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Section 1: 10-Q (10-Q)

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Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
 
 
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
 
For the quarterly period ended
March 31, 2020
OR
 
 
 
 
 
 
 
 
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
 
 
 
 
 
For the transition period from
 
to
 
 
Commission file number 000-55428
STEADFAST APARTMENT REIT, INC.
(Exact Name of Registrant as Specified in Its Charter)
 
 
 
Maryland
 
36-4769184
(State or Other Jurisdiction of
 
(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)
 (949852-0700
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No
Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
 
 
 
 
Large Accelerated filer
Accelerated filer
 
 
 
 
 
Non-Accelerated filer

Smaller reporting company
 
 
 
 
Emerging growth company
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 
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
As of May 6, 2020, there were 108,979,095 shares of the Registrant’s common stock issued and outstanding.
 


Table of Contents

STEADFAST APARTMENT REIT, INC.
INDEX
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

1

Table of Contents

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements



STEADFAST APARTMENT REIT, INC.

CONSOLIDATED BALANCE SHEETS
 
March 31, 2020
 
December 31, 2019
 
(Unaudited)
 
 
ASSETS
Assets:
 
 
 

Real Estate:
 
 
 
Land
$
336,766,137

 
$
151,294,208

Building and improvements
2,832,836,151

 
1,369,256,465

Tenant origination and absorption costs
39,716,257

 

Total real estate held for investment, cost
3,209,318,545

 
1,520,550,673

Less accumulated depreciation and amortization
(305,599,544
)
 
(277,033,046
)
Total real estate held for investment, net
2,903,719,001

 
1,243,517,627

Real estate held for development
15,870,392

 
5,687,977

Real estate held for sale, net

 
21,665,762

Total real estate, net
2,919,589,393

 
1,270,871,366

Cash and cash equivalents
215,105,801

 
74,806,649

Restricted cash
18,635,695

 
73,614,452

Investment in unconsolidated joint venture
21,975,498

 

Rents and other receivables
4,922,665

 
2,032,774

Assets related to real estate held for sale

 
118,570

Other assets
7,597,827

 
5,513,315

Total assets
$
3,187,826,879

 
$
1,426,957,126

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
 
 
 

Accounts payable and accrued liabilities
$
52,782,874

 
$
30,265,713

Notes Payable, net:
 
 
 
    Mortgage notes payable, net
1,388,449,438

 
560,098,815

    Credit facility, net
588,344,120

 
548,460,230

Total notes payable, net
1,976,793,558

 
1,108,559,045

Distributions payable
8,356,638

 
4,021,509

Due to affiliates
8,022,867

 
7,305,570

Liabilities related to real estate held for sale

 
788,720

Total liabilities
2,045,955,937

 
1,150,940,557

Commitments and contingencies (Note 10)

 

Redeemable common stock
1,889,463

 
1,202,711

Stockholders’ Equity:
 
 
 
Preferred stock, $0.01 par value per share; 100,000,000 shares authorized, no shares issued and outstanding

 

Common stock, $0.01 par value per share; 999,998,000 shares authorized, 108,898,231 and 52,607,695 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively
1,088,982

 
526,077

Convertible stock, $0.01 par value per share; 1,000 shares authorized, zero and 1,000 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively

 
10

Class A Convertible stock, $0.01 par value per share; 1,000 shares authorized, 1,000 and zero shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively
10

 

Additional paid-in capital
1,588,131,358

 
698,453,981

Cumulative distributions and net losses
(449,238,871
)
 
(424,166,210
)
Total stockholders’ equity
1,139,981,479

 
274,813,858

Total liabilities and stockholders’ equity
$
3,187,826,879

 
$
1,426,957,126

 
See accompanying notes to consolidated financial statements.

2

Table of Contents

PART I — FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued)


STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 
Three Months Ended March 31,
 
2020
 
2019
Revenues:
 
 
 
Rental income
$
53,266,672

 
$
42,316,920

Other income
447,267

 
268,307

Total revenues
53,713,939

 
42,585,227

Expenses:
 
 
 
Operating, maintenance and management
12,496,559

 
10,058,274

Real estate taxes and insurance
8,743,446

 
6,581,189

Fees to affiliates
8,427,296

 
6,065,648

Depreciation and amortization
28,575,896

 
18,282,293

Interest expense
14,390,954

 
12,233,295

General and administrative expenses
2,430,299

 
1,864,269

Total expenses
75,064,450

 
55,084,968

Loss before other income (expenses)
(21,350,511
)
 
(12,499,741
)
Other income (expenses):
 
 
 
Gain on sale of real estate, net
11,384,599

 

Interest income
253,254

 
178,678

Insurance proceeds in excess of losses incurred
66,723

 
3,400

Equity in loss from unconsolidated joint venture
(35,193
)
 

Loss on debt extinguishment

 
(41,609
)
Total other income
11,669,383

 
140,469

Net loss
$
(9,681,128
)
 
$
(12,359,272
)
Loss per common share — basic and diluted
$
(0.14
)
 
$
(0.24
)
Weighted average number of common shares outstanding — basic and diluted
68,180,512

 
51,873,832

 
See accompanying notes to consolidated financial statements.

