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Section 1: 10-K (10-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ý
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 For the fiscal year ended December 31, 2019
 
OR
o
 
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
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)
18100 Von Karman Avenue, Suite 500
 
 
Irvine, California
 
92612
(Address of Principal Executive Offices)
 
(Zip Code)
(949) 852-0700
(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

Securities registered pursuant to Section 12(g) of the Act:
 Common Stock, $0.01 par value per share
(Title of Class)
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No ý
 
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 ý No o
 
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 ý No o

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


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Large Accelerated filer o
Accelerated filer o
Non-Accelerated filer x
Smaller reporting company o


Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period of complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ý
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
 
There is no established market for the registrant’s shares of common stock. There were approximately 51,850,018 shares of common stock held by non-affiliates as of June 28, 2019, the last business day of the registrant’s most recently completed second fiscal quarter, for an aggregate market value of $821,304,280, assuming an estimated value per share of $15.84.
 
As of March 5, 2020, there were 52,875,501 shares of the Registrant’s common stock issued and outstanding.


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STEADFAST APARTMENT REIT, INC.
INDEX
 
 
 
Page
 
 
 
 
 
PART I
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART III
 
 
 
 
 
 
 
 
 
 
 
 
PART IV
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 
Certain statements included in this Annual Report on Form 10-K of Steadfast Apartment REIT, Inc. (which is referred to in this Annual Report on Form 10-K, as context requires, as the “Company,” “we,” “us,” or “our”) 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. 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; 
the fact that we pay fees and expenses to our advisor and its affiliates that were not negotiated on an arm’s-length basis and the fact that the payment of these fees and expenses increases the risk that our stockholders will not earn a profit on their investment in us; 
our ability to retain our executive officers and other key personnel of our advisor, our property manager and other affiliates of our advisor; 
our ability to generate sufficient cash flows to pay distributions for our stockholders;
our level of indebtedness following our mergers with Steadfast Income REIT, Inc. and Steadfast Apartment REIT III, Inc.;
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.
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 annual report. All forward-looking statements are made as of the date of this annual report and the risk that actual results will differ materially from the expectations expressed in this annual report will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this annual 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 annual 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 annual report will be achieved. All forward looking statements included herein should be read in connection with the risks identified in Part I. Item 1A. “Risk Factors” of this Annual Report on Form 10-K.

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PART I
ITEM 1.                                                BUSINESS
Overview 
Steadfast Apartment REIT, Inc. (which is referred to in this annual report, as context requires, as the “Company,” “we,” “us,” or “our”) was formed on August 22, 2013, as a Maryland corporation and elected to qualify as a real estate investment trust, or REIT, for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2014. We own and operate a diverse portfolio of real estate investments, primarily in the multifamily sector located throughout the United States. In addition to our focus on multifamily properties, we may also make selective strategic acquisitions of other types of commercial properties. We may also acquire or originate mortgage, mezzanine, bridge and other real estate loans and equity securities of other real estate companies. As of December 31, 2019, we owned 32 multifamily properties comprised of a total of 11,195 apartment homes and one parcel of land held for the development of apartment homes. For more information on our real estate portfolio, see “—Our Real Estate Portfolio” below. 
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. As of December 31, 2019, we had sold 54,276,237 shares of common stock for gross offering proceeds of $809,562,356, including 6,662,210 shares of common stock issued pursuant to our distribution reinvestment plan for proceeds of $99,127,477.
On March 14, 2018, our board of directors determined an estimated value per share of our common stock of $15.18 as of December 31, 2017. On March 12, 2019, our board of directors determined an estimated value per share of our common stock of $15.84 as of December 31, 2018. For more information on the determinations of the estimated value per share of our common stock, see Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Purchases of Equity Securities—Estimated Value Per Share.” In connection with the determination of our estimated value per share, our board of directors determined a price per share for the distribution reinvestment plan of $15.18 and $15.84, effective April 1, 2018 and April 1, 2019, respectively. We intend to establish an updated estimated value per share following the completion of the mergers (defined and discussed below) which closed on March 6, 2020. We expect that the estimated value per share will be as of March 6, 2020 and will be reported by us in a Current Report on Form 8-K. 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.
We were externally managed by Steadfast Apartment Advisor, LLC, which we refer to as our “advisor,” pursuant to the Advisory Agreement, as amended, or the advisory agreement, dated December 13, 2013, by and between, us and our advisor. In connection with the closing of the mergers, we and our advisor entered into an Amended and Restated Advisory Agreement dated March 6, 2020. The current term of the Advisory Agreement expires on March 6, 2021. Subject to certain restrictions and limitations, our advisor manages our day-to-day operations and our portfolio of properties and real estate-related assets, sources and presents investment opportunities to our board of directors and provides investment management services on our behalf. The advisor has also entered into an Advisory Services Agreement with Crossroads Capital Advisors, LLC, or Crossroads Capital Advisors, whereby Crossroads Capital Advisors provides advisory services to us on behalf of the advisor. Stira Capital Markets Group, LLC (formerly known as Steadfast Capital Markets Group, LLC), or the dealer manager, an affiliate of Steadfast REIT Investments, LLC, our sponsor, served as the dealer manager for our initial public offering. Our advisor, along with the dealer manager, provides marketing, investor relations and other administrative services on our behalf.
Substantially all of our business was conducted through Steadfast Apartment REIT Operating Partnership, L.P., a Delaware limited partnership formed on August 27, 2013, which we refer to as our “operating partnership.” We are the sole general partner of our operating partnership and our wholly-owned subsidiary, Steadfast Apartment REIT Limited Partner, LLC, is the sole limited partner of our operating partnership. Following completion of the mergers on March 6, 2020, we now conduct our business through the operating partnership, Steadfast Income REIT Operating Partnership, L.P. and Steadfast Apartment REIT III Operating Partnership, L.P.
Merger with Steadfast Income REIT, Inc.
On August 5, 2019, we, Steadfast Income REIT, Inc., or SIR, our operating partnership, Steadfast Income REIT Operating Partnership, L.P., the operating partnership of SIR, and SI Subsidiary, LLC, our wholly-owned subsidiary, or SIR Merger Sub, entered into an Agreement and Plan of Merger, or the SIR Merger Agreement.

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Pursuant to the terms and conditions of the SIR Merger Agreement, on March 6, 2020, SIR merged with and into SIR Merger Sub, or the SIR Merger, with SIR Merger Sub surviving the SIR Merger. Following the SIR Merger, SIR Merger Sub, as the surviving entity, will continue 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, or the SIR Common Stock, converted into 0.5934 shares of our common stock.
Merger with Steadfast Apartment REIT III, Inc.
On August 5, 2019, we, Steadfast Apartment REIT III, Inc., or STAR III, our operating partnership, Steadfast Apartment REIT III Operating Partnership, L.P., the operating partnership of STAR III, and SIII Subsidiary, LLC, our wholly-owned subsidiary, 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, or the STAR III Merger and together with the SIR Merger, the “mergers”, with STAR III Merger Sub surviving the STAR III Merger. Following the STAR III Merger, STAR III Merger Sub, as the surviving entity, will continue 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, or the STAR III Common Stock, was converted into 1.430 shares of our common stock.
Each of SIR and STAR III were non-listed REITs sponsored by our sponsor and their external advisors were affiliates of our advisor.
Combined Company
The combined company after the mergers retains the name “Steadfast Apartment REIT, Inc.” Each merger is intended to qualify 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.
As of the closing of the mergers, our portfolio (unaudited) consisted of (1) 69 properties (including one property held for development) in 14 states, with an average effective rent of $1,173 and (2) a 10% interest in one unconsolidated joint venture that owned 20 multifamily properties with a total of 4,584 apartment homes. Based on occupancy as of December 31, 2019, our portfolio had an occupancy rate of 94.9%, an average age of 20 years and gross real estate assets value of $3,375,635,000 (unaudited).
As a result of the completion of the mergers, our financial information materially changed; however, the financial information included in this Annual Report on Form 10-K reflects only our stand-alone, historical financial results.

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Our Structure
Our sponsor, Steadfast REIT Investments, LLC, a Delaware limited liability company, is indirectly controlled by Rodney F. Emery, the chairman of our board of directors and our chief executive officer. We refer to each of our sponsor, advisor, dealer manager and their affiliates as “a Steadfast Companies affiliate” and collectively as “Steadfast Companies affiliates.” The chart below shows the relationships among our company and various Steadfast Companies affiliates following the SIR Merger and the STAR III Merger.
403279121_starorgchartpostmerger.jpg_______________
(1)
Crossroads Capital Multifamily, LLC and Crossroads Capital Advisors, LLC are affiliated entities, each being wholly-owned subsidiaries of Crossroads Capital Group, LLC.


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Objectives and Strategies
Our investment objectives are to:
realize capital appreciation in the value of our investments over the long term; and
pay attractive and stable cash distributions to stockholders.
We intend to use cash flows from operations to continue to invest in and manage our real estate investments located throughout the United States, with the objective of generating stable rental income and maximizing the opportunity for future capital appreciation. We believe that a majority of our portfolio consists of established, well-positioned, institutional-quality apartment communities with high occupancies and consistent rental revenue. Established apartment communities are typically older, more affordable apartments that cater to the middle-class segment of the workforce, with monthly rental rates that accommodate the generally accepted guidelines for housing costs as a percentage of gross income. As a result, we believe the demand for apartment housing at these properties is higher compared to other types of multifamily properties and is generally more consistent in all economic cycles. We continue to implement a value-enhancement strategy on the apartment homes we acquired. Our value-enhancement strategy involves the acquisition of under-managed, stabilized apartment communities in high job and population growth neighborhoods and the investment of additional capital to make strategic upgrades of the interiors of the apartment homes. These opportunities vary in degree based on the specific business plan for each asset, but could include new appliances, better cabinets, countertops and flooring.
2019 Highlights
During 2019, we:
entered into merger agreements to combine our company with SIR and STAR III;
invested $26,689,336 in improvements to our real estate investment portfolio;
acquired land for the new development of 176 apartment homes for a purchase price of $2,469,183;
invested $2,920,469 in development and construction to our real estate held for development;
disposed of two multifamily properties, for a gross sales price of $59,100,000, exclusive of closing costs, resulting in a gain on sales of real estate of $11,651,565;
paid cash distributions of $25,681,391 and distributed $21,222,382 in shares of our common stock pursuant to our distribution reinvestment plan, which constituted a 6.0% annualized distribution rate to our stockholders based on our initial public offering price of $15.00 per share;
generated cash flows from operations of $29,078,255, although we incurred a net loss of $38,524,316;
generated net operating income, or NOI, of $96,636,421 (for further information on how we calculate NOI and a reconciliation of NOI to net loss, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Net Operating Income”);
generated funds from operations, or FFO, of $23,604,194 (for further information on how we calculate FFO and a reconciliation of FFO to net loss, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations and Modified Funds From Operations”);
generated modified funds from operations, or MFFO, of $25,378,778 (for further information on how we calculate MFFO and a reconciliation of MFFO to net loss, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds from Operations and Modified Funds from Operations”); and
received proceeds of $56,890,038, net of principal payments of $202,728,946, deferred financing costs of $1,573,716 and loan financing deposits of $452,300, related to the refinancing of a portion of our outstanding debt (for further information on the 2019 refinancing transactions, please refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”).

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Our Real Estate Portfolio
As of December 31, 2019, we owned the 32 multifamily properties and one parcel of land held for the development of apartment homes described below.
 
Property Name
 
Location
 
Number of Homes
 
Average Monthly Occupancy
 
Average Monthly Rent(1)
 
Purchase Date
 
Contract Purchase Price
 
Mortgage Debt Outstanding(2)
1
Villages at Spring Hill Apartments
 
Spring Hill, TN
 
176

 
96.0
%
 
$
1,120

 
5/22/2014
 
$
14,200,000

 
(3 
) 
2
Harrison Place Apartments
 
Indianapolis, IN
 
307

 
94.1
%
 
992

 
6/30/2014
 
27,864,250

 
(3 
) 
3
Terrace Cove Apartment Homes
 
Austin, TX
 
304

 
95.1
%
 
966

 
8/28/2014
 
23,500,000

 
(3 
) 
4
The Residences on McGinnis Ferry
 
Suwanee, GA
 
696

 
96.0
%
 
1,344

 
10/16/2014
 
98,500,000

 
(3 
) 
5
The 1800 at Barrett Lakes
 
Kennesaw, GA
 
500

 
92.4
%
 
1,076

 
11/20/2014
 
49,000,000

 
40,623,442

6
The Oasis
 
Colorado Springs, CO
 
252

 
94.8
%
 
1,424

 
12/19/2014
 
40,000,000

 
39,499,673

7
Columns on Wetherington
 
Florence, KY
 
192

 
91.7
%
 
1,220

 
2/26/2015
 
25,000,000

 
(3 
) 
8
Preston Hills at Mill Creek
 
Buford, GA
 
464

 
91.6
%
 
1,192

 
3/10/2015
 
51,000,000

 
(3 
) 
9
Eagle Lake Landing Apartments
 
Speedway, IN
 
277

 
96.8
%
 
905

 
3/27/2015
 
19,200,000

 
(3 
) 
10
Reveal on Cumberland
 
Fishers, IN
 
220

 
95.0
%
 
1,144

 
3/30/2015
 
29,500,000

 
20,827,267

11
Heritage Place Apartments
 
Franklin, TN
 
105

 
97.1
%
 
1,145

 
4/27/2015
 
9,650,000

 
8,590,932

12
Rosemont at East Cobb
 
Marietta, GA
 
180

 
96.7
%
 
1,100

 
5/21/2015
 
16,450,000

 
13,258,252

13
Ridge Crossings Apartments
 
Hoover, AL
 
720

 
92.8
%
 
1,012

 
5/28/2015
 
72,000,000

 
57,668,758

14
Bella Terra at City Center
 
Aurora, CO
 
304

 
96.1
%
 
1,221

 
6/11/2015
 
37,600,000

 
(3 
) 
15
Hearthstone at City Center
 
Aurora, CO
 
360

 
95.0
%
 
1,257

 
6/25/2015
 
53,400,000

 
(3 
) 
16
Arbors at Brookfield
 
Mauldin, SC
 
702

 
92.7
%
 
923

 
6/30/2015
 
66,800,000

 
(3 
) 
17
Carrington Park
 
Kansas City, MO
 
298

 
95.3
%
 
1,011

 
8/19/2015
 
39,480,000

 
(3 
) 
18
Delano at North Richland Hills
 
North Richland Hills, TX
 
263

 
95.8
%
 
1,486

 
8/26/2015
 
38,500,000

 
31,814,165

19
Meadows at North Richland Hills
 
North Richland Hills, TX
 
252

 
94.4
%
 
1,392

 
8/26/2015
 
32,600,000

 
26,580,102

20
Kensington by the Vineyard
 
Euless, TX
 
259

 
95.8
%
 
1,507

 
8/26/2015
 
46,200,000

 
34,111,658

21
Monticello by the Vineyard
 
Euless, TX
 
354

 
96.3
%
 
1,344

 
9/23/2015
 
52,200,000

 
41,229,964

22
The Shores
 
Oklahoma City, OK
 
300

 
94.7
%
 
1,016

 
9/29/2015
 
36,250,000

 
23,653,152

23
Lakeside at Coppell
 
Coppell, TX
 
315

 
96.8
%
 
1,716

 
10/7/2015
 
60,500,000

 
47,883,143

24
Meadows at River Run
 
Bolingbrook, IL
 
374

 
90.1
%
 
1,364

 
10/30/2015
 
58,500,000

 
42,438,707

25
PeakView at T-Bone Ranch
 
Greeley, CO
 
224

 
93.3
%
 
1,373

 
12/11/2015
 
40,300,000

 
(3 
) 
26
Park Valley Apartments
 
Smyrna, GA
 
496

 
94.4
%
 
1,068

 
12/11/2015
 
51,400,000

 
48,575,513

27
PeakView by Horseshoe Lake
 
Loveland, CO
 
222

 
93.7
%
 
1,396

 
12/18/2015
 
44,200,000

 
38,003,137

28
Stoneridge Farms
 
Smyrna, TN
 
336

 
95.2
%
 
1,196

 
12/30/2015
 
47,750,000

 
45,340,947

29
Fielder’s Creek
 
Englewood, CO
 
217

 
96.3
%
 
1,219

 
3/23/2016
 
32,400,000

 

30
Landings of Brentwood
 
Brentwood, TN
 
724

 
96.8
%
 
1,262

 
5/18/2016
 
110,000,000

 
(4 
) 
31
1250 West Apartments
 
Marietta, GA
 
468

 
93.6
%
 
1,061

 
8/12/2016
 
55,772,500

 
(3 
) 
32
Sixteen50 @ Lake Ray Hubbard
 
Rockwall, TX
 
334

 
96.4
%
 
1,492

 
9/29/2016
 
66,050,000

 
(3 
) 
33
Garrison Station Development(5)
 
Murfreesboro, TN
 

 
%
 

 
5/30/2019
 
5,687,978

 

 
 
 
 
 
11,195

 
94.6%(6)

 
$
1,200

 
 
 
$
1,451,454,728

 
$
560,098,815

________________
(1)
Average monthly rent is based upon the effective rental income for the month of December 2019 after considering the effect of vacancies, concessions and write-offs.
(2)
Mortgage debt outstanding is net of deferred financing costs associated with the loans for each individual property listed above but excludes the principal balance of $551,669,000 and associated deferred financing costs of $3,208,770 related to the refinancings pursuant to our Master Credit Facility Agreement, or MCFA.
(3)
Properties secured pursuant to the terms of the MCFA.
(4)
At December 31, 2018, Landings of Brentwood was pledged as collateral pursuant to our line of credit. On January 9, 2019, we terminated the line of credit.
(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 176 apartment homes of 1, 2 and 3-bedrooms with a typical mix for this market.

