STET APT The following discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements ofSteadfast Apartment REIT, Inc. and the notes thereto. As used herein, the terms "we," "our" and "us" refer toSteadfast Apartment REIT, Inc. , aMaryland corporation. Forward-Looking Statements Certain statements included in this Quarterly Report on Form 10-Q (this "Quarterly Report") that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as "may," "should," "expect," "could," "intend," "plan," "anticipate," "estimate," "believe," "continue," "predict," "potential" or the negative of such terms and other comparable terminology. The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. One factor that could have a material adverse effect on our operations and future prospects is the adverse effect of COVID-19 on the financial condition, results of operations, cash flows and performance of us and our tenants, the real estate market and the global economy and financial markets. The extent to which COVID-19 impacts us and our residents will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, the outbreak of new strains of the virus and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, you should interpret many of the risks identified in this report, as well as the risks set forth above, as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic. Additional factors that could have a material adverse effect on our operations and future prospects include, but are not limited to: •the fact that we have had a net loss for each quarterly and annual period since inception; •changes in economic conditions generally and the real estate and debt markets specifically; •our ability to secure resident leases for our multifamily properties at favorable rental rates; •risks inherent in the real estate business, including resident defaults, potential liability relating to environmental matters and the lack of liquidity of real estate investments; •our ability to retain our key employees; •our ability to generate sufficient cash flows to pay distributions to our stockholders; •the Internalization Transaction (defined herein) may not be financially beneficial to us and our stockholders and our net income and funds from operations may decrease as a result of the Internalization Transaction; •legislative or regulatory changes (including changes to the laws governing the taxation of real estate investment trusts, or REITs); •the availability of capital; •changes in interest rates; and •changes to generally accepted accounting principles, or GAAP. Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements included in this Quarterly Report. All forward-looking statements are made as of the date of this Quarterly Report and the risk that actual results will differ materially from the expectations expressed in this Quarterly Report will increase with the passage of time. Except as otherwise required by the federal securities laws, we 55
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undertake no obligation to publicly update or revise any forward-looking statements after the date of this Quarterly Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this Quarterly Report, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Quarterly Report will be achieved. All forward looking statements included herein should be read in connection with the risks identified in the "Risk Factors" section of this Quarterly Report and our Annual Report on Form 10-K for the year endedDecember 31, 2020 , filed with theSecurities and Exchange Commission , or theSEC , onMarch 12, 2021 . Overview We were formed onAugust 22, 2013 , as aMaryland corporation that elected to be taxed as, and qualifies as, a REIT. As ofMarch 31, 2021 , we owned and managed a diverse portfolio of 69 multifamily properties comprised of 21,591 apartment homes and three parcels of land held for the development of apartment homes. We may acquire additional multifamily properties or pursue multifamily development projects in the future. COVID-19 Impact We are carefully monitoring the ongoing COVID-19 pandemic and its impact on our business. During the quarter endedJune 30, 2020 , we instituted payment plans for our residents that were experiencing hardship due to COVID-19, which we refer to as the "COVID-19 Payment Plan." Pursuant to the COVID-19 Payment Plan, we allowed qualifying residents to defer their rent, which is collected by us in monthly installment payments over the duration of the current lease or renewal term (which may not exceed 12 months). Additionally, for the months of May andJune 2020 , we provided certain qualifying residents with a one-time concession to incentivize their performance under the payment plan. If the qualifying resident failed to make payments pursuant to the COVID-19 Payment Plan, the concession was immediately terminated, and the qualifying resident was required to immediately repay the amount of the concession. Due to reduced demand, we did not offer residents any other payment plans during the remaining