3

Table of Contents

PART I — FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued)


STEADFAST APARTMENT REIT, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2020 (Unaudited)
 
 
 
Common Stock
 
Convertible Stock
 
Class A Convertible Stock
 
Additional
Paid-In Capital
 
Cumulative Distributions & Net Losses
 
Total
Stockholders’ Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
BALANCE, December 31, 2019
 
52,607,695

 
$
526,077

 
1,000

 
$
10

 

 
$

 
$
698,453,981

 
$
(424,166,210
)
 
$
274,813,858

Issuance of common stock
 
327,635

 
3,277

 

 

 

 

 
5,080,878

 

 
5,084,155

Issuance of common stock in connection with the SIR Merger
 
43,775,314

 
437,753

 

 

 

 

 
692,963,221

 

 
693,400,974

Issuance of common stock in connection with the STAR III Merger
 
12,240,739

 
122,407

 

 

 

 

 
193,770,898

 

 
193,893,305

Exchange of convertible common stock into Class A convertible common stock
 

 

 
(1,000
)
 
(10
)
 
1,000

 
10

 

 

 

Transfers to redeemable common stock
 

 

 

 

 

 

 
(1,383,318
)
 

 
(1,383,318
)
Repurchase of common stock
 
(53,152
)
 
(532
)
 

 

 

 

 
(796,757
)
 

 
(797,289
)
Distributions declared ($0.224 per share of common stock)
 

 

 

 

 

 

 

 
(15,391,533
)
 
(15,391,533
)
Amortization of stock-based compensation
 

 

 

 

 

 

 
42,455

 

 
42,455

Net loss
 

 

 

 

 

 

 

 
(9,681,128
)
 
(9,681,128
)
BALANCE, March 31, 2020
 
108,898,231

 
$
1,088,982

 

 
$

 
1,000

 
$
10

 
$
1,588,131,358

 
$
(449,238,871
)
 
$
1,139,981,479

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
STEADFAST APARTMENT REIT, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2019 (Unaudited)
 
 
 
Common Stock
 
Convertible Stock
 
Class A Convertible Stock
 
Additional
Paid-In Capital
 
Cumulative Distributions & Net Losses
 
Total
Stockholders’ Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
BALANCE, December 31, 2018
 
51,723,801

 
$
517,238

 
1,000

 
$
10

 

 
$

 
$
684,140,823

 
$
(338,670,111
)
 
$
345,987,960

Issuance of common stock
 
354,319

 
3,544

 

 

 

 

 
5,375,022

 

 
5,378,566

Repurchase of common stock
 
(138,961
)
 
(1,390
)
 

 

 

 

 
(1,998,610
)
 

 
(2,000,000
)
Distributions declared ($0.222 per share of common stock)
 

 

 

 

 

 

 

 
(11,511,537
)
 
(11,511,537
)
Amortization of stock-based compensation
 

 

 

 

 

 

 
13,896

 

 
13,896

Net loss
 

 

 

 

 

 

 

 
(12,359,272
)
 
(12,359,272
)
BALANCE, March 31, 2019
 
51,939,159

 
$
519,392

 
1,000

 
$
10

 

 
$

 
$
687,531,131

 
$
(362,540,920
)
 
$
325,509,613

 
See accompanying notes to consolidated financial statements.

4

Table of Contents

PART I — FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued)


STEADFAST APARTMENT REIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited)
 
Three Months Ended March 31,
 
2020
 
2019
Cash Flows from Operating Activities:
 
 
 

Net loss
$
(9,681,128
)
 
$
(12,359,272
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
28,575,896

 
18,282,293

Loss on disposal of buildings and improvements
68,846

 
2,198

Amortization of deferred financing costs
327,470

 
247,773

Amortization of stock-based compensation
42,455

 
13,896

Amortization of below market leases
922

 

Change in fair value of interest rate cap agreements
2,251

 
179,616

Gain on sale of real estate
(11,384,599
)
 

Amortization of loan premium
(144,457
)
 

Amortization of loan discount
29,875

 

Loss on debt extinguishment

 
41,609

Equity in loss from unconsolidated joint venture
35,193

 

Insurance claim recoveries
(228,380
)
 
(10,092
)
Changes in operating assets and liabilities:
 
 
 
Rents and other receivables
58,590

 
53,653

Other assets
818,320

 
540,887

Accounts payable and accrued liabilities
(3,927,637
)
 
(5,117,094
)
Due to affiliates
598,136

 
400,596

Net cash provided by operating activities
5,191,753

 
2,276,063

Cash Flows from Investing Activities:
 
 
 
Acquisition of real estate investments
(69,196,179
)
 

Cash acquired in connection with the Mergers, net of transaction costs
98,283,732

 

Acquisition of real estate held for development
(6,287,613
)
 

Additions to real estate investments
(1,221,453
)
 
(4,210,470
)
Additions to real estate held for development
(670,071
)
 

Escrow deposits for pending real estate acquisitions
(2,500,000
)
 
(1,200,200
)
Net proceeds from sale of real estate investment
32,962,285

 