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(6)
At December 31, 2019, our portfolio was approximately 96.0% leased, calculated using the number of occupied and contractually leased apartment homes divided by total apartment homes. As of December 31, 2019, no single tenant accounted for greater than 10% of our 2019 gross annualized rental revenues.
We plan to invest approximately $10 million to $15 million during the year ending December 31, 2020, for the combined company, for interior renovations at certain properties in our portfolio. These renovations are primarily to enhance the interior amenities of the apartment homes and will be performed initially on vacant homes and thereafter on homes vacated from time to time in the ordinary course.
The following information generally applies to all of our properties:
we believe all of our properties are adequately covered by insurance and are suitable for their intended purposes;
except as noted above, we have no plans for any material renovations, improvements or developments with respect to any of our properties; and
our properties face competition in attracting new residents and retaining current residents from other multifamily properties in and around their respective submarkets.
Leverage
We use secured debt, and intend to use in the future secured and unsecured debt, as a means of providing additional funds for the acquisition, development or renovation of our properties. We believe that the careful use of borrowings will help us achieve our diversification goals and potentially enhance the returns on our investments. At December 31, 2019, our debt was approximately 60% of the value of our properties, as determined by the most recent valuations performed by an independent third-party appraiser as of December 31, 2019. Going forward, we expect that our borrowings (after debt amortization) will be approximately 55% to 65% of the value of our properties and other real estate-related assets. Under our Articles of Amendment and Restatement, which we refer to as 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 unless such excess is approved by a majority of the independent directors and disclosed to stockholders, along with a justification for such excess, in our next quarterly report. In such event, we will monitor our debt levels and take action to reduce any such excess as soon as practicable. Our aggregate borrowings are reviewed by our board of directors at least quarterly. At December 31, 2019, our borrowings were not in excess of 300% of the value of our net assets.
Employees
We have no paid employees. The employees of our advisor and its affiliates provide management, acquisition, advisory and certain administrative services for us.
Competition
We are subject to significant competition in seeking real estate investments and residents. We compete with many third parties engaged in real estate investment activities, including other REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, lenders, hedge funds, governmental bodies and other entities. Many of our competitors have substantially greater financial and other resources than we have and may have substantially more operating experience than us. They may also enjoy significant competitive advantages that result from, among other things, a lower cost of capital.
The multifamily property market in particular is highly competitive. This competition could reduce occupancy levels and revenues at our multifamily properties, which would adversely affect our operations. We face competition from many sources, including from other multifamily properties in our target markets. In addition, overbuilding of multifamily properties may occur, which would increase the number of multifamily homes available and may decrease occupancy and unit rental rates. Furthermore, multifamily properties we acquire most likely compete, or will compete, with numerous housing alternatives in attracting residents, including owner occupied single- and multifamily homes available to rent or purchase. Competitive housing in a particular area and the increasing affordability of owner occupied single- and multifamily homes available to rent or buy could adversely affect our ability to retain our residents, lease apartment homes and increase or maintain rental rates.
We may also compete with affiliates of our sponsor that have similar investment objectives as us. To the extent that we compete with any other program affiliated with our sponsor for investments, our sponsor will face potential conflicts of interest and there is a risk that our sponsor will select investment opportunities for us that provide lower returns than the investments selected for other such programs, or that certain otherwise attractive investment opportunities will not be available to us.

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Regulations
Our investments are subject to various federal, state, and local laws, ordinances, and regulations, including, among other things, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution, and indirect environmental impacts such as increased motor vehicle activity. We believe that we have all permits and approvals necessary under current law to operate our investments.
Income Taxes
We elected to be taxed as a REIT under the Internal Revenue Code, and 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 requirements relating to the nature of our income and assets and the 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 we are eligible for relief under certain statutory provisions.
Financial Information About Industry Segments
Our current business consists of owning, managing, operating, leasing, acquiring, developing, investing in, and disposing of real estate assets. We internally evaluate all of our real estate assets as one industry segment, and, accordingly, we do not report segment information.
Available Information
We are subject to the reporting requirements of the Exchange Act and, accordingly, we file annual reports, quarterly reports and other information with the Securities and Exchange Commission, or SEC. Access to copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the SEC, including amendments to such filings, may be obtained free of charge from our website, http://www.steadfastreits.com. These filings are available promptly after we file them with, or furnish them to, the SEC. We are not incorporating our website or any information from the website into this annual report. The SEC also maintains a website, http://www.sec.gov, that contains our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Report on Form 8-K and other filings with the SEC. Access to these filings is free of charge.
ITEM 1A.                                       RISK FACTORS
The following are some of the risks and uncertainties that could cause our actual results to differ materially from those presented in our forward-looking statements. The risks and uncertainties described below are not the only ones we face but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business. References to “shares” and “our common stock” refer to the shares of common stock of Steadfast Apartment REIT, Inc.
General Investment Risks
From inception through December 31, 2019, we have experienced annual net losses and may experience similar losses in the future.
From inception through December 31, 2019, we incurred a net loss of $221,552,200. We cannot assure you that we will be profitable in the future or that we will recognize growth in the value of our assets.
There is no public trading market for shares of our common stock and we are not required to effectuate a liquidity event by a certain date. As a result, it will be difficult for you to sell your shares of common stock and, if you are able to sell your shares, you are likely to sell them at a substantial discount. Our stockholders also are limited in their ability to sell shares pursuant to our share repurchase plan and may have to hold their shares for an indefinite period of time.
There is no public market for the shares of our common stock and we have no obligation to list our shares on any public securities market or provide any other type of liquidity to our stockholders by a particular date. It is anticipated that our board of directors will consider a liquidity event within five years after the completion of our offering stage; however, the timing of

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any such event would be significantly dependent upon economic and market conditions. We terminated our initial public offering on March 24, 2016. Because there is no public trading market for shares of common stock, it will be difficult for you to sell your shares of common stock. Even if you are able to sell your shares of common stock, the absence of a public market may cause the price received for any shares of our common stock sold to be less than what you paid or less than your proportionate value of the assets we own. We have adopted a share repurchase plan but it is limited in terms of the amount of shares that stockholders may sell to us each quarter. Our board of directors can amend, suspend, or terminate our share repurchase plan upon 30 days’ notice. The restrictions of our share repurchase plan limit our stockholders’ ability to sell their shares should they require liquidity and limit our stockholders’ ability to recover the value they invested. See Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Purchases of Equity Securities—Share Repurchase Plan” for more information regarding the limitations of our share repurchase plan. As a result, you should be prepared to hold your shares for an indefinite period of time.
We have paid, and it is likely we will continue to pay, distributions from sources other than our cash flow from operations. To the extent that we pay distributions from sources other than our cash flow from operations, we will have reduced funds available for investment and the overall return to our stockholders may be reduced.
Our organizational documents permit us to pay distributions from any source, including net proceeds from our public offerings, borrowings, advances from our sponsor or advisor and the deferral of fees and expense reimbursements by our advisor, in its sole discretion. To the extent that our cash flow from operations has been or is insufficient to fully cover our distributions, we have paid, and may continue to pay, distributions from sources other than cash flow from operations. We have not established a limit on the amount of proceeds from our public or private securities offerings, or other sources other than cash flow from operations, which we may use to fund distributions.
If we are unable to consistently fund distributions to our stockholders entirely from our cash flow from operations, the value of your shares upon a listing of our common stock, the sale of our assets or any other liquidity event may be reduced. To the extent that we fund distributions from sources other than our cash flow from operations, our funds available for investment will be reduced relative to the funds available for investment if our distributions were funded solely from cash flow from operations, our ability to achieve our investment objectives will be negatively impacted and the overall return to our stockholders may be reduced. In addition, if we make a distribution in excess of our current and accumulated earnings and profits, the distribution will be treated first as a tax-free return of capital, which will reduce the stockholder’s tax basis in its shares of common stock. The amount, if any, of each distribution in excess of a stockholder’s tax basis in its shares of common stock will be taxable as gain realized from the sale or exchange of property.
For the year ended December 31, 2019, we paid aggregate distributions of $46,903,773, including $25,681,391 of distributions paid in cash and 1,354,560 shares of our common stock issued pursuant to our distribution reinvestment plan for $21,222,382. For the year ended December 31, 2019, our net loss was $38,524,316, we had FFO of $23,604,194 and net cash provided by operations of $29,078,255. For the year ended December 31, 2019, we funded $29,078,255, or 62%, and $17,825,518, or 38%, of total distributions paid, including shares issued pursuant to our distribution reinvestment plan, from cash flow from operations and funds equal to amounts reinvested in the STAR DRP, respectively. Since inception, of the $198,592,501 in total distributions paid through December 31, 2019, including shares issued pursuant to our distribution reinvestment plan, we funded $137,568,170 or 70% from cash flow from operations, $40,370,171, or 20%, from funds equal to amounts reinvested in our distribution reinvestment plan and $20,654,160, or 10%, from offering proceeds. For information on how we calculate FFO and the reconciliation of FFO to net loss, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds from Operations and Modified Funds from Operations.”
Our success is dependent on the performance of our advisor and its affiliates and any adverse change in their financial health could cause our operations to suffer.
Our ability to achieve our investment objectives and to pay distributions is dependent upon the performance of our advisor and its affiliates and any adverse change in their financial health could cause our operations to suffer. Our advisor and its affiliates are sensitive to trends in the general economy, as well as the commercial real estate and credit markets. An economic downturn could result in reductions in overall transaction volume and size of sales and leasing activities, which could put downward pressure on our advisor’s and its affiliates’ revenues and operating results. To the extent that any decline in revenues and operating results impacts the performance of our advisor and its affiliates, our financial condition could suffer.
We have paid substantial fees and expenses to our advisor and its affiliates. These fees were not negotiated at arm’s-length, may be higher than fees payable to unaffiliated third parties and may reduce cash available for investment.
A portion of the offering proceeds from the sale of our shares in our public offering was used to pay fees and expenses to our advisor and its affiliates. These fees were not negotiated at arm’s-length and may be higher than fees payable to unaffiliated third parties. In addition, the full offering price paid by stockholders was not invested in properties. As a result, stockholders will only receive a full return of their invested capital if we either (1) sell our assets or the Company for a sufficient amount in

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excess of the original purchase price of our assets or (2) the market value of the Company after we list our shares of common stock on a national securities exchange is substantially in excess of the original purchase price of our assets.
The geographic concentration of our portfolio may make us particularly susceptible to adverse economic developments in the real estate markets of those areas.
In addition to general, regional and national economic conditions, our operating results are impacted by the economic conditions of the specific markets in which we have concentrations of properties. As of December 31, 2019, of the $1,451,454,728 contract price of our real estate assets, 22% was located in the Atlanta, Georgia metropolitan statistical area, 20% was located in the Dallas/Fort Worth, Texas metropolitan statistical area and 13% was located in the Nashville, Tennessee metropolitan statistical area. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for multifamily property space resulting from the local business climate, could adversely affect our property revenue resulting in a lower NOI.
Financial regulatory reforms could have a significant impact on our business, financial condition and results of operations.
On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was signed into law. The Dodd-Frank Act represents a significant change in the American financial regulatory environment and impacts nearly every aspect of the U.S. financial services industry. The Dodd-Frank Act requires various federal agencies to adopt hundreds of new rules to implement the Dodd-Frank Act and to deliver to Congress numerous studies and reports that may influence future legislation. The Dodd-Frank Act leaves significant discretion to federal agencies as to exactly how to implement the broad provisions of the Dodd-Frank Act. Some provisions of the Dodd-Frank Act are subject to rulemaking and will take effect over several years, making it difficult to anticipate the overall impact on us. The changes resulting from the Dodd-Frank Act may impact the profitability of business activities, require changes to certain business practices, impose more stringent capital, liquidity and leverage requirements or otherwise adversely affect our business.
A cybersecurity incident and other technology disruptions could negatively impact our business.
We use technology in substantially all aspects of our business operations. We also use mobile devices, social networking, outside vendors and other online activities to connect with our residents, suppliers and employees of our affiliates. Such uses give rise to potential cybersecurity risks, including security breach, espionage, system disruption, theft and inadvertent release of information. Our business involves the storage and transmission of numerous classes of sensitive and confidential information and intellectual property, including residents’ and suppliers’ personal information, private information about employees of our affiliates, and financial and strategic information about us. If we fail to assess and identify cybersecurity risks associated with our operations, we may become increasingly vulnerable to such risks. Additionally, the measures we have implemented to prevent security breaches and cyber incidents may not be effective. The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems or the technology systems of third parties on which we rely, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of residents, potential liability and competitive disadvantage, any of which could result in a material adverse effect on our financial condition or results of operations.
Our board of directors determined an estimated value per share of $15.84 for our shares of common stock as of December 31, 2018. You should not rely on the estimated value per share as being an accurate measure of the current value of our shares of common stock.
On March 12, 2019, our board of directors determined an estimated value per share of our common stock of $15.84 as of December 31, 2018. Our board of directors’ objective in determining the estimated value per share was to arrive at a value, based on the most recent data available, that it believed was reasonable based on methodologies that it deemed appropriate after consultation with our advisor. However, the market for commercial real estate can fluctuate quickly and substantially and the value of our assets is expected to change in the future and may decrease. Also, our board of directors did not consider certain other factors, such as a liquidity discount to reflect the fact that our shares are not currently traded on a national securities exchange and the limitations on the ability to redeem shares pursuant to our share repurchase plan.
As with any valuation methodology, the methodologies used to determine the estimated value per share were based upon a number of assumptions, estimates and judgments that may not be accurate or complete. Our assets have been valued based upon appraisal standards and the value of our assets using these methodologies are not required to be a reflection of market value under those standards and will not result in a reflection of fair value under GAAP. Further, different parties using different property-specific and general real estate and capital market assumptions, estimates, judgments and standards could derive a different estimated value per share, which could be significantly different from the estimated value per share determined by our board of directors. The estimated value per share does not represent the fair value of our assets less liabilities in accordance with United States GAAP as of December 31, 2018. The estimated value per share is not a representation or indication that: a stockholder would be able to realize the estimated value per share if he or she attempts to sell shares; a

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stockholder would ultimately realize distributions per share equal to the estimated value per share upon liquidation of assets and settlement of our liabilities or upon a sale of our company; shares of our common stock would trade at the estimated value per share on a national securities exchange; a third party would offer the estimated value per share in an arm’s-length transaction to purchase all or substantially all of our shares of common stock; or the methodologies used to estimate the value per share would be acceptable to FINRA or compliant with the Employee Retirement Income Security Act of 1974, or ERISA, the Internal Revenue Code or other applicable law, or the applicable provisions of a retirement plan or individual retirement plan, or IRA, with respect to their respective requirements. Further, the estimated value per share was calculated as of a moment in time and the value of our shares will fluctuate over time as a result of, among other things, future acquisitions or dispositions of assets (including acquisitions and dispositions of real estate investments since December 31, 2018), developments related to individual assets and changes in the real estate and capital markets. For additional information on the calculation of our estimated value per share as of December 31, 2018, see Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Purchases of Equity Securities—Estimated Value Per Share.”
We intend to establish an updated estimated value per share following the completion of the mergers, which closed on March 6, 2020. We expect that the estimated value per share will be as of March 6, 2020, and will be reported by us in a Current Report on Form 8-K. This updated estimated value per share will be subject to the same risks described above.
If we internalize our management functions, we could incur other significant costs associated with being self-managed.
Our advisor notified us that it intends to present a proposal to our special committee within 60 days of the closing of the mergers regarding a possible internalization of management, whereby our advisor would sell, and we would acquire, our advisor or certain assets of our advisor and its affiliates. Such a transaction, if consummated, likely would include an amendment to the advisory agreement with our advisor to permit our advisor or its affiliates to receive consideration for internalization. We cannot reasonably estimate the form of or amount of consideration that may be paid as consideration in exchange for the sale and the impact it would have on funds available to distribute to our stockholders.
If our board of directors elects to internalize management functions, we may elect to negotiate to acquire our advisor’s assets and hire our advisor’s personnel. Pursuant to our advisory agreement with our advisor, we are not allowed to solicit or hire any of our advisor’s personnel without our advisor’s prior written consent. While we would no longer bear the costs of the various fees and expenses we expect to pay to our advisor under the advisory agreement, our direct expenses would include general and administrative costs, including legal, accounting and other expenses related to asset management fees. We would also be required to employ personnel and would be subject to potential liabilities commonly faced by employers, such as workers’ disability and compensation claims, potential labor disputes and other employee-related liabilities and grievances as well as incur the compensation and benefits costs of our officers and other employees and consultants that are paid by our advisor or its affiliates. We may issue equity awards to officers, employees and consultants, which awards would decrease net income and FFO and may further dilute your investment. We cannot reasonably estimate the amount of fees to our advisor we would save or the costs we would incur if we became self-managed. If the expenses we assume, plus the costs to acquire the advisor and or its assets as a result of an internalization, are higher than the expenses we avoid paying to our advisor, our FFO would be lower as a result of the internalization than they otherwise would have been, potentially decreasing the amount of funds available to distribute to our stockholders.
The outbreak of widespread contagious disease, such as the Coronavirus, could adversely impact the value of our investments, the ability to meet our capital and operating needs or make cash distributions to our stockholders.
The widespread outbreak of infectious or contagious disease, such as H1N1 influenza (swine flu), avian bird flu, SARS, the Coronavirus and Zika virus, could adversely impact our ability to generate income sufficient to meet operating expenses or generate income and capital appreciation, if any, at rates lower than those anticipated or available through investments in comparable real estate or other investments.
We also may depend on access to third-party sources to continue our investing activities and pay distributions to our stockholders. Our access to third-party sources depends on, in part, general market conditions, including conditions that are out of our control, such as the impact of health and safety concerns like the current Coronavirus outbreak.
As of the date of this annual report, the recent outbreak of the Coronavirus appears to be principally concentrated in China, although cases have been confirmed in other countries and regions, including the United States. The extent to which our business may be affected by the Coronavirus will largely depend on future developments with respect to the continued spread and treatment of the virus, which we cannot accurately predict. New information and developments may emerge concerning the severity of the Coronavirus and the actions to contain the Coronavirus or treat its impact. Our business and financial results could be materially and adversely impacted.