months of 2020. In the aggregate, approximately$2,025,092 in rent billed was subject to the COVID-19 Payment Plan, with$53,500 still due as ofMarch 31, 2021 . InJanuary 2021 , we began offering an extension to the COVID-19 Payment Plan, or the Extension Plan, that allows eligible residents to defer their rent, which is collected by us in monthly installment payments over the lesser of the duration of the current lease term or a maximum of three months (with the exception of certain states that allow a maximum of six months deferral). Under the Extension Plan, no concessions are offered for residents with a payment plan duration of two months or less and residents who opted for the COVID-19 Payment Plan are not eligible to participate in the Extension Plan unless they paid off the amounts due under the COVID-19 Payment Plan. As ofMay 1, 2021 , the number of qualifying residents who opted for the Extension Plan were 41 and approximately$43,277 in rent was subject to the Extension Plan. During the quarter endedSeptember 30, 2020 , we initiated a debt forgiveness program for certain of our residents that were experiencing hardship due to COVID-19 and who were in default on their lease payments, which we refer to as the "Debt Forgiveness Program." Pursuant to the Debt Forgiveness Program, we offered qualifying residents an opportunity to terminate the lease without being liable for any unpaid rent and penalties. We determined that accounts receivable related to the Debt Forgiveness Program are not probable of collection and therefore included these accounts in our reserve. In the aggregate,$298,576 of rent was written off as ofMarch 31, 2021 . As ofMarch 31, 2021 , approximately 55 of 304 residents that qualified for the Debt Forgiveness Program, vacated their apartment homes, terminating their lease resulting in the forgiveness and write off of their debt. We may in the future continue to offer various types of payment plans or rent relief depending on the ongoing impact of the COVID-19 pandemic. During the three months endedMarch 31, 2021 , we collected 96% in rent due pursuant to our leases. We collected 97% in rent due pursuant to our leases duringApril 2021 . We have reserved approximately$2,728,971 of accounts receivable which we consider not probable for collection. Although the COVID-19 pandemic has not materially impacted our rent collections, the future impact of COVID-19 is still unknown. We are currently working with residents at our communities to obtain rental relief assistance pursuant to theEmergency Rental Assistance Program adopted by theU.S. Department of Treasury . We expect the significance of the COVID-19 pandemic, including the extent of its effect on our financial and operational results, to be dictated by, among other things, its duration, the success of efforts to contain it and the impact of actions taken in response. For instance, recent government action to provide substantial financial support could provide helpful mitigation for us; its ultimate impact, however, is not yet clear. 56
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Winter Storm InFebruary 2021 , certain regions ofthe United States experienced winter storms and extreme cold temperatures, including in the states where we own and operate multifamily properties. The impact of the storms and the extreme cold temperatures resulting in power outages and freezing water pipes negatively impacted some of our properties. Our properties are fully insured, and we expect the costs to be fully recoverable by insurance proceeds, less the plan's deductible. During the three months endedMarch 31, 2021 , we wrote off$15,459,862 of the carrying value of our fixed assets and recorded$11,948,789 of estimated repair expenses, with a corresponding increase in general and administrative expenses and an increase in our accounts payable and accrued liabilities. We also recorded insurance recoveries of$27,407,651 for the estimated insurance claims proceeds in the amount of total losses incurred (as described above) as an increase in rents and other receivables with a corresponding decrease to general and administrative expenses. As a result, while our net loss for the three months endedMarch 31, 2021 , was not impacted, we experienced a decrease in the carrying value of our real estate held for investment, net and increases to rents and other receivables and accounts payable and accrued liabilities in the consolidated balance sheets for three months endedMarch 31, 2021 . Public Offering OnDecember 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. OnMarch 24, 2016 , we terminated our initial public offering. As ofMarch 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 ofMarch 31, 2021 , we had sold 111,967,192 shares of common stock for gross offering proceeds of$1,722,630,330 , including 8,337,112 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of$124,901,172 and 56,016,053 shares of common stock issued in connection with the Mergers (as defined below). OnMarch 9, 2021 , our