Proceeds from insurance claims
86,892

 
85,092

Cash distribution from unconsolidated joint venture
118,000

 

Net cash provided by (used in) investing activities
51,575,593

 
(5,325,578
)
Cash Flows from Financing Activities:
 
 
 
Principal payments on mortgage notes payable
(313,032
)
 
(244,458
)
Borrowings from credit facilities
40,468,000

 

Payments of commissions on sale of common stock
(46,995
)
 
(55,651
)
Payment of loan financing deposits
(80,000
)
 

Payment of deferred financing costs
(4,079,493
)
 

Distributions to common stockholders
(6,716,712
)
 
(6,116,456
)
Repurchase of common stock
(797,289
)
 
(2,000,000
)
Net cash provided by (used in) financing activities
28,434,479

 
(8,416,565
)
Net increase (decrease) in cash, cash equivalents and restricted cash
85,201,825

 
(11,466,080
)
Cash, cash equivalents and restricted cash, beginning of the period
148,539,671

 
72,738,775

Cash, cash equivalents and restricted cash, end of the period
$
233,741,496

 
$
61,272,695


5

Table of Contents

PART I — FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued)



STEADFAST APARTMENT REIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
 
Three Months Ended March 31,
 
2020
 
2019
Supplemental Disclosures of Cash Flow Information:
 
 
 
Interest paid (net of capitalized interest of $69,569 and $0, respectively)
$
11,429,429

 
$
11,762,392

Supplemental Disclosures of Noncash Flow Transactions:
 
 
 
Distributions payable
$
8,356,638

 
$
3,970,014

Investment management fees payable in shares
$
1,187,351

 
$

Assumption of mortgage notes payable to acquire real estate
$
36,515,122

 
$

Premiums on assumed mortgage notes payable
$
14,899,631

 
$

Discount on assumed mortgage notes payable
$
10,489,075

 
$

Distributions paid to common stockholders through common stock issuances pursuant to the distribution reinvestment plan
$
5,084,155

 
$
5,378,566

Redeemable common stock
$
1,889,463

 
$

Redemptions payable
$
2,110,537

 
$
2,000,000

Accounts payable and accrued liabilities from additions to real estate investments
$
2,843,487

 
$
327,788

Due to affiliates from additions to real estate investments
$
267,567

 
$
47,123

Accounts payable & accrued liabilities from capitalized acquisition costs related to the mergers with SIR and STAR III
$
1,548,054

 
$

Accounts payable & accrued liabilities from additions to real estate held for development
$
1,816,203

 
$

Due to affiliates from additions to real estate held for development
$
93,213

 
$

Due to affiliates for commissions on sale of common stock
$
24,293

 
$
244,300

Fair value of real estate acquired in the SIR merger
$
1,100,742,973

 
$

Fair value of real estate acquired in the STAR III merger
$
479,559,505

 
$

Fair value of equity issued to SIR shareholders in the SIR merger
$
693,400,974

 
$

Fair value of equity issued to STAR III shareholders in the STAR III merger
$
193,893,305

 
$

Fair value of debt assumed in the SIR merger
$
506,023,982

 
$

Fair value of debt assumed in the STAR III merger
$
289,407,045

 
$

Fair value of unconsolidated joint venture assumed in the SIR merger
$
22,128,691

 
$

Net assets assumed in the SIR merger
$
3,553,868

 
$

Net assets assumed in the STAR III merger
$
2,060,898

 
$

Net liabilities assumed in the SIR merger
$
21,782,302

 
$

Net liabilities assumed in the STAR III merger
$
7,334,616

 
$

Operating lease right-of-use asset, net
$
151,336

 
$
6,768

Operating lease liabilities, net
$
163,491

 
$
6,833

 
See accompanying notes to consolidated financial statements.

6

Table of Contents

PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)
STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(unaudited)