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Disruptions in the financial markets and deteriorating economic conditions could adversely impact our ability to implement our investment strategy and achieve our investment objectives.
United States and global financial markets experienced extreme volatility and disruption from 2008 to 2010. There was a widespread tightening in overall credit markets, devaluation of the assets underlying certain financial contracts, and increased borrowing by governmental entities. The turmoil in the capital markets during the most recent recession resulted in constrained equity and debt capital available for investment in the real estate market, resulting in fewer buyers seeking to acquire properties, increases in capitalization rates and lower property values. During the subsequent economic recovery, capital has been more available and the overall economy has improved. However, the failure of a sustained economic recovery or future disruptions in the financial markets and deteriorating economic conditions could impact the value of our investments in properties. In addition, if potential purchasers of properties have difficulty obtaining capital to finance property acquisitions, capitalization rates could increase and property values could decrease. Current economic conditions greatly increase the risks of our investments. See “—Risks Related to Investments in Real Estate.”
Events in U.S. financial markets have had, and may continue to have, a negative impact on the terms and availability of credit, which could have an adverse effect on our business and our results of operations.
The failure of large U.S. financial institutions in 2009 and the resulting turmoil in the U.S. financial sector had a negative impact on the terms and availability of credit within the United States. The tightening of the U.S. credit markets resulted in a lack of adequate credit. Some lenders continue to impose more stringent restrictions on the terms of credit, including shorter terms and more conservative loan-to-value underwriting than was previously customary. The negative impact of the tightening credit markets may limit our ability to finance the acquisition of properties on favorable terms, if at all, and may result in increased financing costs or financing with increasingly restrictive covenants.
We are uncertain of our sources for funding our future capital needs. If we do not have sufficient funds from operations to cover our expenses or to fund improvements to our real estate and cannot obtain debt or equity financing on acceptable terms, our ability to cover our expenses or to fund improvements to our real estate will be adversely affected.
We terminated our initial public offering on March 24, 2016. In the event that we develop a need for additional capital in the future for the repayment of maturing debt obligations, the improvement of our real properties or for any other reason, sources of funding may not be available to us. If we do not have sufficient funds from cash flow generated by our investments or out of net sale proceeds, or cannot obtain debt or equity financing on acceptable terms, our financial condition and ability to make distributions may be adversely affected.
Risks Relating to Our Organizational Structure
Maryland law and our organizational documents limit your right to bring claims against our officers and directors.
Maryland law provides that a director will not have any liability as a director so long as he or she performs his or her duties in accordance with the applicable standard of conduct. In addition, our charter provides that, subject to the applicable limitations set forth therein or under Maryland law, no director or officer will be liable to us or our stockholders for monetary damages. Our charter also provides that we will generally indemnify our directors, our officers, our advisor and its affiliates for losses they may incur by reason of their service in those capacities unless their act or omission was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, they actually received an improper personal benefit in money, property or services or, in the case of any criminal proceeding, they had reasonable cause to believe the act or omission was unlawful. Moreover, we have entered into separate indemnification agreements with each of our directors and executive officers. As a result, we and our stockholders may have more limited rights against these persons than might otherwise exist under common law. In addition, we may be obligated to fund the defense costs incurred by these persons. However, our charter provides that we may not indemnify our directors, our advisor and its affiliates for loss or liability suffered by them or hold our directors or our advisor and its affiliates harmless for loss or liability suffered by us unless they have determined that the course of conduct that caused the loss or liability was in our best interests, they were acting on our behalf or performing services for us, the liability was not the result of negligence or misconduct by our non-independent directors, our advisor and its affiliates or gross negligence or willful misconduct by our independent directors, and the indemnification or agreement to hold harmless is recoverable only out of our net assets, including the proceeds of insurance, and not from the stockholders. As a result of these limitations on liability and indemnification provisions and agreements, we and our stockholders may be entitled to a more limited right of action than we would otherwise have if indemnification rights were not granted.
The limit on the percentage of shares of our common stock that any person may own may discourage a takeover or business combination that may benefit our stockholders.
Our charter restricts the direct or indirect ownership by one person or entity to no more than 9.8% of the value of our then outstanding capital stock (which includes common stock and any preferred stock we may issue) and no more than 9.8% of the

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value or number of shares, whichever is more restrictive, of our then outstanding common stock unless exempted (prospectively or retroactively) by our board of directors. These restrictions may discourage a change of control of us and may deter individuals or entities from making tender offers for shares of our common stock on terms that might be financially attractive to stockholders or which may cause a change in our management. In addition to deterring potential transactions that may be favorable to our stockholders, these provisions may also decrease your ability to sell your shares of our common stock.
Our stockholders’ voting interest in us would be diluted if we issue additional shares.
Existing stockholders do not have preemptive rights to any shares issued by us in the future. Under our charter, we have authority to issue a total of 1,100,000,000 shares of capital stock, of which 999,998,000 shares are classified as common stock with a par value of $0.01 per share, 100,000,000 shares are classified as preferred stock with a par value of $0.01 per share, 1,000 shares are classified as convertible stock with a par value of $0.01 per share, and 1,000 shares are classified as Class A convertible stock, with a par value of $0.01 per share. Subject to any limitations set forth under Maryland law, our board of directors may increase the number of authorized shares of stock, increase or decrease the number of shares of any class or series of stock designated, or reclassify any unissued shares without the necessity of obtaining stockholder approval. All such shares may be issued in the discretion of our board of directors. Therefore, existing stockholders would experience dilution of their equity investment in us if we (i) sell additional shares in the future, including those issued pursuant to our distribution reinvestment plan, (2) sell securities that are convertible into shares of our common stock, (3) issue shares of our common stock in a private offering of securities to institutional investors, (4) issue restricted shares of our common stock to our independent directors, (5) issue shares of our common stock in a merger or to sellers of properties acquired by us in connection with an exchange of limited partnership interests of our operating partnership. Because the limited partnership interests of our operating partnership may, in the discretion of our board of directors, be exchanged for shares of our common stock, any merger, exchange or conversion between our operating partnership and another entity ultimately could result in the issuance of a substantial number of shares of our common stock, thereby diluting the percentage ownership interest of other stockholders. Because of these and other reasons, our stockholders may experience substantial dilution in their percentage ownership of our shares.
We may issue preferred stock or other classes of common stock, which issuance could adversely affect the existing holders of our common stock.
Our stockholders do not have preemptive rights to any shares issued by us in the future. We may issue, without stockholder approval, preferred stock or other classes of common stock with rights that could dilute the value of your shares of common stock. However, the issuance of preferred stock must also be approved by a majority of our independent directors not otherwise interested in the transaction, who will have access, at our expense, to our legal counsel or to independent legal counsel. The issuance of preferred stock or other classes of common stock could increase the number of stockholders entitled to distributions without simultaneously increasing the size of our asset base. Under our charter, we have authority to issue a total of 1,100,000,000 shares of capital stock, of which 999,998,000 shares are classified as common stock with a par value of $0.01 per share, 100,000,000 shares are classified as preferred stock with a par value of $0.01 per share, 1,000 shares are classified as convertible stock with a par value of $0.01per share and 1,000 shares are classified as Class A convertible stock with a par value of $0.01 per share. Our board of directors, with the approval of a majority of the entire board of directors and without any action by our stockholders, may amend our charter from time to time to increase or decrease the aggregate number of shares of capital stock or the number of shares of capital stock of any class or series that we have authority to issue. If we ever created and issued preferred stock with a distribution preference over common stock, payment of any distribution preferences of outstanding preferred stock would reduce the amount of funds available for the payment of distributions on our common stock. Further, holders of preferred stock are normally entitled to receive a preference payment in the event we liquidate, dissolve or wind up before any payment is made to our common stockholders, likely reducing the amount common stockholders would otherwise receive upon such an occurrence. In addition, under certain circumstances, the issuance of preferred stock or a separate class or series of common stock may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of our securities, or the removal of incumbent management.
Your investment will be diluted upon conversion of the Class A convertible stock.
We have issued 1,000 shares of our Class A convertible stock, or the Class A convertible stock, to our advisor for an aggregate purchase price of $1,000. Under limited circumstances, each outstanding share of our Class A convertible stock may be converted into shares of our common stock, which will have a dilutive effect to our stockholders. Our Class A convertible stock will be converted into shares of our common stock if (1) we have made total distributions of money or other property by us, SIR and STAR III to their respective holders of common shares (with respect to SIR and STAR III, in each case prior to the closing of the mergers), which we refer to collectively as the “Class A Distributions,” equal to the original issue price of our shares of common stock, shares of common stock of SIR and shares of common stock of STAR III, or the Common Equity, plus an aggregate 6.0% cumulative, non-compounded, annual return on the original issue price of those shares, (2) we list our common stock for trading on a national securities exchange or enter into a merger whereby holders of our common stock receive listed securities of another issuer or (3) our advisory agreement is terminated or not renewed (other than for “cause” as

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defined in our advisory agreement), each referred to as a “Triggering Event.” Upon any of these Triggering Events, each share of Class A convertible stock will be converted into a number of shares of our 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 our outstanding common shares on an as-converted basis as of the date of the Triggering Event. In the event of a termination or non-renewal of our advisory agreement for cause, all of the shares of the convertible stock will be repurchased by us for $1.00. Upon the issuance of our common stock in connection with the conversion of the convertible stock, then-existing stockholders’ interests in us will be diluted.
The conversion of the Class A convertible stock held by our advisor due upon termination of the advisory agreement and the voting rights granted to the holder of our Class A convertible stock may discourage a takeover attempt or prevent us from effecting a merger that otherwise would have been in the best interests of our stockholders.
If we engage in a merger in which we are not the surviving entity or our advisory agreement is terminated without cause, our advisor may be entitled to conversion of the shares of our Class A convertible stock it holds and to require that we purchase all or a portion of the limited partnership interests in our operating partnership that it holds at any time thereafter for cash or our common stock. The existence of this Class A convertible stock may deter a prospective acquirer from bidding on our company, which may limit the opportunity for stockholders to receive a premium for their stock that might otherwise exist if an investor attempted to acquire us through a merger.
The affirmative vote of two-thirds of the outstanding shares of Class A convertible stock, voting as a single class, will be required (1) for any amendment, alteration or repeal of any provision of our charter that materially and adversely changes the rights of the Class A convertible stock and (2) to effect a merger of our company into another entity, or a merger of another entity into our company, unless in each case each share of Class A convertible stock (A) will remain outstanding without a material and adverse change to its terms and rights or (B) will be converted into or exchanged for shares of stock or other ownership interest of the surviving entity having rights identical to that of our Class A convertible stock (except for changes that do not materially and adversely affect the holders of the Class A convertible stock). In the event that we propose to merge with or into another entity, including another REIT, our advisor could, by exercising these voting rights, determine whether or not we are able to complete the proposed transaction. By voting against a proposed merger, our advisor could prevent us from effecting the merger, even if the merger otherwise would have been in the best interests of our stockholders.
Our UPREIT structure may result in potential conflicts of interest with limited partners in our operating partnership whose interests may not be aligned with those of our stockholders.
Limited partners in our operating partnership have the right to vote on certain amendments to the operating partnership agreement, as well as on certain other matters. Persons holding such voting rights may exercise them in a manner that conflicts with the interests of our stockholders. As general partner of our operating partnership, we are obligated to act in a manner that is in the best interest of all partners of our operating partnership. Circumstances may arise in the future when the interests of limited partners in our operating partnership may conflict with the interests of our stockholders. These conflicts may be resolved in a manner stockholders do not believe are in their best interest.
We may change our targeted investments and investment guidelines without our stockholders’ consent.
Our board of directors may change our targeted investments and investment guidelines at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the investments described in this Annual Report on Form 10-K. A change in our targeted investments or investment guidelines may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could adversely affect the value of our common stock and our ability to make distributions to our stockholders.
Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our stockholders.
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that Court does not have jurisdiction, the U.S. District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for: (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of any duty owed by any of our directors or officers or employees to us or to our stockholders, (3) any action asserting a claim against us or any of our directors or officers or employees arising pursuant to any provision of the MGCL, or our charter or bylaws or (4) any action asserting a claim against us or any of our directors or officers or employees that is governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in our shares shall be deemed to have notice of and to have consented to these provisions of our bylaws, as they may be amended from time to time. Our board of directors, without stockholder approval, adopted this provision of the

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bylaws so that we can respond to such litigation more efficiently and reduce the costs associated with our responses to such litigation, particularly litigation that might otherwise be brought in multiple forums. This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder believes is favorable for disputes with us or our directors, officers, agents or employees, if any, and may discourage lawsuits against us and our directors, officers, agents or employees, if any. Alternatively, if a court were to find this provision of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings notwithstanding that the MGCL expressly provides that the charter or bylaws of a Maryland corporation may require that any internal corporate claim be brought only in courts sitting in one or more specified jurisdictions, we may incur additional costs that we do not currently anticipate associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition and results of operations.
Our stockholders’ investment return may be reduced if we were to be required to register as an investment company under the Investment Company Act of 1940, as amended, or the 1940 Act. If we lose our exemption from registration under the 1940 Act, we would not be able to continue its business unless and until we register under the 1940 Act.
We do not intend to register as an investment company under the 1940 Act. As of December 31, 2019, we owned 32 multifamily properties and one parcel of land held for the development of apartment homes, and investments in real estate will represent the substantial majority of our total asset mix, which would not subject us to the 1940 Act. In order to maintain an exemption from regulation under the 1940 Act, we must engage primarily in the business of buying real estate.
To maintain compliance with our 1940 Act exemption, we may be unable to sell assets we would otherwise want to sell and may need to sell assets we would otherwise wish to retain. In addition, we may be required to acquire additional income- or loss-generating assets that we might not otherwise acquire or forego opportunities to acquire interests in companies that we would otherwise want to acquire. If we are required to register as an investment company but fail to do so, we would be prohibited from engaging in our business, and criminal and civil actions could be brought against us. In addition, our contracts would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of us and liquidate our business.
Risks Related To Conflicts of Interest
We depend on our advisor and its key personnel and if any such key personnel were to cease to be affiliated with our advisor, our business could suffer.
Our ability to achieve our investment objectives is dependent upon the performance of our advisor and, to a significant degree, upon the continued contributions of certain of the key personnel of our advisor, each of whom would be difficult to replace. If our advisor were to lose the benefit of the experience, efforts and abilities of any these individuals, our operating results could suffer.
Our advisor and its affiliates, including our officers and our affiliated directors, will face conflicts of interest caused by compensation arrangements with us, which could result in actions that are not in the best interests of our stockholders.
Our advisor and its affiliates receive substantial fees from us in return for their services and these fees could influence the advice provided to us. Among other matters, the compensation arrangements could affect our advisor’s judgment with respect to, but not limited to, the following: (i) real estate acquisitions, which allow our advisor to earn acquisition fees upon repurchases of assets and to increase asset management fees; (ii) real estate asset sales, since the asset management fees payable to our advisor would decrease and our advisor would be entitled to a disposition fee upon sales; and (iii) whether and when we seek to list our common stock on a national securities exchange, which would trigger a conversion of our advisor’s convertible stock. These compensation arrangements may induce our advisor to recommend transactions that may not be in our best interest at the time, and our advisor will have considerable discretion with respect to the terms of any acquisition, disposition or leasing transaction.
The time and resources that our sponsor and its affiliates could devote to us may be diverted to other investment activities, and we may face additional competition due to the fact that our sponsor and its affiliates are not prohibited from raising money for, or managing, another entity that makes the same or other types of investments that we do.
Our sponsor and its affiliates are not prohibited from raising money for, or managing, another investment entity that makes the same or other types of investments as we do. As a result, the time and resources they could devote to us may be diverted to other investment activities. We cannot currently estimate the time our officers and directors will be required to devote to us because the time commitment required of our officers and directors will vary depending upon a variety of factors, including, but not limited to, general economic and market conditions affecting us, our advisor’s ability to locate and acquire investments that meet our investment objectives and the size of our real estate portfolio. Since these professionals engage in and will continue to engage in other business activities on behalf of themselves and others, these professionals will face conflicts of interest in allocating their time among us, our advisor, and its affiliates and other business activities in which they are involved. This could result in actions that are more favorable to affiliates of our advisor than to us.

