2020, and incorporated herein by reference)~~
~~10.11~~						~~Form of Restricted Stock Award Agreement (included as Exhibit 10.11 to the Registrant~~’~~s Current Report on Form 8-K (File No. 000-55428) filed with the SEC on September 3, 2020, and incorporated herein by reference)~~


31.1*						Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*						Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**						Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
32.2**						Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
99.1						Share Repurchase Plan (included as Exhibit 99.2 to the Registrant’s Current Report on Form 8-K (File No. 000-55428) filed with the SEC on March 6, 2020, and incorporated herein by reference)
104*						Cover Page Interactive Data File - (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

~~______________~~

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PART II — OTHER INFORMATION (continued)

Filed ~~herewith.~~herewith

In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

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SIGNATURES

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


		Steadfast Apartment REIT, Inc.


Date:	~~November 12, 2020~~May 14, 2021	By:	/s/ Rodney F. Emery
			Rodney F. Emery
			Chief Executive Officer and Chairman of the Board
			(Principal Executive Officer)

Date:	~~November 12, 2020~~May 14, 2021	By:	/s/ Ella S. Neyland
			Ella S. Neyland
			President, Chief Financial Officer and Treasurer
			(Principal Financial and Accounting Officer)

9984


	September 30,
	2020		2019
Cash and cash equivalents	$	311,515,756	$	74,816,801
Restricted cash	42,531,779		47,261,216
Other assets related to real estate held for sale	91,450		0
Total cash, cash equivalents and restricted cash	$	354,138,985	$	122,078,017


					Purchase Price Allocation
Property Name	Location	Purchase Date	Properties	Homes	Land		Buildings and Improvements		Tenant Origination and Absorption Costs		Below Market Leases		Discount (Premium) on Assumed Liabilities		Total Purchase Price
Eleven10 @ Farmers Market	Dallas, TX	1/28/2020	1	313	$	10,574,569	$	50,026,284	$	1,463,076	$	0	$	0	$	62,063,929
Patina Flats at the Foundry	Loveland, CO	2/11/2020	1	155	2,463,617		41,537,960		1,184,050		(61,845)		0		45,123,782
SIR Merger(1)	Various	3/6/2020	27	7,527	114,377,468		959,337,747		27,027,759		0		1,391,489		1,102,134,463
STAR III Merger(1)	Various	3/6/2020	9	2,639	58,056,275		411,461,858		10,041,373		0		(5,802,045)		473,757,461
Arista at Broomfield	Broomfield, CO	3/13/2020	1	0	7,283,803		1,121,939		0		0		0		8,405,742
VV&M	Dallas, TX	4/21/2020	1	310	8,207,057		51,299,734		1,407,518		0		(945,235)		59,969,074
Flatirons	Broomfield, CO	6/19/2020	1	0	8,574,704		145,898		0		0		0		8,720,602
			41	10,944	$	209,537,493	$	1,514,931,420	$	41,123,776	$	(61,845)	$	(5,355,791)	$	1,760,175,053


October 1 through December 31, 2020	$	54,250
2021	166,983
2022	244,460
2023	250,196
2024	257,214
Thereafter	731,348
	$	1,704,451


	Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020
Issuance of Class A-2 OP Units	$	0	$	14,450,000
Issuance of Class B OP Units	93,750,000		93,750,000
Loss allocated to Class A-2 OP Units	(700,327)		(537,013)
Loss allocated to Class B OP Units	(144,326)		(144,326)
Distributions to Class A-2 OP Units	(214,642)		(377,956)
Distributions to Class B OP Units	(454,100)		(454,100)
Noncontrolling interests	$	92,236,605	$	106,686,605