1.         Organization and Business
Steadfast Apartment REIT, Inc. (the “Company”) was formed on August 22, 2013, as a Maryland corporation that elected to qualify as a real estate investment trust (“REIT”) commencing with the taxable year ended December 31, 2014. On September 3, 2013, the Company was initially capitalized with the sale of 13,500 shares of common stock to Steadfast REIT Investments, LLC (the “Sponsor”) at a purchase price of $15.00 per share for an aggregate purchase price of $202,500. Steadfast Apartment Advisor, LLC (the “Advisor”), a Delaware limited liability company formed on August 22, 2013, invested $1,000 in the Company in exchange for 1,000 shares of non-participating, non-voting convertible stock (the “Convertible Stock”). In connection with the SIR Merger and STAR III Merger (described below), the Advisor exchanged the Convertible Stock for new non-participating, non-voting Class A convertible stock (the “Class A Convertible Stock”), see Note 7 (Stockholders’ Equity).
The Company owns and operates a diverse portfolio of multifamily properties located in targeted markets throughout the United States. As of March 31, 2020, the Company owned 69 multifamily properties comprising a total of 21,525 apartment homes, two parcels of land held for the development of apartment homes and a 10% interest in one unconsolidated joint venture that owned 20 multifamily properties with a total of 4,584 apartment homes. The Company may acquire additional multifamily properties or pursue multifamily developments in the future. For more information on the Company’s real estate portfolio, see Note 3 (Real Estate).
Public Offering
On December 30, 2013, the Company commenced its initial public offering to offer a maximum of 66,666,667 shares of common stock for sale to the public at an initial price of $15.00 per share (with discounts available for certain categories of purchasers) (the “Primary Offering”). The Company also registered up to 7,017,544 shares of common stock for sale pursuant to the Company’s distribution reinvestment plan (the “DRP,” and together with the Primary Offering, the “Public Offering”) at an initial price of $14.25 per share. The Company terminated its Public Offering on March 24, 2016, but continues to offer shares of common stock pursuant to the DRP. As of the termination of the Primary Offering on March 24, 2016, the Company had sold 48,625,651 shares of common stock in the Public Offering for gross proceeds of $724,849,631, including 1,011,561 shares of common stock issued pursuant to the DRP for gross offering proceeds of $14,414,752. As of March 31, 2020, the Company had issued 110,613,259 shares of common stock for gross offering proceeds of $1,701,940,788, including 6,983,179 shares of common stock issued pursuant to the DRP for gross offering proceeds of $104,211,630.
On April 17, 2020, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $15.23 as of March 6, 2020. Additional information on the Company’s estimated value per share can be found on the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on April 20, 2020. In connection with the determination of an estimated value per share, the Company’s board of directors determined a price per share for the DRP of $15.23, effective May 1, 2020. The Company’s board of directors may again, from time to time, in its sole discretion, change the price at which the Company offers shares pursuant to the DRP to reflect changes in the Company’s estimated value per share and other factors that the Company’s board of directors deems relevant. 
Merger with Steadfast Income REIT, Inc.
On August 5, 2019, the Company, Steadfast Income REIT, Inc. (“SIR”), Steadfast Apartment REIT Operating Partnership, L.P., a wholly-owned subsidiary of the Company (the “STAR Operating Partnership”), Steadfast Income REIT Operating Partnership, L.P., the operating partnership of SIR (“SIR OP”), and SI Subsidiary, LLC, a wholly-owned subsidiary of the Company (“SIR Merger Sub”), entered into an Agreement and Plan of Merger (the “SIR Merger Agreement”). Pursuant to the terms and conditions of the SIR Merger Agreement, on March 6, 2020, SIR merged with and into SIR Merger Sub with SIR Merger Sub surviving the merger (the “SIR Merger”). Following the SIR Merger, SIR Merger Sub, as the surviving entity, continues as the Company’s wholly-owned subsidiary. In accordance with the applicable provisions of the Maryland General Corporation Law (“MGCL”), the separate existence of SIR ceased.

7

Table of Contents

PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)
STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(unaudited)

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 1.430 shares of the Company’s common stock.
Merger with Steadfast Apartment REIT III, Inc.
On August 5, 2019, the Company, Steadfast Apartment REIT III, Inc. (“STAR III”), the STAR Operating Partnership, Steadfast Apartment REIT III Operating Partnership, L.P., the operating partnership of STAR III (the “STAR III OP”), and SIII Subsidiary, LLC, a wholly-owned subsidiary of the Company (“STAR III Merger Sub”), entered into an Agreement and Plan of Merger (the “STAR III Merger Agreement”). Pursuant to the terms and conditions of the STAR III Merger Agreement, on March 6, 2020, STAR III merged with and into STAR III Merger Sub with STAR III Merger Sub surviving the merger (the “STAR III Merger”, and together with the SIR Merger, the “Mergers”). Following the STAR III Merger, STAR III Merger Sub, as the surviving entity, continues as a wholly-owned subsidiary of the Company. In accordance with the applicable provisions of the MGCL, the separate existence of STAR III ceased.
At the effective time of the STAR III Merger, each issued and outstanding share of STAR III common stock (or a fraction thereof), $0.01 par value per share was converted into 0.5934 shares of the Company’s common stock.
Combined Company
The Combined Company after the Mergers retained 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 (the “Internal Revenue Code”). For more information on the Mergers, see Note 3 (Real Estate).
The Advisor and Operating Partnership
The business of the Company is externally managed by the Advisor, pursuant to the Amended and Restated Advisory Agreement dated March 6, 2020, by and between the Company and the Advisor (as may be amended, the “Advisory Agreement”). The current term of the Advisory Agreement expires on March 6, 2021, and is subject to annual renewal by the Company’s board of directors. Subject to certain restrictions and limitations, the Advisor manages the Company’s day-to-day operations, manages the Company’s portfolio of properties, sources and presents investment opportunities to the Company’s board of directors and provides investment management services on the Company’s behalf. The Advisor has also entered into an Advisory Services Agreement with Crossroads Capital Advisors, LLC (“Crossroads Capital Advisors”), whereby Crossroads Capital Advisors provides certain advisory services to the Company on behalf of the Advisor. Stira Capital Markets Group, LLC (formerly known as Steadfast Capital Markets Group, LLC) (the “Dealer Manager”), an affiliate of the Advisor, served as the dealer manager for the Public Offering. The Dealer Manager was responsible for marketing the Company’s shares of common stock offered pursuant to the Public Offering. The Advisor, along with the Dealer Manager, provides marketing, investor relations and other administrative services on the Company’s behalf.
Substantially all of the Company’s business is conducted through the STAR Operating Partnership, SIR OP and STAR III OP. The Company is the sole general partner of STAR Operating Partnership and SIR Merger Sub and STAR III Merger Sub is the sole general partner of SIR OP and STAR III OP, respectively. The Company and Steadfast Apartment REIT Limited Partner, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company, entered into the Limited Partnership Agreement of Steadfast Apartment REIT Operating Partnership, L.P. on September 3, 2013 (as amended, the “STAR OP Partnership Agreement”). Each of SIR OP and STAR III OP are party to partnership agreements with SIR Merger Sub and STAR III Merger Sub, respectively, that have substantially the same terms as the STAR OP Partnership Agreement. As the context requires, in this quarterly report references to the “Operating Partnership” refer to SIR OP, STAR OP and STAR III OP collectively and references to the “Operating Partnership Agreement” refer to the STAR OP Partnership Agreement and the SIR OP and STAR III OP partnership agreements collectively.
As the Company accepted subscriptions for shares of its common stock, the Company transferred substantially all of the net offering proceeds from its Public Offering to the STAR Operating Partnership as a contribution in exchange for partnership interests and the Company’s percentage ownership in the STAR Operating Partnership increased proportionately.