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In addition, we may compete with affiliates of our advisor for the same investors and investment opportunities. We may also co-invest with any such investment entity. Even though all such co-investments will be subject to approval by our independent directors, they could be on terms not as favorable to us as those we could achieve co-investing with a third party.
Our advisor may have conflicting fiduciary obligations if we acquire assets from affiliates of our sponsor or enter into joint ventures with affiliates of our sponsor. As a result, in any such transaction we may not have the benefit of arm’s-length negotiations of the type normally conducted between unrelated parties.
Our advisor may cause us to invest in a property owned by, or make an investment in equity securities in or real estate-related loans to, our sponsor or its affiliates or through a joint venture with affiliates of our sponsor. In these circumstances, our advisor will have a conflict of interest when fulfilling its fiduciary obligation to us. In any such transaction, we would not have the benefit of arm’s-length negotiations of the type normally conducted between unrelated parties.
The fees we paid to affiliates in connection with our public offering and continue to pay in connection with the acquisition and management of our investments were determined without the benefit of arm’s-length negotiations of the type normally conducted between unrelated parties.
The fees paid to the dealer manager for services they provided for us and the fees to be paid to our advisor, our property managers and other affiliates for services they provide for us were determined without the benefit of arm’s-length negotiations of the type normally conducted between unrelated parties, may be in excess of amounts that we would otherwise pay to third parties for such services and may reduce the amount of cash that would otherwise be available for investments in real properties and distributions to our stockholders.
Risks Related To Investments in Real Estate
Our operating results will be affected by economic and regulatory changes that impact the real estate market in general.
Our investments in multifamily properties will be subject to risks generally attributable to the ownership of real property, including:
changes in global, national, regional or local economic, demographic or real estate market conditions;
changes in supply of or demand for similar properties in an area;
increased competition for real property investments targeted by our investment strategy;
bankruptcies, financial difficulties or lease defaults by our residents;
changes in interest rates and availability of financing;
changes in the terms of available financing, including more conservative loan-to-value requirements and shorter debt maturities;
competition from other residential properties;
the inability or unwillingness of residents to pay rent increases;
changes in government rules, regulations and fiscal policies, including changes in tax, real estate, environmental and zoning laws;
the severe curtailment of liquidity for certain real estate related assets; and
rent restrictions due to government program requirements.
All of these factors are beyond our control. Any negative changes in these factors could affect our ability to meet our obligations and make distributions to stockholders.
We are unable to predict future changes in global, national, regional or local economic, demographic or real estate market conditions. For example, a recession or rise in interest rates could make it more difficult for us to lease or dispose of multifamily properties and could make alternative interest-bearing and other investments more attractive and therefore potentially lower the relative value of the real estate assets we acquire. These conditions, or others we cannot predict, may adversely affect our results of operations and returns to our stockholders. In addition, the value of the multifamily properties we acquire may decrease following the date we acquire such properties due to the risks described above or any other unforeseen changes in market conditions. If the value of our multifamily properties decreases, we may be forced to dispose of our properties at a price lower than the price we paid to acquire our properties, which could adversely impact the results of our operations and our ability to make distributions and return capital to our investors.

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A concentration of our investments in the apartment sector may leave our profitability vulnerable to a downturn or slowdown in the sector or state or region.
Our property portfolio is comprised solely of multifamily properties. As a result, we will be subject to risks inherent in investments in a single type of property. Because our investments are in the apartment sector, the potential effects on our revenues, and as a result, our cash available for distribution to our stockholders, resulting from a downturn or slowdown in the apartment sector could be more pronounced than if we had more fully diversified our investments. If our investments are concentrated in a particular state or geographic region, and such state or geographic region experiences economic difficulty disproportionate to the nation as a whole, then the potential effects on our revenues, and as a result, our cash available for distribution to our stockholders, could be more pronounced than if we had more fully diversified our investments geographically.
We depend on residents for our revenue, and therefore, our revenue and our ability to make distributions to our stockholders is dependent upon the ability of the residents at our properties to generate enough income to pay their rents in a timely manner. A substantial number of non-renewals, terminations or lease defaults could reduce our net income and limit our ability to make distributions to our stockholders. 
The underlying value of our properties and the ability to make distributions to our stockholders depend upon the ability of the residents at our properties to generate enough income to pay their rents in a timely manner, and the success of our investments depends upon the occupancy levels, rental income and operating expenses of our properties and our company. Residents’ inability to timely pay their rents may be impacted by employment and other constraints on their personal finances, including debts, purchases and other factors. These and other changes beyond our control may adversely affect our residents’ ability to make rental payments. In the event of a resident default or bankruptcy, we may experience delays in enforcing our rights as landlord and may incur costs in protecting our investment and re-leasing our property. We may be unable to re-lease the property for the rent previously received. We may be unable to sell a property with low occupancy without incurring a loss. These events and others could cause us to reduce the amount of distributions we make to stockholders and the value of our stockholders’ investment to decline.
We may be unable to secure funds for future capital improvements, which could adversely impact our ability to make cash distributions to our stockholders.
In order to attract residents, we may be required to expend funds for capital improvements and apartment renovations when residents do not renew their leases or otherwise vacate their apartment homes. In addition, we may require substantial funds to renovate an apartment community in order to sell it, upgrade it or reposition it in the market. If we have insufficient capital reserves, we will have to obtain financing from other sources. We intend to establish capital reserves in an amount we, in our discretion, believe is necessary. A lender also may require escrow of capital reserves in excess of any established reserves. If these reserves or any reserves otherwise established are designated for other uses or are insufficient to meet our cash needs, we may have to obtain financing from either affiliated or unaffiliated sources to fund our cash requirements. We cannot assure our stockholders that sufficient financing will be available or, if available, will be available on economically feasible terms or on terms acceptable to us. Moreover, certain reserves required by lenders may be designated for specific uses and may not be available for capital purposes such as future capital improvements. Additional borrowing for capital needs and capital improvements will increase our interest expense, and therefore our financial condition and our ability to make cash distributions to our stockholders may be adversely affected.
A property that experiences significant vacancy could be difficult to sell or re-lease.
A property may experience significant vacancy through the eviction of residents and/or the expiration of leases. Certain of the multifamily properties we acquire may have some level of vacancy at the time of our acquisition of the property and we may have difficulty obtaining new residents. If vacancies continue for a long period of time, we may suffer reduced revenues resulting in lower cash distributions to stockholders. In addition, the resale value of the property could be diminished because the market value may depend principally upon the value of the leases of such property.
We will compete with numerous other persons and entities for real estate investments.
We are subject to significant competition in seeking real estate investments and residents. We compete with many third parties engaged in real estate investment activities, including other REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, lenders, hedge funds, governmental bodies and other entities. Many of our competitors have substantially greater financial and other resources than we have and may have substantially more operating experience than us. They may also enjoy significant competitive advantages that result from, among other things, a lower cost of capital.

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Competition from other multifamily communities and housing alternatives for residents could reduce our profitability and the return on your investment.
The multifamily property market in particular is highly competitive. This competition could reduce occupancy levels and revenues at our multifamily properties, which would adversely affect our operations. We face competition from many sources, including from other multifamily properties in markets where we own properties. In addition, overbuilding of multifamily properties may occur, which would increase the number of multifamily homes available and may decrease occupancy and unit rental rates. Furthermore, our multifamily properties compete, with numerous housing alternatives in attracting residents, including owner occupied single- and multifamily homes available to rent or purchase. Competitive housing in a particular area and the increasing affordability of owner occupied single and multifamily homes available to rent or buy caused by declining mortgage interest rates and government programs to promote home ownership could adversely affect our ability to retain our residents, lease apartment homes and increase or maintain rental rates.
Our strategy for acquiring value-enhancement multifamily properties involves greater risks than more conservative investment strategies. 
We have implemented a value-enhancement strategy for a substantial portion of the total apartment homes we have acquired. Our value-enhancement strategy involves the acquisition of under-managed, stabilized apartment communities in high job and population growth neighborhoods and the investment of additional capital to make strategic upgrades of the interiors of the apartment homes. These opportunities will vary in degree based on the specific business plan for each asset, but could include new appliances, better cabinets, countertops and flooring. Our strategy for acquiring value-enhancement multifamily properties involves greater risks than more conservative investment strategies. The risks related to these value-enhancement investments include risks related to delays in the repositioning or improvement process, higher than expected capital improvement costs, possible borrowings necessary to fund such costs, and ultimately that the repositioning process may not result in the higher rents and occupancy rates anticipated. In addition, our value-enhancement properties may not produce revenue while undergoing capital improvements. Furthermore, we may also be unable to complete the improvements of these properties and may be forced to hold or sell these properties at a loss. For these and other reasons, we cannot assure you that we will realize growth in the value of our value-enhancement multifamily properties, and as a result, our ability to make distributions to our stockholders could be adversely affected.
Multifamily properties are illiquid investments, and we may be unable to adjust our portfolio in response to changes in economic or other conditions or sell a property if or when we decide to do so.
Multifamily properties are illiquid investments. We may be unable to adjust our portfolio in response to changes in economic or other conditions. In addition, the real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates, supply and demand, and other factors that are beyond our control. We cannot predict whether we will be able to sell any real property for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We cannot predict the length of time needed to find a willing purchaser and to close the sale of a real property.
Additionally, we may be required to expend funds to correct defects or to make improvements before a real property can be sold. We cannot assure you that we will have funds available to correct such defects or to make such improvements.
In acquiring a real property, we may agree to restrictions that prohibit the sale of that real property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that real property. All these provisions would restrict our ability to sell a property, which could reduce the amount of cash available for distribution to our stockholders.
Short-term apartment leases expose us to the effects of declining market rent, which could adversely impact our ability to make cash distributions to our stockholders.
Substantially all of our apartment leases are for a term of one year or less. Because these leases generally permit the residents to leave at the end of the lease term without penalty, our rental revenues may be impacted by declines in market rents more quickly than if our leases were for longer terms.
Increased construction of similar properties that compete with our apartment communities in any particular location could adversely affect the operating results of our properties and our cash available for distribution to our stockholders.
We may have acquired apartment communities in locations that may be experiencing increases in construction of properties that compete with our apartment communities. This increased competition and construction could:
make it more difficult for us to find residents to lease apartment homes in our apartment communities;
force us to lower our rental prices in order to lease apartment homes in our apartment communities; or
substantially reduce our revenues and cash available for distribution to our stockholders.

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Actions of joint venture partners could negatively impact our performance.
We may enter into joint ventures with third parties, including with entities that are affiliated with our advisor. We may also purchase and develop properties in joint ventures or in partnerships, co-tenancies or other co-ownership arrangements with the sellers of the properties, affiliates of the sellers, developers or other persons. Such investments may involve risks not otherwise present with a direct investment in real estate, including, for example:
the possibility that our venture partner or co-tenant in an investment might become bankrupt;
that the venture partner or co-tenant may at any time have economic or business interests or goals which are, or which become, inconsistent with our business interests or goals;
that such venture partner or co-tenant may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives;
the possibility that we may incur liabilities as a result of an action taken by such venture partner;
that disputes between us and a venture partner may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business;
the possibility that if we have a right of first refusal or buy/sell right to buy out a co-venturer, co-owner or partner, we may be unable to finance such a buy-out if it becomes exercisable or we may be required to purchase such interest at a time when it would not otherwise be in our best interest to do so; or
the possibility that we may not be able to sell our interest in the joint venture if we desire to exit the joint venture.
Such investments may also have the potential risk of impasses on decisions because neither we nor the co-venturer would have full control over the joint venture, which might have a negative influence on the joint venture and decrease potential returns to you. In addition, to the extent our participation represents a minority interest, a majority of the participants may be able to take actions which are not in our best interests because of our lack of full control. Disputes between us and co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business. Consequently, actions by or disputes with co-venturers might result in subjecting properties owned by the joint venture to additional risk. In addition, to the extent that our venture partner or co-tenant is an affiliate of the Advisor, certain conflicts of interest will exist.
Our multifamily properties will be subject to property taxes that may increase in the future, which could adversely affect our cash flow.
Our multifamily properties are subject to real and personal property taxes, as well as excise taxes, that may increase as tax rates change and as the properties are assessed or reassessed by taxing authorities. As the owner of the properties, we are ultimately responsible for payment of the taxes to the applicable government authorities. If we fail to pay any such taxes, the applicable taxing authority may place a lien on the real property and the real property may be subject to a tax sale. In addition, we will generally be responsible for real property taxes related to any vacant space.
Uninsured losses or costly premiums for insurance coverage relating to real property may adversely affect your returns.
We attempt to adequately insure all of our multifamily properties against casualty losses. The nature of the activities at certain properties we may acquire may expose us and our operators to potential liability for personal injuries and property damage claims. In addition, there are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, tornadoes, hurricanes, pollution or environmental matters that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. Mortgage lenders sometimes require commercial property owners to purchase specific coverage against acts of terrorism as a condition for providing mortgage loans. These policies may not be available at a reasonable cost, if at all, which could inhibit our ability to finance or refinance our properties. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. Changes in the cost or availability of insurance could expose us to uninsured casualty losses. In the event that any of our properties incurs a casualty loss that is not fully covered by insurance, the value of our assets will be reduced by any such uninsured loss. In addition, we cannot assure you that funding will be available to us for repair or reconstruction of damaged real property in the future.
Costs of complying with governmental laws and regulations related to environmental protection and human health and safety may be high.
All real property investments and the operations conducted in connection with such investments are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. Some of these laws and

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regulations may impose joint and several liability on customers, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal.
Under various federal, state and local environmental laws, a current or previous owner or operator of real property may be liable for the cost of removing or remediating hazardous or toxic substances on such real property. These environmental laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may adversely affect our ability to sell, rent or pledge such real property as collateral for future borrowings. Environmental laws also may impose restrictions on the manner in which real property may be used or businesses may be operated. Some of these laws and regulations have been amended so as to require compliance with new or more stringent standards as of future dates. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require us to incur material expenditures. Future laws, ordinances or regulations may impose material environmental liability. Additionally, the existing condition of land when we buy it, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties, may affect our properties. There are also various local, state and federal fire, health, life-safety and similar regulations with which we may be required to comply and which may subject us to liability in the form of fines or damages for noncompliance. In connection with the acquisition and ownership of our properties, we may be exposed to these costs in connection with such regulations. The cost of defending against environmental claims, any damages or fines we must pay, compliance with environmental regulatory requirements or remediating any contaminated real property could materially and adversely affect our business and results of operations, lower the value of our assets and, consequently, lower the amounts available for distribution to our stockholders.
The costs associated with complying with the Americans with Disabilities Act may reduce the amount of cash available for distribution to our stockholders. 
Investment in properties may also be subject to the Americans with Disabilities Act of 1990, as amended, or the ADA. Under the ADA, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. We are committed to complying with the ADA to the extent to which it applies. The ADA has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities. With respect to the properties we acquire, the ADA’s requirements could require us to remove access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. We will attempt to acquire properties that comply with the ADA or place the burden on the seller or other third party, such as residents, to ensure compliance with the ADA. We cannot assure you that we will be able to acquire properties or allocate responsibilities in this manner. Any monies we use to comply with the ADA will reduce the amount of cash available for distribution to our stockholders.
To the extent we invest in age-restricted communities, we may incur liability by failing to comply with the Housing for Older Persons Act, or HOPA, the Fair Housing Act, or FHA, or certain state regulations, which may affect cash available for distribution to our stockholders.
To the extent we invest in age-restricted communities, any such properties must comply with the FHA and HOPA. The FHA generally prohibits age-based housing discrimination; however certain exceptions exist for housing developments that qualify as housing for older persons. HOPA provides the legal requirements for such housing developments. In order for housing to qualify as housing for older persons, HOPA requires (1) all residents of such developments to be at least 62 years of age or (2) that at least 80% of the occupied apartment homes are occupied by at least one person who is at least 55 years of age and that the housing community publish and adhere to policies and procedures that demonstrate this required intent and comply with rules issued by the United States Department of Housing and Urban Development, or HUD, for verification of occupancy. In addition, certain states require that age-restricted communities register with the state. Noncompliance with the FHA, HOPA or state registration requirements could result in the imposition of fines, awards of damages to private litigants, payment of attorneys’ fees and other costs to plaintiffs, substantial litigation costs and substantial costs of remediation, all of which would reduce the amount of cash available for distribution to our stockholders.
Government housing regulations may limit the opportunities at some of the government-assisted housing properties we invest in, and failure to comply with resident qualification requirements may result in financial penalties or loss of benefits, such as rental revenues paid by government agencies.
To the extent that we invest in government-assisted housing, we may acquire properties that benefit from governmental programs intended to provide affordable housing to individuals with low or moderate incomes. These programs, which are typically administered by HUD or state housing finance agencies, generally provide mortgage insurance, favorable financing terms, tax credits or rental assistance payments to property owners. As a condition of the receipt of assistance under these programs, the properties must comply with various requirements, which typically limit rents to pre-approved amounts and impose restrictions on resident incomes. Failure to comply with these requirements and restrictions may result in financial