board of directors determined an estimated value per share of our common stock of$15.55 as ofDecember 31, 2020 . In connection with the determination of an estimated value per share, our board of directors determined a purchase price per share for the distribution reinvestment plan of$15.55 , effectiveApril 1, 2021 . In the future, our board of directors may, in its sole discretion and from time to time, change the price at which we offer shares pursuant to our distribution reinvestment plan to reflect changes in our estimated value per share and other factors that our board of directors deems relevant. Merger with Steadfast Income REIT, Inc. OnAugust 5, 2019 , we, Steadfast Income REIT, Inc., or SIR,Steadfast Apartment REIT Operating Partnership, L.P. , our wholly-owned subsidiary, orSTAR Operating Partnership ,Steadfast Income REIT Operating Partnership, L.P. , the operating partnership of SIR, or the SIR OP, andSI Subsidiary, LLC , or SIR Merger Sub, entered into an Agreement and Plan of Merger, or the SIR Merger Agreement. Pursuant to the terms and conditions of the SIR Merger Agreement, onMarch 6, 2020 , SIR merged with and into SIR Merger Sub with SIR Merger Sub surviving the merger, or the SIR Merger. Following the SIR Merger, SIR Merger Sub, as the surviving entity, continued as our wholly-owned subsidiary. In accordance with the applicable provisions of the Maryland General Corporation Law, or MGCL, the separate existence of SIR ceased. At the effective time of the SIR Merger, each issued and outstanding share of SIR common stock (or a fraction thereof),$0.01 par value per share, converted into 0.5934 shares of our common stock. Merger withSteadfast Apartment REIT III, Inc. OnAugust 5, 2019 , we,Steadfast Apartment REIT III, Inc. , or STAR III,STAR Operating Partnership ,Steadfast Apartment REIT III Operating Partnership, L.P. , the operating partnership of STAR III, or the STAR III OP, andSIII Subsidiary, LLC , or STAR III Merger Sub, entered into an Agreement and Plan of Merger, or the STAR III Merger Agreement. Pursuant to the terms and conditions of the STAR III Merger Agreement, onMarch 6, 2020 , STAR III merged with and into STAR III Merger Sub with STAR III Merger Sub surviving the merger, or the STAR III Merger, and together with the SIR Merger, the "Mergers." Following the STAR III Merger, STAR III Merger Sub, as the surviving entity, continued as our wholly-owned subsidiary. In accordance with the applicable provisions of the MGCL, the separate existence of STAR III ceased. At the effective time of the STAR III Merger, each issued and outstanding share of STAR III common stock (or a fraction thereof),$0.01 par value per share, was converted into 1.430 shares of our common stock. 57
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Combined Company Through the Mergers, we acquired 36 multifamily properties with 10,166 apartment homes and a 10% interest in one unconsolidated joint venture that owned 20 multifamily properties with a total of 4,584 apartment homes, all of which had a gross real estate value of approximately$1.5 billion . The combined company after the Mergers retained the name "Steadfast Apartment REIT, Inc. " Each merger qualified as a "reorganization" under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. Pre-Internalization Operating Partnerships Merger OnAugust 28, 2020 , pursuant to an Agreement and Plan of Merger,STAR Operating Partnership merged with and into the SIR OP, or the SIR OP/STAR OP Merger. The SIR OP/STAR OP Merger was treated forU.S. federal income tax purposes as a tax-deferred contribution by us of all of the assets and liabilities ofSTAR Operating Partnership to SIR OP under Section 721(a) of the Internal Revenue Code. Immediately following the consummation of the SIR OP/STAR OP Merger, onAugust 28, 2020 , pursuant to an Agreement and Plan of Merger, STAR III OP merged with and into SIR OP, or the Operating Partnership Merger, and together with the SIR OP/STAR OP Merger, the "Operating Partnership Mergers," with SIR OP being the "resulting partnership" and STAR III OP terminating. OnAugust 28, 2020 , SIR OP changed its name to "Steadfast Apartment REIT Operating Partnership, L.P. ", which is referred to herein as the "Current Operating Partnership ." In addition, onAugust 28, 2020 , prior to completion of the Operating Partnership Mergers, we acquired STAR III Merger Sub. OnAugust 28, 2020 , SIR Merger Sub, as the initial general partner of theCurrent Operating Partnership , transferred all of its general partnership interests to us, and we were admitted as a substitute general partner of theCurrent Operating Partnership . OnAugust 28, 2020 , we,Steadfast Income Advisor, LLC , the initial limited partner of theCurrent Operating Partnership , or SIR Advisor,Steadfast Apartment Advisor III, LLC , aDelaware limited liability company and the special limited partner of theCurrent Operating Partnership , or STAR III Advisor,Wellington VVM LLC , aDelaware limited liability company and limited partner