8

Table of Contents

PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)
STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(unaudited)

The Partnership Agreement provides that the Operating Partnership is operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code, which classification could result in the Operating Partnership being taxed as a corporation. In addition to the administrative and operating costs and expenses incurred by the Operating Partnership in acquiring and operating real properties, the Operating Partnership pays all of the Company’s administrative costs and expenses, and such expenses are treated as expenses of the Operating Partnership.
2.         Summary of Significant Accounting Policies
There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2019. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 12, 2020. 
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of the Company, the STAR Operating Partnership and its subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. The financial statements of the Company’s subsidiaries are prepared using accounting policies consistent with those of the Company.
The accompanying unaudited consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary for a fair and consistent presentation of the results of such periods. Operating results for the three months ended March 31, 2020, are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The unaudited consolidated financial statements herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.
Real Estate Assets
Real Estate Purchase Price Allocation
Upon the acquisition of real estate properties or other entities owning real estate properties, the Company evaluates whether the acquisition is a business combination or an asset acquisition under ASC 805, Business Combinations (“ASC 805”). For both business combinations and asset acquisitions the Company allocates the purchase price of real estate properties to acquired tangible assets, consisting of land, buildings and improvements, and acquired intangible assets and liabilities, consisting of the value of above-market and below-market leases and the value of in-place leases. For asset acquisitions, the Company capitalizes transaction costs and allocates the purchase price using a relative fair value method allocating all accumulated costs. For business combinations, the Company expenses transaction costs incurred and allocates the purchase price based on the estimated fair value of each separately identifiable asset and liability. Acquisition fees and costs associated with transactions determined to be asset acquisitions are capitalized in total real estate, net in the accompanying consolidated balance sheets. For the three months ended March 31, 2020, all of the Company’s acquisitions were determined to be asset acquisitions.

9

Table of Contents

PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)
STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(unaudited)

The fair values of the tangible assets of an acquired property (which includes land, buildings and improvements) are determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land and buildings and improvements based on management’s determination of the relative fair value of these assets. Management determines the as-if-vacant fair value of a property using methods similar to those used by independent appraisers. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases, including leasing commissions and other related costs. In estimating carrying costs, management includes real estate taxes, insurance, and other operating expenses during the expected lease-up periods based on current market conditions.
The fair values of above-market and below-market in-place leases are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) an estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease including any fixed rate bargain renewal periods, with respect to a below-market lease. The above-market and below-market lease values are capitalized as intangible lease assets or liabilities. Above-market lease values are amortized as an adjustment of rental revenue over the remaining terms of the respective leases. Below-market leases are amortized as an adjustment of rental revenue over the remaining terms of the respective leases, including any fixed rate bargain renewal periods. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of above-market and below-market in-place lease values related to that lease would be recorded as an adjustment to rental revenue.
The fair values of in-place leases include an estimate of direct costs associated with obtaining a new resident and opportunity costs associated with lost rentals that are avoided by acquiring an in-place lease. Direct costs associated with obtaining a new resident include commissions, resident improvements, and other direct costs and are estimated based on management’s consideration of current market costs to execute a similar lease. The value of opportunity costs is calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. These lease intangibles are amortized to depreciation and amortization expense over the remaining terms of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of in-place lease assets relating to that lease would be expensed.
 Impairment of Real Estate Assets
 The Company accounts for its real estate assets in accordance with ASC 360, Property, Plant and Equipment (“ASC 360”). ASC 360 requires the Company to continually monitor events and changes in circumstances that could indicate that the carrying amounts of the Company’s real estate and related intangible assets may not be recoverable. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, the Company assesses the recoverability of the assets by estimating whether the Company will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition. Based on this analysis, if the Company does not believe that it will be able to recover the carrying value of the real estate and related intangible assets and liabilities, the Company records an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities. If any assumptions, projections or estimates regarding an asset changes in the future, the Company may have to record an impairment to reduce the net book value of such individual asset. The Company continues to monitor events in connection with the recent outbreak of the novel Coronavirus (“COVID-19”) and evaluates any potential indicators that could suggest that the carrying value of its real estate investments and related intangible assets and liabilities may not be recoverable. The Company did not record any impairment loss on its real estate assets during the three months ended March 31, 2020 and 2019.