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penalties or loss of benefits. In addition, we will typically need to obtain the approval of HUD in order to acquire or dispose of a significant interest in or manage a HUD-assisted property.
Risks Associated with Real Estate-Related Assets
Disruptions in the financial markets and deteriorating economic conditions could adversely impact the market for real estate-related assets, which may negatively impact our investments in real-estate related assets.
We may invest in real estate-related assets backed by multifamily properties. The returns available to investors in these investments are determined by: (1) the supply and demand for such investments and (2) the existence of a market for such investments, which includes the ability to sell or finance such investments. During periods of volatility the number of investors participating in the market may change at an accelerated pace. As liquidity or “demand” increases, the returns available to investors will decrease. Conversely, a lack of liquidity will cause the returns available to investors to increase. In recent years, concerns pertaining to the deterioration of credit in the residential mortgage market have adversely impacted almost all areas of the debt capital markets including corporate bonds, asset-backed securities and commercial real estate bonds and loans. Future instability in the financial markets or weakened economic conditions may negatively impact investments in such real estate-related assets.
If we make or invest in mortgage loans, our mortgage loans may be affected by unfavorable real estate market conditions and other factors that impact the commercial real estate underlying the mortgage loans, which could decrease the value of those loans and the return on your investment.
If we make or invest in mortgage loans, we will be at risk of defaults by the borrowers on those mortgage loans. These defaults may be caused by many conditions beyond our control, including interest rate levels, economic conditions affecting real estate values and other factors that impact the value of the underlying real estate. We will not know whether the values of the properties securing our mortgage loans will remain at the levels existing on the dates of origination of those mortgage loans. If the values of the underlying properties decrease, our risk will increase because of the lower value of the security associated with such loans.
Our investments in real estate-related assets may be illiquid, and we may not be able to reallocate our portfolio in response to changes in economic and other conditions. 
Certain of the real estate-related assets that we may purchase in connection with privately negotiated transactions will not be registered under the relevant securities laws, resulting in a prohibition against their transfer, sale, pledge or other disposition except in a transaction that is exempt from the registration requirements of, or is otherwise in accordance with, those laws. The mezzanine and bridge loans we may purchase would be particularly illiquid investments due to their short life, their unsuitability for securitization and the greater difficulty of recoupment in the event of a borrower’s default. As a result, our ability to reallocate our portfolio in response to changes in economic and other conditions may be relatively limited.
Risks Associated With Debt Financing
We incur mortgage indebtedness and other borrowings that may increase our business risks and could hinder our ability to make distributions and decrease the value of your investment.
We have financed a portion of the purchase price of our multifamily properties by borrowing funds. Under our charter, we are prohibited from borrowing in excess of 300% of the value of our net assets. For valuation purposes, the value of a property will equal the value determined by an independent third-party appraiser or qualified independent valuation expert. Generally speaking, this is expected to approximate 75% of the aggregate cost of our assets. We may borrow in excess of these amounts if such excess is approved by a majority of the independent directors and is disclosed to stockholders in our next quarterly report, along with the justification for such excess. In addition, we may incur mortgage debt and pledge some or all of our investments as security for that debt to obtain funds to acquire additional investments or for working capital. We may also borrow funds as necessary or advisable to ensure we maintain our REIT tax qualification, including the requirement that we distribute at least 90% of our annual REIT taxable income to our stockholders (computed without regard to the dividends-paid deduction and excluding net capital gains). Furthermore, we may borrow in excess of the borrowing limitations in our charter if we otherwise deem it necessary or advisable to ensure that we maintain our qualification as a REIT for U.S. federal income tax purposes.
Certain debt levels will cause us to incur higher interest charges, which would result in increased debt service payments and could be accompanied by restrictive covenants. If there is a shortfall between the cash flow from a property and the cash flow needed to service mortgage debt on that property, the amount available for distributions to our stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, thus reducing the value of your investment. For tax purposes, a foreclosure on any of our properties will generally be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the

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outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we will recognize taxable income on foreclosure, but we would not receive any cash proceeds. If any mortgage contains cross collateralization or cross default provisions, a default on a single property could affect multiple properties. If any of our properties are foreclosed upon due to a default, our ability to pay cash distributions to our stockholders could be adversely affected.
Instability in the debt markets and our inability to find financing on attractive terms may make it more difficult for us to finance or refinance properties, which could reduce the amount of cash distributions we can make to our stockholders.
If mortgage debt is unavailable on reasonable terms as a result of increased interest rates, underwriting standards, capital market instability or other factors, we run the risk of being unable to refinance such debt when the loans come due, or of being unable to refinance on favorable terms to the extent that we place mortgage debt on properties. If interest rates are higher when we refinance debt, our income could be reduced. We may be unable to refinance debt at appropriate times, which may require us to sell properties on terms that are not advantageous to us, or could result in the foreclosure of such properties. If any of these events occur, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to our stockholders and may hinder our ability to raise more capital by issuing securities or by borrowing more money.
Increases in interest rates could increase the amount of our debt payments and negatively impact our operating results.
The interest we pay on our debt obligations reduces our cash available for distributions. Utilization of variable rate debt, combined with increases in interest rates would increase our interest costs, which would reduce our cash flows and our ability to make distributions to our stockholders. If we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times which may not permit realization of the maximum return on such investments.
Changes in banks’ inter-bank lending rate reporting practices or the method pursuant to which LIBOR is determined may impact our variable rate debt and adversely affect our ability to manage and hedge our debt.
Our variable rate debt is tied to the benchmark LIBOR.  LIBOR and other indices are the subject of recent national, international, and other regulatory guidance and proposals for reform. Some of these reforms are already effective while others are still to be implemented. These reforms may cause such benchmarks to perform differently than in the past, or have other consequences which cannot be predicted. LIBOR is calculated by reference to a market for interbank lending that continues to shrink, as it’s based on increasingly fewer actual transactions. This increases the subjectivity of the LIBOR calculation process and increases the risk of manipulation. Actions by the regulators or law enforcement agencies, as well as ICE Benchmark Administration (the current administrator of LIBOR), may result in changes to the manner in which LIBOR is determined or the establishment of alternative reference rates. For example, on July 27, 2017, the U.K. Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021.
It is likely that, over time, U.S. Dollar LIBOR will be replaced by the Secured Overnight Financing Rate (“SOFR”) published by the Federal Reserve Bank of New York. However, the manner and timing of this shift is currently unknown. SOFR is an overnight rate instead of a term rate, making SOFR an inexact replacement for LIBOR. There is currently no perfect way to create robust, forward-looking, SOFR term rates. Market participants are still considering how various types of financial instruments and securitization vehicles should react to a discontinuation of LIBOR. It is possible that not all of our variable rate debt will transition away from LIBOR at the same time, and it is possible that not all of our variable rate debt will transition to the same alternative reference rate, in each case increasing the difficulty of hedging. Switching existing financial instruments and hedging transactions from LIBOR to SOFR requires calculations of a spread. Industry organizations are attempting to structure the spread calculation in a manner that minimizes the possibility of value transfer between counterparties, borrowers, and lenders by virtue of the transition, but there is no assurance that the calculated spread will be fair and accurate or that all asset types and all types of securitization vehicles will use the same spread. We and other market participants have less experience understanding and modeling SOFR-based assets and liabilities than LIBOR-based assets and liabilities, increasing the difficulty of investing, hedging, and risk management. The process of transition involves operational risks. It is also possible that no transition will occur for many financial instruments, meaning that those instruments would continue to be subject to the weaknesses of the LIBOR calculation process. At this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or any other reforms to LIBOR that may be implemented. If LIBOR ceases to exist, we may need to renegotiate with borrowers and financing institutions that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established. As such, the potential effect of any such event on our cost of capital and interest income cannot yet be determined.
Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders.
When providing financing, a lender may impose restrictions on us that affect our distributions and operating policies, and our ability to incur additional debt. Loan documents we enter into may contain covenants that limit our ability to further mortgage a property, discontinue insurance coverage, or replace our advisor. In addition, loan documents may limit our ability

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to replace a property’s property manager or terminate certain operating or lease agreements related to a property. These or other limitations may adversely affect our flexibility and our ability to achieve our investment objectives.
The derivative financial instruments that we use to hedge against interest rate fluctuations may not be successful in mitigating our risks associated with interest rates and could reduce the overall returns on your investment. 
We use derivative financial instruments, such as interest rate cap or collar agreements and interest rate swap agreements, to hedge exposures to changes in interest rates on loans secured by our assets, but no hedging strategy can protect us completely. These agreements involve risks, such as the risk that counterparties may fail to honor their obligations under these arrangements and that these arrangements may not be effective in reducing our exposure to interest rate changes. We cannot assure you that our hedging strategy and the derivatives that we use will adequately offset the risk of interest rate volatility or that our hedging transactions will not result in losses. In addition, the use of such instruments may reduce the overall return on our investments. These instruments may also generate income that may not be treated as qualifying REIT income for purposes of the 75% or 95% REIT income tests.
Federal Income Tax Risks
Failure to qualify as a REIT would reduce our net cash flows available for investment or distribution.
In order for us to qualify as a REIT, we must satisfy certain complex requirements set forth in the Code and Treasury Regulations relating to our organization, ownership and nature and amount of our assets, income and distributions, some of which may not be entirely within our control. Although we intend to structure our activities in a manner designed to satisfy all of these requirements, there can be no assurance that we will actually do so.
If we fail to qualify as a REIT for any taxable year and we do not qualify for certain statutory relief provisions, we will be subject to U.S. federal income tax on our taxable income at corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the taxable year in which we lost our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, distributions to stockholders would no longer qualify for the dividends paid deduction, and we would no longer be required to make distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax. Our failure to qualify as a REIT could adversely affect the return on a stockholder’s investment.
You may have current tax liability on distributions you elect to reinvest in our common stock.
If you participate in our distribution reinvestment plan, you will be deemed to have received, and for U.S. federal income tax purposes will recognize taxable income equal to the amount reinvested in our shares to the extent such amount does not exceed our earnings and profits. As a result, unless you are a tax-exempt entity, you may have to use funds from other sources to pay your tax liability on distributions reinvested in our shares.
Distributions payable by REITs generally are subject to a higher tax rate than regular corporate dividends under current law.
The maximum U.S. federal income tax rate for certain qualified dividends payable to U.S. stockholders that are individuals, trusts and estates generally is 20%. Dividends payable by REITs, however, are generally not eligible for the reduced rates for qualified dividends and are taxed at ordinary income rates (but U.S. stockholders that are individuals, trusts and estates generally may deduct 20% of ordinary dividends from a REIT for taxable years beginning after December 31, 2017, and before January 1, 2026.
The more favorable rates applicable to regular corporate dividends under current law could cause investors who are individuals, trusts and estates or are otherwise sensitive to these lower rates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including shares of our common stock.
REIT distribution requirements could adversely affect our ability to execute our business plan.
We generally must distribute annually at least 90% of our REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain for this purpose) in order to qualify as a REIT. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income (including net capital gain), we will be subject to U.S. federal corporate income tax on our undistributed REIT taxable income. In addition, if we fail to distribute during each calendar year at least the sum of (a) 85% of our ordinary income for that year, (b) 95% of our capital gain net income for that year, and (c) any undistributed taxable income from prior periods, we will be subject to a 4% nondeductible excise tax on the excess of the required distribution over the sum of (i) the amounts that we actually distributed and (ii) the amounts we retained and upon which we paid income tax at the corporate level. Although we intend to make distributions to

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you to comply with the REIT requirements of the Internal Revenue Code, it is possible that we might not always be able to do so.
From time to time, we may generate taxable income greater than our taxable income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders. If we do not have other funds available in these situations we could be required to borrow funds, sell investments at disadvantageous prices or find another alternative source of funds to make distributions sufficient to satisfy the REIT distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. There is no assurance that outside financing will be available to us. Even if available, the use of outside financing or other alternative sources of funds to pay distributions could increase our costs or dilute your equity interests. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.
Our gains from sales of our assets are potentially subject to the prohibited transaction tax, which could reduce the return on your investment.
Our ability to dispose of property during the first few years following acquisition may be restricted to a substantial extent as a result of our REIT status. Under applicable provisions of the Code regarding “prohibited transactions” by REITs, we would be subject to a 100% tax on any gain realized on the sale or other disposition of any property (other than foreclosure property) that we own, directly or through any subsidiary entity, including our operating partnership, but generally excluding any taxable REIT subsidiaries, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of a trade or business, unless we qualify for a statutory safe harbor. Whether property is inventory or otherwise held primarily for sale to customers in the ordinary course of a trade or business depends on the particular facts and circumstances surrounding each property. We intend to avoid the 100% prohibited transaction tax by (1) conducting activities that may otherwise be considered prohibited transactions through a taxable REIT subsidiary or, (2) conducting our operations in such a manner so that no sale or other disposition of an asset we own, directly or through any subsidiary other than a taxable REIT subsidiary, will be treated as a prohibited transaction (including by structuring certain dispositions of our properties to comply with certain safe harbors available under the Internal Revenue Code for properties held at least two years). However, no assurance can be given that any particular property we own, directly or through any subsidiary entity, including our operating partnership, but excluding any taxable REIT subsidiaries, will not be treated as inventory or property held primarily for sale to customers in the ordinary course of a trade or business.
Complying with REIT requirements may force us to liquidate otherwise attractive investments.
To maintain our REIT status, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualifying real estate assets, including certain mortgage loans and mortgage-backed securities. Our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer. No more than 20% of the value of our total assets can be represented by securities of one or more taxable REIT subsidiaries, and not more than 25% of the value of our assets may consist of “nonqualified publicly offered REIT debt instruments.”
If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate from our portfolio otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to you.
Liquidation of assets may jeopardize our REIT status.
To maintain our REIT status, we must comply with requirements regarding our assets and our sources of income. If we are compelled to liquidate our investments to repay obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory.
The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT.
We may acquire or originate mezzanine loans. The Internal Revenue Service has provided a safe harbor in Revenue Procedure 2003-65 for structuring mezzanine loans so that they will be treated by the Internal Revenue Service as a real estate asset for purposes of the REIT asset tests and interest derived from mezzanine loans will be treated as qualifying mortgage interest for purposes of the 75% gross income test. Although the Revenue Procedure provides a safe harbor on which taxpayers may rely, it does not prescribe rules of substantive tax law. We may acquire mezzanine loans that do not meet all of the requirements of the safe harbor. In the event we own a mezzanine loan that does not meet the safe harbor, the Internal Revenue Service could challenge such loan’s treatment as a real estate asset for purposes of the REIT asset and income tests and, if such a challenge were sustained, we could fail to continue to qualify as a REIT.

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If our operating partnership fails to maintain its status as a disregarded entity or partnership, its income may be subject to taxation, which would reduce the cash available for distribution to you and likely result in a loss of our REIT status.
We intend to maintain the status of the operating partnership as a disregarded entity or partnership for U.S. federal income tax purposes. However, if the Internal Revenue Service were to successfully challenge the status of the operating partnership as a disregarded entity or partnership for such purposes, it would be taxable as a corporation. In such event, this would reduce the amount of distributions that the operating partnership could make to us. This would also likely result in our losing REIT status, and, if so, becoming subject to a corporate level tax on our own income. This would substantially reduce any cash available to pay distributions. In addition, if any of the partnerships or limited liability companies through which the operating partnership owns its properties, in whole or in part, loses its characterization as a partnership and is otherwise not disregarded for U.S. federal income tax purposes, it would be subject to taxation as a corporation, thereby reducing distributions to the operating partnership. Such a recharacterization of an underlying property owner could also threaten our ability to maintain our status as a REIT.
Legislative or regulatory action could adversely affect investors.
In recent years, numerous legislative, judicial and administrative changes have been made in the provisions of U.S. federal income tax laws applicable to investments similar to an investment in shares of our common stock. Additional changes to the tax laws are likely to continue to occur, and we cannot assure you that any such changes will not adversely affect our taxation and our ability to continue to qualify as a REIT or the taxation of a stockholder. Any such changes could have an adverse effect on an investment in our shares or on the market value or the resale potential of our assets. You are urged to consult with your own tax advisor with respect to the impact of recent legislation on their investment in our shares and the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our shares.
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 your vote or the vote of our other stockholders. Our board of directors has fiduciary duties to us and our stockholders and could only cause such changes in our tax treatment if it determines in good faith that such changes are in the best interests of our stockholders.
In addition, the Tax Cuts and Jobs Act, or the Tax Act, made significant changes to the U.S. federal income tax rules for taxation of individuals and businesses. In addition to reducing corporate and individual tax rates, the Tax Act eliminates or restricts various deductions. Most of the changes applicable to individuals are temporary and apply only to taxable years beginning after December 31, 2017, and before January 1, 2026. The Tax Act made numerous large and small changes to the tax rules that do not affect the REIT qualification rules directly, but may otherwise affect us or you.
While the changes in the Tax Act generally appear to be favorable with respect to REITs, the extensive changes to non-REIT provisions in the Internal Revenue Code may have unanticipated effects on us or you.
We urge you to consult with your own tax advisor with respect to the status of the Tax Act and other legislative, regulatory or administrative developments and proposals and their potential effect on an investment in shares of our common stock.