of theCurrent Operating Partnership , or Wellington, andCopans VVM, LLC , aDelaware limited liability company and limited partner of theCurrent Operating Partnership , or Copans, and together with Wellington, "VV&M", entered into a Second Amended and Restated Agreement of Limited Partnership, or the Second A&R Partnership Agreement, in order to, among other things, reflect the consummation of the Operating Partnership Mergers. The purpose of the pre-internalization Operating Partnership Mergers was to simplify our corporate structure so that we had a single operating partnership as our direct subsidiary. Internalization Transaction OnAugust 31, 2020 , we and theCurrent Operating Partnership entered into a series of transactions and agreements (such transactions and agreements hereinafter collectively referred to as the "Internalization Transaction"), withSteadfast REIT Investments, LLC , our former sponsor, or SRI, which resulted in the internalization of our external management functions provided bySteadfast Apartment Advisor, LLC , our former external advisor, which we refer to as our "Former Advisor," and its affiliates. Prior to the closing of the Internalization Transaction, which took place contemporaneously with the execution of the Contribution & Purchase Agreement (as defined below) onAugust 31, 2020 , or the Internalization Closing,Steadfast Investment Properties, Inc. , aCalifornia corporation, or SIP,Steadfast REIT Services, Inc. , aCalifornia corporation, or Steadfast REIT Services, and their respective affiliates owned and operated all of the assets necessary to operate as a self-managed company, and employed all the employees necessary to operate as a self-managed company. Pursuant to a Contribution and Purchase Agreement, between us, theCurrent Operating Partnership and SRI, SRI contributed to theCurrent Operating Partnership all of the membership interests inSTAR RS Holdings, LLC , aDelaware limited liability company, or SRSH, and the assets and rights necessary to operate as a self-managed company in all material respects, and the liabilities associated with such assets and rights, or the Contribution, in exchange for$124,999,000 , which was paid as follows: (1)$31,249,000 in cash, or the Cash Consideration, and (2) 6,155,613.92 Class B units of limited partnership interests in theCurrent Operating Partnership , or the Class B OP Units, having the agreed value set forth in the Contribution and Purchase Agreement, or the OP Unit Consideration. In addition, we purchased all of our Class A Convertible Stock held by the Former Advisor for$1,000 . As a result of the Internalization Transaction, we became self-managed and acquired components of the advisory, asset management and property management business of the Former Advisor and its affiliates by hiring the employees, who comprise the workforce necessary for the management and day-to-day real estate and accounting operations for us and theCurrent Operating Partnership . Additional information on the Internalization Transaction can be found 58
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on our Current Report in Form 8-K filed with theSEC onSeptember 3, 2020 . See also Note 3 (Internalization Transaction) to our consolidated financial statements in this Quarterly Report. The Former Advisor Prior to the Internalization Transaction, our day-to-day operations were externally managed by the Former Advisor, pursuant to the Amended and Restated Advisory Agreement effective as ofMarch 6, 2020 , by and between us and the Former Advisor, as amended, the "Advisory Agreement". OnAugust 31, 2020 , prior to the Internalization Closing, we, the Former Advisor and theCurrent Operating Partnership entered into a Joinder Agreement, pursuant to which theCurrent Operating Partnership became a party to the Advisory Agreement. OnAugust 31, 2020 , prior to the Internalization Closing, we and the Former Advisor entered into the First Amendment to Amended and Restated Advisory Agreement in order to remove certain restrictions in the Advisory Agreement related to business combinations and to provide that any amounts accrued to the Former Advisor commencing onSeptember 1, 2020 were paid in cash to the Former Advisor by theCurrent Operating Partnership . In connection with the Internalization Transaction,STAR REIT Services, LLC , our subsidiary, or SRS, assumed the rights and obligations of the Advisory Agreement from the Former Advisor.The Current Operating Partnership Substantially all of our business is conducted through theCurrent Operating Partnership . We are the sole general partner of theCurrent Operating Partnership . As a condition to the Internalization Closing, onAugust 31, 2020 , we, as the general partner and parent of theCurrent Operating Partnership , SRI and VV&M entered into a Third Amended and Restated Agreement of Limited Partnership of theOperating Partnership , which is referred to herein as the "Operating Partnership Agreement," to restate theSecond A&R Partnership Agreement in order