10

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PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)
STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(unaudited)

Revenue recognition - operating leases
The majority of the Company’s revenue is derived from rental revenue, which is accounted for in accordance with ASC 842, Leases (“ASC 842”). The Company leases apartment homes under operating leases with terms generally of one year or less. Generally, credit investigations are performed for prospective residents and security deposits are obtained. In accordance with ASC 842, the Company recognizes minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectibility is probable and records amounts expected to be received in later years as deferred rent receivable. For lease arrangements when it is not probable that the Company will collect all or substantially all of the remaining lease payments under the term of the lease, rental revenue is limited to the lesser of the rental revenue that would be recognized on a straight-line basis (as applicable) or the lease payments that have been collected from the lessee. Differences between rental revenue recognized and amounts contractually due under the lease agreements are credited or charged to straight-line rent receivable or straight-line rent liability, as applicable. Tenant reimbursements for common area maintenance and other recoverable expenses, are recognized when the services are provided and the performance obligations are satisfied. Tenant reimbursements for common area maintenance are accounted for as variable lease payments and are recorded as rental income on the Company’s statement of operations.
Rents and Other receivables
In accordance with ASC 842, the Company makes a determination of whether the collectibility of the lease payments in an operating lease is probable. If the Company determines the lease payments are not probable of collection, the Company would fully reserve for any contractual lease payments, deferred rent receivable, and variable lease payments and would recognize rental income only if cash is received. The Company exercises judgment in establishing these allowances and considers payment history and current credit status of residents in developing these estimates. Due to the short-term nature of the operating leases, the Company does not maintain a deferred rent receivable related to the straight-lining of rents. Any changes to the Company’s collectibility assessment are reflected as an adjustment to rental income.
Residents’ payment plans due to COVID-19
On April 10, 2020, the FASB issued a Staff Q&A to respond to some frequently asked questions about accounting for lease concessions related to the effects of the COVID-19 pandemic. Under ASC 842, subsequent changes to lease payments that are not stipulated in the original lease contract are generally accounted for as lease modifications, which may affect the economics of the lease for the remainder of the lease term. Some contracts may contain explicit or implicit enforceable rights and obligations that require lease concessions if certain circumstances arise that are beyond the control of the parties to the contract. If a lease contract provides enforceable rights and obligations for concessions in the contract and no changes are made to that contract, the concessions are not accounted for under the lease modification guidance in ASC 842. If concessions granted by lessors are beyond the enforceable rights and obligations in the contract, entities would generally account for those concessions in accordance with the lease modification guidance in ASC 842.
The FASB staff has been made aware that, given the unprecedented and global nature of the COVID-19 pandemic, it may be exceedingly challenging for entities to determine whether existing contracts provide enforceable rights and obligations for lease concessions and, if so, whether those concessions are consistent with the terms of the contract or are modifications to a contract.
Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance under ASC 842 to those contracts. Entities may make the elections for any lessor-provided concessions related to the effects of the COVID-19 pandemic (e.g., deferrals of lease payments, reduced future lease payments) as long as the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee. In addition to that, for concessions that provide a deferral of payments with no substantive changes to the consideration in the original contract, the FASB allows entities to account for the concessions as if no changes to the lease contract were made. Under this method, a lessor would increase its lease receivable and continue to recognize income.
As of March 31, 2020, no lease concessions were granted to the Company’s residents; however, subsequent to March 31, 2020, the Company began working with residents impacted by the COVID-19 pandemic to determine an appropriate rent relief

11

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PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)
STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(unaudited)

program. For the month of April 2020, the Company allowed qualifying residents to defer their April 2020 rent, which will be collected by the Company in monthly installment payments over the duration of the current lease or renewal term (which may not exceed twelve months) (the “April 2020 COVID-19 Payment Plan”). For the month of May 2020, the Company began providing certain qualifying residents with a one-time concession to incentivize their performance under the payment plan (the “May 2020 COVID-19 Payment Plan” and together with the April 2020 COVID-19 Payment Plan, the “COVID-19 Payment Plans”). If the qualifying resident fails to make payments pursuant to the May 2020 COVID-19 Payment Plan, the concession is immediately terminated, and the qualifying resident is required to immediately repay the amount of the concession. Qualifying residents for the COVID-19 Payment Plans were required to provide support to demonstrate their financial hardship.The Company continues to evaluate the impact of its rent relief programs and the appropriate accounting policy elections to be applied to the COVID-19 Payment Plans.
Investments in Unconsolidated Joint Ventures
The Company accounts for investments in unconsolidated joint venture entities in which it may exercise significant influence over, but does not control, using the equity method of accounting. Under the equity method, the investment is initially recorded at cost including an outside basis difference, which represents the Company’s transaction costs related to the joint venture, and subsequently adjusts it to reflect additional contributions or distributions, the Company’s proportionate share of equity in the joint venture’s earnings (loss) and amortization of the outside basis difference. The Company recognizes its proportionate share of the ongoing income or loss of the unconsolidated joint venture as equity in earnings (loss) of unconsolidated joint venture on the consolidated statements of operations. On a quarterly basis, the Company evaluates its investment in an unconsolidated joint venture for other-than-temporary impairments. The Company has elected the cumulative earnings approach to classify cash receipts from the unconsolidated joint venture on the accompanying consolidated statements of cash flows.
Fair Value Measurements
Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other assets and liabilities at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:
Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.
When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and will establish a fair value by assigning weights to the various valuation sources.