Our property taxes could increase due to property tax rate changes or reassessment, which would impact our cash flows.
Even if we qualify as a REIT for U.S. federal income tax purposes, we will be required to pay some state and local taxes on our properties. The real property taxes on our properties may increase as property tax rates change or as our properties are assessed or reassessed by taxing authorities. Therefore, the amount of property taxes we pay in the future may increase substantially. If the property taxes we pay increase and if any such increase is not reimbursable under the terms of our lease, then our cash flows will be impacted, and our ability to pay expected distributions to you could be adversely affected.
Non-U.S. investors may be subject to FIRPTA on the sale of shares of our common stock if we are unable to qualify as a “domestically controlled qualified investment entity.”
A non-U.S. person (other than certain foreign pension plans and certain foreign publicly traded entities) disposing of a U.S. real property interest, including shares of a U.S. corporation whose assets consist principally of U.S. real property interests, is generally subject to a tax, known as FIRPTA, on the gain recognized on the disposition of such interest. FIRPTA does not apply to the disposition of stock in a REIT if the REIT is “domestically controlled.” A REIT is domestically controlled if, at all times during a specified testing period (the continuous five-year period ending on the date of disposition or, if shorter, the entire period of the REIT’s existence), less than 50% in value of its shares is held directly or indirectly by non-U.S. holders. We cannot assure you that we will qualify as a domestically controlled REIT. If we were to fail to so qualify, gain realized by a non-U.S. investor (other than certain foreign pension plans and certain foreign publicly traded entities) on a sale of our common stock would be subject to FIRPTA unless our common stock was traded on an established securities market and the

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non-U.S. investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding common stock.
A non-U.S. investor also may be subject to FIRPTA tax upon the payment of any distribution by us, which dividend is attributable to gain from sales or exchanges of U.S. real property interests. We encourage you to consult your own tax advisor to determine the tax consequences applicable to you.
If either or both of the mergers do not qualify as a tax-free reorganization, there may be adverse tax consequences.
The mergers are each intended to qualify as a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code. The closing of the mergers was conditioned on the receipt by each of the Company, SIR and STAR III of an opinion of its counsel to the effect that each merger will qualify as a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code. However, these legal opinions will not be binding on the IRS or on the courts. If, for any reason, the mergers were to fail to qualify as a tax-free reorganization, then each former stockholder of SIR and/or STAR III generally would recognize gain or loss, as applicable, equal to the difference between (i) the merger consideration (i.e. the sum of the cash plus the fair market value of the shares of the Company’s common stock) received by the former SIR and/or STAR III stockholder in the applicable merger, and (ii) such former stockholder’s adjusted tax basis in its shares of SIR or STAR III common stock.
Retirement Plan Risks
If our assets are deemed to be ERISA plan assets, the Advisor and we may be exposed to liabilities under Title I of ERISA and the Internal Revenue Code.
In some circumstances where an ERISA plan holds an interest in an entity, the assets of the entire entity are deemed to be ERISA plan assets unless an exception applies. This is known as the "look-through rule." Under those circumstances, the obligations and other responsibilities of plan sponsors, plan fiduciaries and plan administrators, and of parties in interest and disqualified persons, under Title I of ERISA and Section 4975 of the Code, as applicable, may be applicable, and there may be liability under these and other provisions of ERISA and the Code. We believe that our assets should not be treated as plan assets because the shares should qualify as "publicly-offered securities" that are exempt from the look-through rules under applicable Treasury Regulations. We note, however, that because certain limitations are imposed upon the transferability of shares so that we may qualify as a REIT, and perhaps for other reasons, it is possible that this exemption may not apply. If that is the case, and if the Advisor or we are exposed to liability under ERISA or the Code, our performance and results of operations could be adversely affected. Prior to making an investment in us, you should consult with your legal and other advisors concerning the impact of ERISA and the Code on your investment and our performance.
ITEM 1B.                                       UNRESOLVED STAFF COMMENTS
We have no unresolved staff comments.
ITEM 2.                                                PROPERTIES
As of December 31, 2019, we owned 32 multifamily properties consisting of an aggregate of 11,195 apartment homes and one parcel of land held for the development of apartment homes. The total contract purchase price of our real estate portfolio as of December 31, 2019 was $1,451,454,728, including development costs. For additional information on our real estate portfolio, see Part I, Item I. “Business—Our Real Estate Portfolio” of this Annual Report on Form 10-K.
Our principal executive offices are located at 18100 Von Karman Avenue, Suite 500, Irvine, CA 92612. Our telephone number, general facsimile number and website address are (949) 852-0700, (949) 852-0143 and http://www.steadfastreits.com, respectively.
ITEM 3.                                               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 4.                                                MINE SAFETY DISCLOSURES
Not applicable.

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PART II
ITEM 5.                                                MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND PURCHASES OF EQUITY SECURITIES
Stockholder Information
As of March 5, 2020, we had approximately 52,875,501 shares of common stock outstanding held by a total of approximately 17,500 stockholders. The number of stockholders is based on the records of DST Systems, Inc., who serves as our transfer agent. As a result of the completion of the mergers on March 6, 2020, we had approximately 108,898,305 shares of common stock issued and outstanding held by a total of approximately 40,000 stockholders.
Market Information
No public market currently exists for our shares of common stock and we currently have no plans to list our shares on a national securities exchange. Until our shares are listed, if ever, our stockholders may not sell their shares unless the buyer meets the applicable suitability and minimum purchase requirements. In addition, our charter prohibits the ownership of more than 9.8% in value of our outstanding capital stock (which includes common stock and preferred stock we may issue) and more than 9.8% in value or number of shares, whichever is more restrictive, of our outstanding common stock, unless exempted (prospectively or retroactively) by our board of directors. Consequently, there is the risk that our stockholders may not be able to sell their shares at a time or price acceptable to them.
Estimated Value Per Share
The following is a discussion of the estimated value per share determined by our board of directors as of December 31, 2018, and publicly announced in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. We intend to establish an updated estimated value per share following the completion of the mergers, which closed on March 6, 2020. We expect that the estimated value per share will be as of March 6, 2020, and will be reported by us in a Current Report on Form 8-K.
Background
In November 2018, our board of directors initiated a process to determine an estimated value per share of the shares of our common stock. We provide an estimated value per share to assist broker-dealers that participated in our public offering in meeting their customer account statement reporting obligations under National Association of Securities Dealers Conduct Rule 2340, as required by the Financial Industry Regulatory Authority, Inc., or FINRA. This valuation was performed in accordance with Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the Institute for Portfolio Alternatives (formerly known as the Investment Program Association), or IPA, in April 2013, or the IPA valuation guidelines. Our board of directors formed a valuation committee, or the valuation committee, comprised solely of independent directors, to oversee the process of determining our estimated value per share. Upon approval of our board of directors, we engaged CBRE Capital Advisors, Inc., or CBRE Cap, a FINRA registered broker dealer firm that specializes in providing real estate financial services, to provide property-level and aggregate valuation analyses and a range for the estimated value per share of our common stock as of December 31, 2018.
From CBRE Cap’s engagement through the issuance of its valuation report on March 12, 2019, or the valuation report, CBRE Cap held discussions with our advisor and our senior management and conducted or commissioned such investigations, research, review and analyses as it deemed necessary. CBRE Cap based its calculation of the range for our estimated value per share of our common stock upon appraisals of all our real properties, or the appraisals, performed by CBRE, Inc., or CBRE, an affiliate of CBRE Cap and an independent third-party appraisal firm, and valuations performed by our advisor with respect to our other assets and liabilities. The valuation committee, upon its receipt and review of the valuation report, concluded that the range between $14.98 and $16.74 for our estimated value per share proposed in the valuation report was reasonable and recommended that the board adopt $15.84 as the estimated value per share of our common stock as of December 31, 2018. The estimated value per share represents the weighted average of the range reflecting the effect of using differing discount rates and terminal capitalization rates in the sensitivity analysis. On March 12, 2019, our board of directors accepted the valuation committee’s recommendation and approved $15.84 as the estimated value per share of our common stock as of December 31, 2018. CBRE Cap is not responsible for the determination of the estimated value per share of our common stock as of December 31, 2018.

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Valuation Methodology
In preparing the valuation report, CBRE Cap, among other things:
reviewed financial and operating information requested from or provided by our advisor and us;
reviewed and discussed with us and our advisor the historical and anticipated future financial performance of our multifamily properties, including forecasts prepared by us and our advisor;
reviewed appraisals commissioned by us that contained analysis on each of our multifamily properties and performed analyses and studies for each property;
conducted or reviewed CBRE Cap proprietary research, including market and sector capitalization rate surveys;
reviewed third-party research, including equity reports and online data providers;
compared our financial information to similar information of companies that CBRE Cap deemed to be comparable;
reviewed our reports filed with the SEC, including our Quarterly Report on Form 10-Q for the period ended September 30, 2018, and the unaudited financial statements therein; and
reviewed the unaudited financial statements as of December 31, 2018, as prepared by us.
The appraisals were performed in accordance with Uniform Standards of Professional Appraisal Practice and were all MAI appraisals. The appraisals were prepared by CBRE and personnel who are members and hold the MAI designation. CBRE Cap reviewed and took into consideration the appraisals, and described the results of the appraisals in its valuation report. Discreet values were assigned to each property in our portfolio.
Our valuation committee and board of directors considered the following valuation methodology with respect to each multifamily property, which was applied by CBRE Cap in its valuation report. Unlevered, ten-year discounted cash flow analyses from appraisals were created for our fully operational properties. The “terminal capitalization rate” method was used to calculate the terminal value of the assets, with such rates varying based on the specific geographic location and other relevant factors.
Valuation Summary: Material Assumptions
The valuation process we used to determine an estimated value per share was designed to follow the recommendations of the IPA valuation guidelines.
The following table summarizes the key assumptions that were employed by CBRE Cap in the discounted cash flow models to estimate the value of our real estate assets:
 
 
Range
 
Weighted-Average
Terminal capitalization rate
 
5.78% - 6.08%
 
5.93%
Discount rate
 
7.14% - 7.51%
 
7.33%
While we believe that CBRE’s assumptions and inputs are reasonable, a change in these assumptions and inputs may significantly impact the appraised value of the real estate properties and our estimated value per share. The table below illustrates the impact on the estimated value per share if the terminal capitalization rates or discount rates were adjusted by 2.5% in either direction, which represents a 5% sensitivity analysis, in accordance with the IPA valuation guidelines, assuming all other factors remain unchanged:
 
 
Increase (Decrease) on the Estimated Value per Share due to
 
 
Decrease of 2.5%
 
Increase of 2.5%
Terminal capitalization rate
 
$
0.43

 
$
(0.48
)
Discount rate
 
0.40

 
(0.43
)
In its valuation report, CBRE Cap included an estimate of the December 31, 2018 value of our assets, including cash and selected other assets net of payables, and accruals and other liabilities including notes payable. The estimated values of our notes payable are equal to GAAP fair values in this annual report, but do not equal the book value of the loans in accordance with GAAP. The GAAP fair values of our notes payable were determined using a discounted cash flow analysis. The discounted cash flow analysis was based on projected cash flow over the remaining loan terms and on management’s estimates of current market interest rates for instruments with similar characteristics. The carrying values of a majority of our other assets and liabilities are considered to equal their fair value due to their short term maturities or liquid nature. Certain balances, such

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as lease intangible assets and liabilities related to real estate investments and deferred financing costs have been eliminated for the purpose of the valuation since the value of those balances was already considered in the appraisals.
Our estimated value per share takes into consideration any potential liability related to an incentive fee our advisor was entitled to upon meeting certain stockholder return thresholds in accordance with our charter. For purposes of determining the estimated value per share, our advisor calculated the potential liability related to this incentive fee based on a hypothetical liquidation of our assets and liabilities at their estimated fair values, without considering the impact of any potential closing costs and fees related to the disposition of real estate properties, and determined that there would be a liability related to the incentive fee of $5,218,160.
Taking into consideration the reasonableness of the valuation methodology, assumptions and conclusions contained in the valuation report, the board of directors determined the estimated value of our equity interest in our real estate portfolio to be in the range of $1,777,959,694 to $1,881,531,755 and our net asset value to range between $775,104,772 and $866,261,775, or between $14.98 and $16.74 per share, based on a share count of 51,723,801 shares issued and outstanding as of December 31, 2018.
As with any valuation methodology, the methodologies considered by the valuation committee and board of directors in reaching an estimate of the value of our shares are based upon all of the foregoing estimates, assumptions, judgments and opinions that may, or may not, prove to be correct. The use of different estimates, assumptions, judgments or opinions may have resulted in significantly different estimates of the value of our shares.
The following table summarizes the material components of our estimated value and estimated value per share as of December 31, 2018 and December 31, 2017:
 
 
Estimated Value as of
December 31,
 
Estimated Value Per Share as of December 31,
 
 
2018
 
2017
 
2018
 
2017
Real estate properties
 
$
1,827,610,000

 
$
1,777,635,000

 
$
35.33

 
$
34.96

Cash
 
72,738,775

 
27,298,855

 
1.41

 
0.54

Other assets
 
4,760,131

 
15,903,101

 
0.09

 
0.31

Mortgage debt
 
(1,042,358,884
)
 
(1,011,004,179
)
 
(20.15
)
 
(19.88
)
Other liabilities
 
(37,994,945
)
 
(34,259,950
)
 
(0.74
)
 
(0.68
)
Incentive fee
 
(5,218,160
)
 
(3,604,360
)
 
(0.10
)
 
(0.07
)
Estimated value per share
 
$
819,536,917

 
$
771,968,467

 
$
15.84

 
$
15.18

The estimated value of our real estate properties as of December 31, 2018 and 2017 was $1,827,610,000 and $1,777,635,000, respectively, while the total cost of the real estate properties was $1,612,494,662 and $1,595,533,800, respectively, comprised of the aggregate purchase price and capital expenditures subsequent to acquisition.
Additional Information Regarding the Valuation, Limitations of Estimated Value per Share and the Engagement of CBRE Cap
In accordance with the IPA valuation guidelines, the valuation committee reviewed, confirmed and approved the processes and methodologies employed by CBRE Cap and their consistency with real estate industry standards and best practices.
The valuation report issued March 12, 2019, was based upon market, economic, financial and other information, circumstances and conditions existing prior to December 31, 2018, and any material change in such information, circumstances and/or conditions may have a material effect on the estimated value per share. CBRE Cap’s valuation materials were addressed solely to our board of directors to assist it in establishing an estimated value of our common stock. CBRE Cap’s valuation materials were restricted, were not addressed to the public and should not be relied upon by any other person to establish an estimated value of our common stock. The valuation report does not constitute a recommendation by CBRE Cap to purchase or sell any shares of our common stock and should not be represented as such.
Each of CBRE Cap and CBRE reviewed the information supplied or otherwise made available to it by us or our advisor for reasonableness, and assumed and relied upon the accuracy and completeness of all such information and of all information supplied or otherwise made available to it by any other party, and did not undertake any duty or responsibility to verify independently any of such information. With respect to operating or financial forecasts and other information and data provided to or otherwise reviewed by or discussed with CBRE Cap and CBRE, CBRE Cap and CBRE assumed that such forecasts and other information and data were reasonably prepared in good faith reflecting our and our advisor’s best currently available estimates and judgments and other subjective judgments, and relied upon us and our advisor to advise CBRE Cap and CBRE promptly if any information previously provided became inaccurate or was required to be updated during the period of its review. CBRE Cap assumes no obligation to update or otherwise revise these materials. In preparing its valuation materials,