12

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PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)
STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(unaudited)

The following describes the valuation methodologies used by the Company to measure fair value, including an indication of the level in the fair value hierarchy in which each asset or liability is generally classified.
Interest rate cap agreements - The Company has entered into certain interest rate cap agreements. These derivatives are recorded at fair value. Fair value was based on a model-driven valuation using the associated variable rate curve and an implied market volatility, both of which were observable at commonly quoted intervals for the full term of the interest rate cap agreements. Therefore, the Company’s interest rate cap agreements were classified within Level 2 of the fair value hierarchy and are included in other assets in the accompanying consolidated balance sheets. Changes in the fair value of the interest rate cap agreements are recorded as interest expense in the accompanying consolidated statements of operations.
The following tables reflect the Company’s assets required to be measured at fair value on a recurring basis on the consolidated balance sheets:
 
 
March 31, 2020
 
 
Fair Value Measurements Using
 
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
  Interest rate cap agreements
 
$

 
$
3,991

 
$


 
 
December 31, 2019
 
 
Fair Value Measurements Using
 
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
  Interest rate cap agreements
 
$

 
$
132

 
$


Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.
Fair Value of Financial Instruments
The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities, distributions payable, due to affiliates and notes payable.
The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities and distributions payable to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. The fair value of amounts due to affiliates is not determinable due to the related party nature of such amounts. The Company has determined that its notes payable, net are classified as Level 3 within the fair value hierarchy.
The fair value of the notes payable, net is estimated using a discounted cash flow analysis using borrowing rates available to the Company for debt instruments with similar terms and maturities. As of March 31, 2020 and December 31, 2019, the fair value of the notes payable was $2,036,958,231 and $1,153,445,768, respectively, compared to the carrying value of $1,976,793,558 and $1,108,559,045, respectively.
Restricted Cash
Restricted cash represents those cash accounts for which the use of funds is restricted by loan covenants and cash is placed with a qualified intermediary for reinvestment under Section 1031 of the Internal Revenue Code. As of March 31, 2020, the

13

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PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)
STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(unaudited)

Company had a restricted cash balance of $18,635,695, which represented amounts set aside as impounds for future property tax payments, property insurance payments and tenant improvement payments as required by agreements with the Company’s lenders. As of December 31, 2019, the Company had a restricted cash balance of $73,614,452, which included $36,740,983 in allocated loan amounts held by the lender of the Company’s master credit facility as collateral for two properties sold during the year ended December 31, 2019$24,720,969 of cash proceeds from the sale of two properties that were being held by qualified intermediaries as of December 31, 2019, and $12,152,500 related to amounts set aside as impounds for future property tax payments, property insurance payments and tenant improvement payments as required by agreements with the Company lenders.
The following table represents the components of the cash, cash equivalents and restricted cash presented on the accompanying consolidated statements of cash flows for the three months ended March 31, 2020 and 2019:
 
 
March 31,
 
 
2020
 
2019
Cash and cash equivalents
 
$
215,105,801

 
$
52,802,102

Restricted cash
 
18,635,695

 
8,470,593

Total cash, cash and cash equivalents and restricted cash
 
$
233,741,496

 
$
61,272,695


Distribution Policy
The Company elected to be taxed, and currently qualifies, as a REIT commencing with the taxable year ended December 31, 2014. To maintain its qualification as a REIT, the Company intends to make distributions each taxable year equal to at least 90% of its REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). Distributions declared during the three months ended March 31, 2020, were based on daily record dates and calculated at a rate of $0.002459 per share per day during the period from January 1, 2020, through March 31, 2020
Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to qualify as a REIT under the Internal Revenue Code. During the three months ended March 31, 2020 and 2019, the Company declared distributions totaling $0.224 and $0.222 per share of common stock, respectively.
Per Share Data
Basic loss per share attributable to common stockholders for all periods presented are computed by dividing net loss by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted loss per share is computed based on the weighted average number of shares of the Company’s common stock and all potentially dilutive securities, if any. Distributions declared per common share assume each share was issued and outstanding each day during the period. Nonvested shares of the Company’s restricted common stock and convertible stock give rise to potentially dilutive shares of the Company’s common stock but such shares were excluded from the computation of diluted earnings per share because such shares were anti-dilutive during the period.
Segment Disclosure
The Company has determined that it has one reportable segment with activities related to investing in multifamily properties. The Company’s investments in real estate are in different geographic regions, and management evaluates operating performance on an individual asset level. However, as each of the Company’s assets has similar economic characteristics, residents and products and services, its assets have been aggregated into one reportable segment.

14

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PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)
STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(unaudited)

Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), and subsequent amendments to the guidance including, ASU 2018-19 in November 2018, ASU 2019-04 in April 2019, ASU 2019-05 in May 2019, ASUs 2019-10 and 2019-11 in November 2019, and ASU 2020-02 in February 2020 (as amended “ASU 2016-13”). ASU 2016-13 requires more timely recording of credit losses on loans and other financial instruments that are not accounted for at fair value through net income (loss), including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology in current GAAP. This guidance does not apply to operating lease receivables arising from operating leases, which are within the scope of ASC 842. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption was permitted for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted ASU 2016-13 on January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The FASB issued ASU 2018-13 to improve the effectiveness of fair value measurement disclosures by adding, eliminating, and modifying certain disclosure requirements. The issuance of ASU 2018-13 is part of a disclosure framework project. The disclosure framework project’s objective and primary focus are to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the information required by GAAP that is most important to users of each entity’s financial statements. Achieving the objective of improving the effectiveness of the notes to financial statements includes: (1) the development of a framework that promotes consistent decisions by the FASB board about disclosure requirements and (2) the appropriate exercise of discretion by reporting entities. The amendments in ASU 2018-13 modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting-Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits. ASU 2018-13 removed certain disclosure requirements under Topic 820 such as the disclosure requirements of the valuation process for level 3 fair value measurements and modified and added certain of the disclosure requirements in Topic 820. ASU 2018-13 requires prospective and retrospective application depending on the amendment and is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption was permitted. The Company adopted ASU 2016-13 on January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815, (“ASU 2020-01”), which clarifies the interaction between the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The amendments in ASU 2020-01 should be applied prospectively. The Company is currently assessing the impact of ASU 2020-01 on its consolidated financial statements and does not expect a material impact on its consolidated financial statements and related disclosures from the adoption of ASU 2020-01.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provided practical expedients to address existing guidance on contract modifications and hedge accounting due to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates (together “IBORs”) to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). In July 2017, the Financial Conduct Authority announced it intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Company refers to this transition as reference

15

Table of Contents

PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)
STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(unaudited)

rate reform. The first practical expedient allows companies to elect to not apply certain modification accounting requirements to debt, derivative and lease contracts affected by reference rate reform if certain criteria are met. These criteria include the following: (i) the contract referenced an IBOR rate that is expected to be discontinued; (ii) the modified terms directly replace or have the potential to replace the IBOR rate that is expected to be discontinued; and (iii) any contemporaneous changes to other terms that change or have the potential to change the amount and timing of contractual cash flows must be related to the replacement of the IBOR rate. If the contract meets all three criteria, there is no requirement for remeasurement of the contract at the modification date or reassessment of the previous accounting determination. The second practical expedient allows companies to change the reference rate and other critical terms related to the reference rate reform in derivative hedge documentation without having to de-designate the hedging relationship. This allows for companies to continue applying hedge accounting to existing cash flow and net investment hedges. ASU 2020-04 was effective upon issuance on a prospective basis beginning January 1, 2020 and may be elected over time as reference rate reform activities occur. The Company is currently evaluating the impact ASU 2020-04 has on its debt, derivative and lease contracts that are eligible for modification relief and may apply those elections as needed. The Company does not expect a material impact on its consolidated financial statements and related disclosures from the adoption of ASU 2020-04.


16

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PART I — FINANCIAL INFORMATION (continued)
 
Item 1. Financial Statements (continued)
STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(unaudited)

3.          Real Estate
Current period acquisitions
During the three months ended March 31, 2020, the Company purchased 39 real estate properties, all of which were determined to be asset acquisitions, including 36 real estate properties acquired in the Mergers, one parcel of land for the development of apartment homes and two real estate properties, both acquired through Section 1031 exchanges under the Internal Revenue Code.
The following is a summary of real estate properties acquired during the three months ended March 31, 2020:
 
 
 
 
 
 
 
 
 
 
Purchase Price Allocation
Property Name
 
Location
 
Purchase Date
 
Properties
 
Units
 
Land
 
Buildings and Improvements
 
Tenant Origination and Absorption Costs
 
Below Market Leases
 
Discount (Premium) on Assumed Liabilities
 
Total Purchase Price
Eleven10 at Farmers Market
 
Dallas, TX
 
1/28/2020
 
1

 
313

 
$
10,574,569

 
$
50,026,284

 
$
1,463,076

 
$

 
$

 
$
62,063,929

Patina Flats at the Foundry
 
Loveland, CO
 
2/11/2020
 
1

 
155

 
2,463,617

 
41,537,960

 
1,184,050

 
(61,845
)
 

 
45,123,782

SIR Merger(1)
 
Various
 
3/6/2020
 
27

 
7,527

 
114,377,468

 
959,337,747

 
27,027,759

 

 
1,391,489

 
1,102,134,463

STAR III Merger (1)
 
Various
 
3/6/2020
 
9

 
2,639