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CBRE Cap did not, and was not requested to, solicit third-party indications of interest for us in connection with possible purchases of our securities or the acquisition of all or any part of us.
In performing its analyses, CBRE Cap made numerous assumptions as of various points in time with respect to industry performance, general business, economic and regulatory conditions, current and future rental market for our operating properties and those in development and other matters, many of which are necessarily subject to change and beyond the control of CBRE Cap and us. The analyses performed by CBRE Cap are not necessarily indicative of actual values, trading values or actual future results of our common stock that might be achieved, all of which may be significantly more or less favorable than suggested by the valuation report. The analyses do not purport to be appraisals or to reflect the prices at which the properties may actually be sold, and such estimates are inherently subject to uncertainty. The actual value of our common stock may vary significantly depending on numerous factors that generally impact the price of securities, our financial condition and the state of the real estate industry more generally. Accordingly, with respect to the estimated value per share of our common stock, neither we nor CBRE Cap can give any assurance that:
a stockholder would be able to resell shares at this estimated value;
a stockholder would ultimately realize distributions per share equal to our estimated value per share upon liquidation of our assets and settlement of our liabilities or a sale of the Company;
another independent third-party appraiser or third-party valuation firm would agree with our estimated value per share;
a third party would offer the estimated value per share in an arm’s length transaction to purchase all or substantially all of our shares of common stock;
our shares would trade at a price equal to or greater than the estimated value per share if we listed them on a national securities exchange; or
the methodology used to estimate our value per share would be acceptable to FINRA or the reporting requirements under ERISA, the Internal Revenue Code or other applicable law, or the applicable provisions of a Benefit Plan or IRA.
The December 31, 2018 estimated value per share was reviewed and recommended by our valuation committee and approved by our board of directors at meetings held on March 12, 2019. The value of our common stock will fluctuate over time as a result of, among other things, developments related to individual assets and responses to the real estate and capital markets.
The estimated value per share does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share does not take into account estimated disposition costs and fees for real estate properties that are not under contract to sell or debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations or the impact of restrictions on the assumption of debt.
CBRE Cap is a FINRA registered broker-dealer and is an investment banking firm that specializes in providing real estate financial services. CBRE is actively engaged in the business of appraising commercial real estate properties similar to those owned by us in connection with public securities offerings, private placements, business combinations and similar transactions. We commissioned CBRE to deliver an appraisal report relating to our real estate properties and CBRE received fees upon delivery of such report. In addition, we have agreed to indemnify CBRE Cap against certain liabilities arising out of this engagement. Each of CBRE Cap and CBRE is an affiliate of CBRE Group, Inc., or the CBRE Group, a Fortune 500 and S&P 500 company headquartered in Los Angeles, California, one of the world’s largest commercial real estate services and investment firms (in terms of 2018 revenue) and a parent holding company of affiliated companies that are engaged in the ordinary course of business in many areas related to commercial real estate and related services. CBRE Cap and its affiliates possess substantial experience in the valuation of assets similar to those owned by us and regularly undertake the valuation of securities in connection with public offerings, private placements, business combinations and similar transactions. For the preparation of the valuation report, we paid CBRE Cap a customary fee for services of this nature, no part of which was contingent relating to the provision of services or specific findings. We have not engaged CBRE Cap for any other services. During the past four years, CBRE Cap assisted our board of directors in the determination of the estimated value per share and certain of our affiliates engaged affiliates of CBRE primarily for various real estate-related services and these affiliates of CBRE received fees in connection with such services. We anticipate that affiliates of CBRE will continue to provide similar or other real estate-related services in the future for us and our affiliates. In addition, we may in our discretion engage CBRE Cap to assist our board of directors in future determinations of our estimated value per share. We are not affiliated with CBRE, CBRE Cap or any of their affiliates. CBRE Cap and CBRE and their affiliates may from time to time in the future perform other commercial real estate appraisal, valuation and financial advisory services for us and our affiliates in transactions related to the properties that are the subjects of the appraisals, so long as such other services do not adversely affect the independence of the applicable CBRE appraiser. While we and affiliates of our advisor have engaged and may engage CBRE Cap or its

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affiliates in the future for commercial real estate services of various kinds, we believe that there are no material conflicts of interest with respect to our engagement of CBRE Cap.
In the ordinary course of their business, each of CBRE Cap and CBRE, and their respective affiliates, directors and officers may structure and effect transactions for their own accounts or for the accounts of their customers in commercial real estate assets of the same kind and in the same markets as our assets.
Distribution Information
To qualify and maintain our qualification as a REIT, we are required to distribute 90% of our annual taxable income, determined without regard to the dividends paid deduction and by excluding net capital gains, to our stockholders. If the aggregate amount of cash distributions in any given year exceeds the amount of our “REIT taxable income” generated during the year, the excess amount will either be (1) a return on capital or (2) gain from the sale or exchange of property to the extent that a stockholder’s basis in our common stock equals or is reduced to zero as the result of our current or prior year distributions.
We declared distributions based on daily record dates for each day during the period commencing April 7, 2014 through December 31, 2019. During the years ended December 31, 2019 and 2018, distributions declared for all record dates of a given month were paid approximately three days after month-end. Distributions were calculated at a rate of $0.002466 per share per day, which if paid each day over a 365-day period is equivalent to a 6.0% annualized distribution rate based on our initial public offering price of $15.00 per share of common stock. There is no guarantee that we will pay distributions at this rate in the future or at all.
Distributions declared during the years ended December 31, 2019 and 2018 aggregated by quarter, are as follows:
 
 
2019
 
 
1st Quarter
 
2nd Quarter
 
3rd Quarter
 
4th Quarter
 
Total
Total Distributions Declared(1)
 
$
11,511,537

 
$
11,684,723

 
$
11,860,005

 
$
11,915,518

 
$
46,971,783

Total Per Share Distribution
 
$
0.222

 
$
0.224

 
$
0.227

 
$
0.227

 
$
0.900

Annualized Rate Based on Purchase Price
 
6.0
%
 
6.0
%
 
6.0
%
 
6.0
%
 
6.0
%
 
 
2018
 
 
1st Quarter
 
2nd Quarter
 
3rd Quarter
 
4th Quarter
 
Total
Total Distributions Declared(1)
 
$
11,312,463

 
$
11,485,650

 
$
11,664,156

 
$
11,717,500

 
$
46,179,769

Total Per Share Distribution
 
$
0.222

 
$
0.224

 
$
0.227

 
$
0.227

 
$
0.900

Annualized Rate Based on Purchase Price
 
6.0
%
 
6.0
%
 
6.0
%
 
6.0
%
 
6.0
%
_________________
(1)
Distributions were based on daily record dates and calculated at a rate of $0.002466 per share per day for the years ended December 31, 2019 and 2018.
The tax composition of our distributions declared for the years ended December 31, 2019 and 2018 was as follows:
 
 
December 31,
 
 
2019
 
2018
Ordinary income
 
17.9
%
 
20.7
%
Return of capital
 
82.1
%
 
79.3
%
Total
 
100.0
%
 
100.0
%
Generally, our policy is to pay distributions from cash flow from operations. Because we may receive income from interest or rents at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period, and we expect to pay these distributions in advance of our actual receipt of these funds. In these instances, our board of directors has the authority under our organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or the deferral of fees and expense reimbursements by our advisor in its sole discretion. We have not established a limit on the amount of proceeds we may use from any public or private securities offerings to fund distributions.

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If we pay distributions from sources other than cash flow from operations, we will have fewer funds available for investments and our stockholders’ overall return on their investment in us may be reduced. As of December 31, 2019, 20%, 10% and 70% of distributions, including shares issued pursuant to our distribution reinvestment plan, have been funded from funds equal to amounts reinvested in our distribution reinvestment plan, net public offering proceeds and cash flows from operations, respectively.
Pursuant to our distribution reinvestment plan, stockholders had the option to elect to have their cash distributions reinvested in shares of our common stock at an initial price of $14.25 per share. On February 14, 2017, our board of directors determined a new share price of $14.85 for purposes of our distribution reinvestment plan. On March 14, 2018, our board of directors determined a new share price of $15.18 for purposes of our distribution reinvestment plan. On March 12, 2019, our board of directors determined a new share price of $15.84 for purposes of our distribution reinvestment plan. In each instance the share price for our distribution reinvestment plan was revised in connection with our board of directors determining a new estimated value per share. No sales commissions or dealer manager fees are payable on shares sold through our distribution reinvestment plan. Our board of directors may terminate the distribution reinvestment plan at its discretion at any time upon ten days’ notice to our stockholders. Following any termination of the distribution reinvestment plan, all subsequent distributions to stockholders will be made in cash.
For additional information on our distributions, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Distributions.”
Unregistered Sales of Equity Securities
On each of August 10, 2017, August 8, 2018 and November 6, 2019, we granted 1,666 shares of restricted common stock to each of our three independent directors pursuant to our independent directors’ compensation plan as compensation for services in connection with their re-election to the board of directors at our annual meeting of stockholders. The shares of restricted stock issued pursuant to our independent directors’ compensation plan were issued in transactions exempt from registration pursuant to Section 4(a)(2) of the Securities Act.
Share Repurchase Plan
Our share repurchase plan may provide an opportunity for our stockholders to have their shares of common stock repurchased by us, subject to certain restrictions and limitations.
On March 14, 2018, our board of directors amended the terms of our share repurchase plan effective as of April 15, 2018 to (1) limit the amount of shares repurchased pursuant to our share repurchase plan each quarter to $2,000,000 and (2) revise the repurchase price to an amount equal to 93% of the most recent publicly disclosed estimated value per share. Pursuant to the amended share repurchase program, the share repurchase price was $14.73 per share, which represented 93% of the estimated value per share of $15.84. As discussed in more detail below, our board of directors further amended our share repurchase plan on March 3, 2020 in connection with the mergers. Prior to the March 3, 2020 amendments, the share repurchase price was further reduced based on how long the stockholder had held the shares as follows:
Share Purchase Anniversary
 
Repurchase Price
on Repurchase Date(1)
Less than 1 year
 
No Repurchase Allowed
1 year
 
92.5% of the Share Repurchase Price(2)
2 years
 
95.0% of the Share Repurchase Price(2)
3 years
 
97.5% of the Share Repurchase Price(2)
4 years
 
100.0% 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 93% of the most recent publicly disclosed estimated value per share determined by our board of directors.
(3)
The required one-year holding period does not apply to repurchases requested within two years after death or disability of a stockholder.

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(4)
The purchase price per share for shares repurchased upon the death or disability of a stockholder will be 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 our share repurchase plan is further reduced by the aggregate amount of net proceeds per share, if any, distributed to our stockholders prior to the repurchase date (defined below) as a result of the sale of one or more of our assets that constitutes a return of capital as a result of such sales.
Repurchases of shares of our common stock are made quarterly upon written request to us at least 15 days prior to the end of the applicable quarter. Repurchase requests will be honored approximately 30 days following the end of the applicable quarter, or the 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, our board of directors approved the Amended and Restated Share Repurchase Plan, or 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, we only repurchased shares of common stock in connection with the death or qualifying disability (as determined by our board of directors in its sole discretion) of a stockholder, subject to certain terms and conditions specified in the Amended & Restated SRP. Repurchases pursuant to the Amended and 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, our board of directors adopted a Second Amended and Restated Share Repurchase Plan to: (1) allow all stockholders to request repurchases (as opposed to death and disability only), (2) limit the amount of shares repurchased pursuant to the SRP each quarter to $4,000,000 and (3) set the repurchase price in all instances (including death and disability) to an amount equal to 93% of the most recent publicly disclosed estimated value per share. The $4,000,000 quarterly limit and the repurchase price of 93% of the estimated value per share will take effect upon 30 days’ notice to stockholders and will be in effect on the repurchase date at the end of April 2020 with respect to redemptions for the fiscal quarter ending March 31, 2020, or the First Quarter Redemptions; provided, however, that we will continue to limit First Quarter Redemptions to death and disability only. Our share repurchase plan will be open to all redemption requests for the second quarter of 2020.
We 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 we do not have sufficient funds available to repurchase all of the shares of our common stock for which repurchase requests have been submitted in any quarter, priority will be given to repurchase requests in the case of the death or disability of a stockholder. If we repurchase less than all of the shares subject to a repurchase request in any quarter, with respect to any shares which have not been repurchased, we 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, pro rata as to repurchases sought upon a stockholder’s death or disability; and then next in exigent circumstances as determined by our board of directors in its sole discretion; and, finally, pro rata as to other repurchase requests.
We are not obligated to repurchase shares of our common stock under the share repurchase plan. The share repurchase plan limits the number of shares to be repurchased in any calendar year to (1) the lessor of 5% of the weighted average number of shares of common stock outstanding during the prior calendar year or any quarterly limit adopted by our board of directors and (2) those that could be funded from the net proceeds from the sale of shares under our distribution reinvestment plan in the prior calendar year, plus such additional funds as may be reserved for that purpose by our board of directors. Such sources of funds could include cash on hand, cash available from borrowings and cash from liquidations of securities investments as of the end of the applicable month, to the extent that such funds are not otherwise dedicated to a particular use, such as working capital, cash distributions to stockholders or purchases of real estate assets. There is no fee in connection with a repurchase of shares of our common stock pursuant to our share repurchase plan.
Our board of directors may, in its sole discretion, amend, suspend or terminate the share repurchase plan at any time upon 30 days’ notice to our 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 our stockholders. Therefore, a stockholder may not have the opportunity to make a repurchase request prior to any potential termination or suspension of our share repurchase plan. The share repurchase plan will terminate in the event that a secondary market develops for our shares of common stock.

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During the year ended December 31, 2019, 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
January 2019
 
142,184

 
138,961

 
$
14.39

 
(4) 
February 2019
 
151,987

 

 

 
(4) 
March 2019
 
146,737

 

 

 
(4) 
April 2019
 
97,417

 

 

 
(4) 
May 2019
 
183,346

 
135,885

 
14.72

 
(4) 
June 2019
 
74,844

 

 

 
(4) 
July 2019
 
18,740

 
135,389

 
14.77

 
(4) 
August 2019
 
25,214

 

 

 
(4) 
September 2019
 
11,347

 

 

 
(4) 
October 2019
 
19,745

 
55,301

 
14.82

 
(4) 
November 2019
 
21,029

 
10,134

 
15.00

 
(4) 
December 2019
 
12,377

 

 

 
(4) 
 
 
904,967

 
475,670

 
 
 
 
________________
(1)
We generally repurchase shares approximately 30 days following the end of the applicable quarter in which requests were received. At December 31, 2019, we had $797,289, representing 53,152 shares of outstanding and unfulfilled repurchase requests, all of which were fulfilled on January 31, 2020.
(2)
During the year ended December 31, 2019, we repurchased shares at prices determined as follows:
92.5% of the Share Repurchase Price for stockholders who have held their shares for at least one year;
95.0% of the Share Repurchase Price for stockholders who have held their shares for at least two years;
97.5% of the Share Repurchase Price for stockholders who have held their shares for at least three years; and
100% of the Share Repurchase Price for stockholders who have held their shares for at least four years.
The Share Repurchase Price is 93% of the most recently determined estimated value per share. Notwithstanding the above, the repurchase price for repurchases sought upon a stockholder’s death, “qualifying disability” or “determination of incompetence” was the average issue price the respective stockholder paid to acquire the shares from us. In connection with the announcement of the proposed SIR Merger and STAR III Merger, on August 5, 2019, our board of directors approved the Amended and Restated Share Repurchase Plan, or 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, we only repurchased shares of common stock in connection with the death or qualifying disability (as determined by our board of directors in its sole discretion) of a stockholder, subject to certain terms and conditions specified in the Amended & Restated SRP.
(3)
From inception through December 31, 2019, 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 limit for any quarter, which will be increased to $4,000,000 beginning with the first quarter of 2020 repurchase date and sets the repurchase price in all instances (ordinary and qualifying death or disability) to an amount equal to 93% of the most recent publicly disclosed estimated value per share.


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ITEM 6.                                                SELECTED FINANCIAL DATA
The following selected financial data as of December 31, 2019, 2018, 2017, 2016 and 2015 and for the years then ended should be read in conjunction with the accompanying consolidated financial statements and related notes thereto and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” During the period from August 22, 2013 (inception) to May 22, 2014, we were in existence and commenced our initial public offering, but had not yet commenced real estate operations, as we had not yet acquired any real estate investments. As a result, we had no material results of operations for that period. We terminated our initial public offering on March 24, 2016.
Our results of operations for the periods presented below are not indicative of those expected in future periods.
 
As of December 31,
 
2019
 
2018
 
2017
 
2016
 
2015
Balance sheet data
 
 
 

 
 
 
 
 
 
Total real estate, net
$
1,270,871,366

 
$
1,356,639,742

 
$
1,411,166,101

 
$
1,453,385,165

 
$
1,207,028,126

Total assets
1,426,957,126

 
1,434,138,648

 
1,454,368,057

 
1,497,101,228

 
1,258,692,194

Notes payable
1,108,559,045

 
1,050,155,743

 
993,405,862

 
971,761,151

 
850,766,025

Total liabilities
1,150,940,557

 
1,088,150,688

 
1,027,665,812

 
1,007,103,450

 
876,726,253

Redeemable common stock
1,202,711

 

 
36,397,062

 
27,949,492

 
9,401,360

Total stockholders’ equity
274,813,858

 
345,987,960

 
390,305,183

 
462,048,286

 
372,564,581

 
For the Year Ended December 31,
 
2019
 
2018
 
2017
 
2016
 
2015
Operating data
 
 
 

 
 

 
 
 
 
Total revenues
$
173,535,679

 
$
169,124,188

 
$
163,036,959

 
$
143,301,398

 
$
68,395,123

Net loss
(38,524,316
)
 
(49,100,346
)
 
(33,623,841
)
 
(37,682,474
)
 
(50,694,124
)
Net loss attributable to common stockholders
(38,524,316
)
 
(49,100,346
)
 
(33,623,841
)
 
(37,682,474
)
 
(50,694,124
)
Loss per common share - basic and diluted
(0.74
)
 
(0.96
)
 
(0.67
)
 
(0.80
)
 
(2.33
)
Other data
 
 
 

 
 

 
 
 
 
Cash flows provided by operating activities
29,078,255

 
33,557,275

 
34,670,391

 
38,221,740

 
6,674,297

Cash flows provided by (used in) investing activities
22,714,294

 
(17,481,756
)
 
(26,784,774
)
 
(269,914,470
)
 
(910,353,430
)
Cash flows provided by (used in) financing activities
24,008,347

 
17,995,551

 
(8,033,178
)
 
225,786,450

 
917,012,264

Distributions declared
46,971,783

 
46,179,769

 
45,321,063

 
42,357,688

 
19,559,628

Distributions declared per common share(1)
0.900

 
0.900

 
0.900

 
0.900

 
0.900

Weighted-average number of common shares outstanding, basic and diluted
52,204,410

 
51,312,947

 
50,358,618

 
47,092,206

 
21,753,832

FFO(2)
23,604,194

 
21,892,934

 
34,793,715

 
30,309,069

 
(8,255,364
)
MFFO(2)
25,378,778

 
27,369,983

 
35,243,568

 
36,566,768

 
17,530,067

_________________
(1)
On April 4, 2014, our board of directors approved a cash distribution that began to accrue on April 7, 2014. Distributions declared per common share for the years ended December 31, 2019, 2018, 2017, 2016 and 2015 assume each share was issued and outstanding each day of each year. During the years ended December 31, 2019, 2018 and 2017, distributions declared were calculated at a rate of $0.002466 per share of common stock per day, which if paid over a 365-day period is equivalent to a 6.0% annualized distribution rate based on our initial public offering price of $15.00 per share of common stock.
(2)
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

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REITs. Additionally, we use MFFO, as defined by the 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 an alternative 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 Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations and Modified Funds From Operations.”
ITEM 7.                                                MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the “Selected Financial Data” above and our accompanying consolidated financial statements and the notes thereto included in this Annual Report on Form 10-K. Also see “Cautionary Note Regarding Forward Looking Statements” preceding Part I.
This section of the Annual Report on Form 10-K generally discusses 2019 and 2018 items and year-to-year comparisons between 2019 and 2018. A discussion of the changes in our financial condition and results of operation for the years ended December 31, 2018 and 2017 has been omitted from this Annual Report on Form 10-K, but may be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 14, 2019.
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 December 31, 2019, we owned and managed a diverse portfolio of multifamily properties, located in the United States comprising a total of 11,195 apartment homes and one parcel of land held for the development of apartment homes. Following completion of the SIR Merger and STAR III Merger on March 6, 2020, we owned and managed a total of 21,525 apartment homes, one parcel of land held for development and a 10% interest in a joint venture that owned 20 multifamily properties with a total of 4,584 apartment homes. We may acquire additional multifamily properties or pursue multifamily development projects in the future.
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. As of December 31, 2019, we had sold 54,276,237 shares of common stock for gross offering proceeds of $809,562,356, including 6,662,210 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $99,127,477.
On March 14, 2018, our board of directors determined an estimated value per share of our common stock of $15.18 as of December 31, 2017. On March 12, 2019, our board of directors determined an estimated value per share of our common stock of $15.84 as of December 31, 2018. 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 $15.18 and $15.84, effective April 1, 2018 and April 1, 2019, respectively. We intend to establish an updated estimated value per share following the completion of the mergers, which closed on March 6, 2020. We expect that the estimated value per share will be as of March 6, 2020, and will be reported by us in a Current Report on Form 8-K.
Subject to certain restrictions and limitations, Steadfast Apartment Advisor, LLC, which we refer to as our “advisor,” manages our day-to-day operations and our portfolio of properties and real estate-related assets. Our advisor sources and presents investment opportunities to our board of directors. Our advisor also provides investment management, marketing, investor relations and other administrative services on our behalf.
Substantially all of our business is conducted through Steadfast Apartment REIT Operating Partnership, L.P., our operating partnership. We are the sole general partner of our operating partnership and one of our wholly-owned subsidiaries is the only limited partner of our operating partnership. As we accepted subscriptions for shares of common stock in our initial public offering, we transferred substantially all of the net proceeds to our operating partnership as a capital contribution. The limited partnership agreement of our operating partnership provides that our 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

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federal income or excise tax liability and (3) ensure that our 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 our 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 our operating partnership in acquiring and operating our investments, our operating partnership will pay all of our administrative costs and expenses, and such expenses will be treated as expenses of our operating partnership. Following the completion of the mergers on March 6, 2020, we now conduct our business through the operating partnership, Steadfast Income REIT Operating Partnership, L.P. and Steadfast Apartment REIT III Operating Partnership, L.P.
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.
Merger with Steadfast Income REIT, Inc.
On August 5, 2019, we, SIR, our operating partnership, Steadfast Income REIT Operating Partnership, L.P., the operating partnership of SIR, and SIR Merger Sub entered into 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 SIR Merger. Following the SIR Merger, SIR Merger Sub, as the surviving entity, will continue as our wholly-owned subsidiary. In accordance with the applicable provisions of the 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, STAR III, our operating partnership, Steadfast Apartment REIT III Operating Partnership, L.P., the operating partnership of STAR III, and STAR III Merger Sub entered into 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 STAR III Merger. Following the STAR III Merger, STAR III Merger Sub, as the surviving entity, will continue as our wholly-owned subsidiary. In accordance with the applicable provisions of the MGCL, the separate existence of STAR III ceased.
At the effective time of the STAR III Merger, each issued and outstanding share of STAR III common stock (or a fraction thereof), $0.01 par value per share was converted into 1.430 shares of our common stock.
Combined Company
The combined company after the mergers retains the name “Steadfast Apartment REIT, Inc.” Each merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code.
As of the closing of the mergers, our portfolio (unaudited) consisted of (1) 69 properties (including one property held for development) in 14 states, with an average effective rent of $1,173 and (2) a 10% interest in one unconsolidated joint venture that owned 20 multifamily properties with a total of 4,584 apartment homes. Based on occupancy as of December 31, 2019, our portfolio had an occupancy rate of 94.9%, an average age of 20 years and gross real estate assets value of $3,375,635,000 (unaudited).
As a result of the completion of the mergers, our financial information materially changed; however, the financial information included in this Annual Report on Form 10-K reflects only our stand-alone, historical financial results.
Market Outlook
We believe economic and demographic trends will benefit our existing portfolio and that we have unique future investment opportunities in the multifamily sector. Home ownership rates are at near all-time lows. Demographic and economic factors favor the flexibility of rental housing and discourage the potential financial burden associated with home ownership. Additionally, Millennials and Baby Boomers, the two largest demographic groups comprising roughly half of the total population in the United States, are increasingly choosing rental housing over home ownership. Demographic studies suggest that Baby Boomers are downsizing their suburban homes and relocating to multifamily apartments. Millennials are renting multifamily apartments due to high levels of student debt and increased credit standards in order to qualify for a home mortgage. According to the Federal Reserve Bank of New York, aggregate student debt has surpassed automotive, home equity lines of credit and credit card debt. Millennials are also getting married and having children later and are choosing to live in apartment communities until their mid-30s. Today, approximately 30% of Millennials are still living with their parents or are still in school. When they are employed, Millennials will likely rent moderate income apartments based upon an average income of $45,000 to $65,000. Our plan is to provide rental housing for these generational groups as they age. We believe these factors will continue to contribute to the demand for multifamily housing.

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Our Real Estate Portfolio
As of December 31, 2019, we owned the 32 multifamily apartment communities and one parcel of land held for the development of apartment homes listed below:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Monthly Occupancy(1)
 
Average Monthly Rent(2)
 
 
Property Name
 
Location
 
Purchase Date
 
Number of Homes
 
Contract Purchase Price
 
Mortgage Debt Outstanding(3)
 
December 31, 2019
 
December 31, 2018
 
December 31, 2019
 
December 31, 2018
1
 
Villages at Spring Hill Apartments
 
Spring Hill, TN
 
5/22/2014
 
176

 
$
14,200,000

 
(4 
) 
 
96.0
%
 
94.9
%
 
$
1,120

 
$
996

2
 
Harrison Place Apartments
 
Indianapolis, IN
 
6/30/2014
 
307

 
27,864,250

 
(4 
) 
 
94.1
%
 
95.4
%
 
992

 
971

3
 
Terrace Cove Apartment Homes
 
Austin, TX
 
8/28/2014
 
304

 
23,500,000

 
(4 
) 
 
95.1
%
 
95.7
%
 
966

 
918

4
 
The Residences on McGinnis Ferry
 
Suwanee, GA
 
10/16/2014
 
696

 
98,500,000

 
(4 
) 
 
96.0
%
 
93.0
%
 
1,344

 
1,282

5
 
The 1800 at Barrett Lakes
 
Kennesaw, GA
 
11/20/2014
 
500

 
49,000,000

 
40,623,442

 
92.4
%
 
95.2
%
 
1,076

 
1,035

6
 
The Oasis
 
Colorado Springs, CO
 
12/19/2014
 
252

 
40,000,000

 
39,499,673

 
94.8
%
 
93.7
%
 
1,424

 
1,349

7
 
Columns on Wetherington
 
Florence, KY
 
2/26/2015
 
192

 
25,000,000

 
(4 
) 
 
91.7
%
 
94.3
%
 
1,220

 
1,153

8
 
Preston Hills at Mill Creek
 
Buford, GA
 
3/10/2015
 
464

 
51,000,000

 
(4 
) 
 
91.6
%
 
93.5
%
 
1,192

 
1,113

9
 
Eagle Lake Landing Apartments
 
Speedway, IN
 
3/27/2015
 
277

 
19,200,000

 
(4 
) 
 
96.8
%
 
94.6
%
 
905

 
865

10
 
Reveal on Cumberland
 
Fishers, IN
 
3/30/2015
 
220

 
29,500,000

 
20,827,267

 
95.0
%
 
94.5
%
 
1,144

 
1,104

11
 
Heritage Place Apartments
 
Franklin, TN
 
4/27/2015
 
105

 
9,650,000

 
8,590,932

 
97.1
%
 
96.2
%
 
1,145

 
1,130

12
 
Rosemont at East Cobb
 
Marietta, GA
 
5/21/2015
 
180

 
16,450,000

 
13,258,252

 
96.7
%
 
92.8
%
 
1,100

 
991

13
 
Ridge Crossings Apartments
 
Hoover, AL
 
5/28/2015
 
720

 
72,000,000

 
57,668,758

 
92.8
%
 
94.7
%
 
1,012

 
979

14
 
Bella Terra at City Center
 
Aurora, CO
 
6/11/2015
 
304

 
37,600,000

 
(4 
) 
 
96.1
%
 
91.8
%
 
1,221

 
1,150

15
 
Hearthstone at City Center
 
Aurora, CO
 
6/25/2015
 
360

 
53,400,000

 
(4 
) 
 
95.0
%
 
92.2
%
 
1,257

 
1,224

16
 
Arbors at Brookfield
 
Mauldin, SC
 
6/30/2015
 
702

 
66,800,000

 
(4 
) 
 
92.7
%
 
93.0
%
 
923

 
929

17
 
Carrington Park
 
Kansas City, MO
 
8/19/2015
 
298

 
39,480,000

 
(4 
) 
 
95.3
%
 
94.0
%
 
1,011

 
1,013

18
 
Delano at North Richland Hills
 
North Richland Hills, TX
 
8/26/2015
 
263

 
38,500,000

 
31,814,165

 
95.8
%
 
94.3
%
 
1,486

 
1,439

19
 
Meadows at North Richland Hills
 
North Richland Hills, TX
 
8/26/2015
 
252

 
32,600,000

 
26,580,102

 
94.4
%
 
93.7
%
 
1,392

 
1,339

20
 
Kensington by the Vineyard
 
Euless, TX
 
8/26/2015
 
259

 
46,200,000

 
34,111,658

 
95.8
%
 
95.0
%
 
1,507

 
1,485

21
 
Monticello by the Vineyard
 
Euless, TX
 
9/23/2015
 
354

 
52,200,000

 
41,229,964

 
96.3
%
 
95.2
%
 
1,344

 
1,336

22
 
The Shores
 
Oklahoma City, OK
 
9/29/2015
 
300

 
36,250,000

 
23,653,152

 
94.7
%
 
94.0
%
 
1,016

 
1,000

23
 
Lakeside at Coppell
 
Coppell, TX
 
10/7/2015
 
315

 
60,500,000

 
47,883,143

 
96.8
%
 
94.6
%
 
1,716

 
1,687

24
 
Meadows at River Run
 
Bolingbrook, IL
 
10/30/2015
 
374

 
58,500,000

 
42,438,707

 
90.1
%
 
91.4
%
 
1,364

 
1,408


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Average Monthly Occupancy(1)
 
Average Monthly Rent(2)
 
 
Property Name
 
Location
 
Purchase Date
 
Number of Homes
 
Contract Purchase Price
 
Mortgage Debt Outstanding(3)
 
December 31, 2019
 
December 31, 2018
 
December 31, 2019
 
December 31, 2018
25
 
PeakView at T-Bone Ranch
 
Greeley, CO
 
12/11/2015
 
224

 
$
40,300,000

 
(4 
) 
 
93.3
%
 
95.5
%
 
$
1,373

 
$
1,295

26
 
Park Valley Apartments
 
Smyrna, GA
 
12/11/2015
 
496

 
51,400,000

 
48,575,513

 
94.4
%
 
92.9
%
 
1,068

 
1,012

27
 
PeakView by Horseshoe Lake
 
Loveland, CO
 
12/18/2015
 
222

 
44,200,000

 
38,003,137

 
93.7
%
 
94.1
%
 
1,396

 
1,388

28
 
Stoneridge Farms
 
Smyrna, TN
 
12/30/2015
 
336

 
47,750,000

 
45,340,947

 
95.2
%
 
93.8
%
 
1,196

 
1,178

29
 
 Fielder’s Creek
 
Englewood, CO
 
3/23/2016
 
217

 
32,400,000

 

 
96.3
%
 
95.9
%
 
1,219

 
1,193

30
 
Landings of Brentwood
 
Brentwood, TN
 
5/18/2016
 
724

 
110,000,000

 
(5 
) 
 
96.8
%
 
95.9
%
 
1,262

 
1,191

31
 
1250 West Apartments
 
Marietta, GA
 
8/12/2016
 
468

 
55,772,500

 
(4 
) 
 
93.6
%
 
90.4
%
 
1,061

 
1,008

32
 
Sixteen50 @ Lake Ray Hubbard
 
Rockwall, TX
 
9/29/2016
 
334

 
66,050,000

 
(4 
) 
 
96.4
%
 
94.6
%
 
1,492

 
1,492

33
 
Garrison Station Development(6)
 
Murfreesboro, TN
 
5/30/2019
 

 
5,687,978

 

 
%
 
%
 

 

 
 
 
 
 
 
 
 
11,195

 
$
1,451,454,728

 
$
560,098,815

 
94.6
%
 
93.9
%
 
$
1,200

 
$
1,163

________________
(1)
As of December 31, 2019, our portfolio was approximately 96.0% leased, calculated using the number of occupied and contractually leased apartment homes divided by total apartment homes.
(2)
Average monthly rent is based upon the effective rental income for the month of December 2019 after considering the effect of vacancies, concessions and write-offs.
(3)
Mortgage debt outstanding is net of deferred financing costs associated with the loans for each individual property listed above but excludes the principal balance of $551,669,000 and associated deferred financing costs of $3,208,770 related to the refinancings pursuant to the MCFA.
(4)
Properties secured pursuant to the terms of the MCFA.
(5)
At December 31, 2018, Landings of Brentwood was pledged as collateral pursuant to our line of credit. On January 9, 2019, we terminated the line of credit.
(6)
We acquired the Garrison Station property on May 30, 2019, which included unimproved land, currently zoned as a PUD. The current zoning permits the development of the property into a multifamily community including 176 apartment homes of 1, 2 and 3-bedrooms with a typical mix for this market.
2019 Property Dispositions
Randall Highlands Apartments
On March 31, 2015, we, through an indirect wholly-owned subsidiary, acquired Randall Highlands Apartments, a multifamily property located in North Aurora, Illinois, containing 146 apartment homes. The purchase price of Randall Highlands Apartments was </