to, among other things, remove references to the limited partner interests previously held by SIR Advisor and STAR III Advisor, reflect the consummation of the Contribution, and designate Class B OP Units that were issued as the OP Unit Consideration. The Operating Partnership Agreement provides that theCurrent Operating Partnership will be operated in a manner that will enable us to (1) satisfy the requirements for being classified as a REIT for federal income tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that theCurrent 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 theCurrent Operating Partnership being taxed as a corporation, rather than as a disregarded entity. We elected to be taxed as a REIT under the Internal Revenue Code commencing with our taxable year endedDecember 31, 2014 . As a REIT, we generally will not be subject to federal income tax to the extent that we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate rates and would not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Failing to qualify as a REIT could materially and adversely affect our net income and results of operations. Market Outlook The global COVID-19 pandemic and resulting shut down of large components of theU.S. economy has created significant uncertainty and enhanced investment risk across many asset classes, including real estate. The degree to which our business is impacted by the COVID-19 pandemic will depend on a number of variables, including access to testing and vaccines, the reimposition of "shelter in place" orders, new strains of the virus and the continuation of new COVID-19 cases throughout the world. While all property classes have been adversely impacted by the recent economic downturn, we believe we are well positioned to navigate this unprecedented period. We believe multifamily properties have been less adversely impacted than hospitality and retail properties, and our portfolio of moderate-income apartments should outperform other classes of multifamily properties. We also believe that long-run economic and demographic trends should benefit our existing portfolio. Home ownership rates should remain at near all-time lows given the current economic situation. Additionally, Millennials and Baby Boomers, the two largest demographic groups comprising roughly half of the total population inthe United States , are expected to continue to increasingly choose rental housing over home ownership. Baby Boomers are downsizing their suburban homes and relocating to multifamily apartments while Millennials are renting multifamily apartments due to high levels of student debt and increased credit standards in order to qualify for a home mortgage. These factors should lead to mitigating the effects of the current economic downturn and continued growth as the economy recovers. 59
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Our Real Estate Portfolio As ofMarch 31, 2021 , we owned the 69 multifamily apartment communities and three parcels of land held for the development of apartment homes listed below: Average Monthly Occupancy(1) Average Monthly Rent(2) PropertyName Location Purchase Date Number of Homes Purchase Price Mortgage Debt Outstanding(3)Mar 31, 2021 Dec 31, 2020 Mar 31, 2021 Dec 31, 2020 1 Villages at SpringSpring Hill ,5/22/2014 176$ 14,200,000 (4) 96.6 % 95.5 %
Hill Apartments TN
2 Harrison Place Indianapolis , 6/30/2014 307 27,864,250 (4) 96.7 % 96.1 % 988 967
Apartments IN
3 The Residences on Suwanee, GA 10/16/2014 696 98,500,000 (4) 95.5 % 95.1 % 1,337 1,331
McGinnis Ferry
4 The 1800 at Barrett Kennesaw , 11/20/2014 500 49,000,000 40,664,224 95.6 % 95.4 % 1,113 1,089
Lakes GA
5 The Oasis Colorado 12/19/2014 252 40,000,000 39,535,415 95.2 % 94.4 % 1,426 1,411
Springs, CO
6 Columns on Florence, KY 2/26/2015 192 25,000,000 (4) 94.8 % 95.3 % 1,198 1,134
Wetherington
7 Preston Hills at Buford, GA 3/10/2015 464 51,000,000 (4) 96.8 % 96.6 % 1,196 1,193
Mill Creek
Eagle Lake
8 Landing Speedway, IN 3/27/2015 277 19,200,000 (4) 96.0 % 91.3 % 873 826
Apartments
9 Reveal on Fishers, IN 3/30/2015 220 29,500,000 20,871,059 97.7 % 96.8 % 1,134 1,125
Cumberland
10 Heritage Place Franklin, TN 4/27/2015 105 9,650,000 8,601,462 100.0 % 96.2 % 1,129 1,132
Apartments
11 Rosemont at East Marietta, GA 5/21/2015 180 16,450,000 13,272,161 96.7 % 95.6 % 1,080 1,071
Cobb
12 Ridge Crossings Hoover, AL 5/28/2015 720 72,000,000 57,729,139 93.1 % 95.1 % 1,029 1,008
Apartments
13 Bella Terra at City Aurora, CO 6/11/2015 304 37,600,000 (4) 94.4 % 95.1 % 1,172 1,153
Center
14 Hearthstone at City Aurora, CO 6/25/2015 360 53,400,000 (4) 93.3 % 93.3 % 1,237 1,149
Center
15 Arbors at Mauldin, SC 6/30/2015 702 66,800,000 (4) 93.3 % 94.7 % 914 901
Brookfield
16 Carrington Park Kansas City, MO 8/19/2015 298 39,480,000 (4) 95.3 % 95.0 % 1,068 1,063
Delano at North North
17 Richland Hills Richland 8/26/2015 263 38,500,000 31,866,344 97.7 % 97.0 % 1,450 1,492
Hills, TX
Meadows at North North
18 Richland Hills Richland 8/26/2015 252 32,600,000 26,626,703 95.2 % 97.2 % 1,443 1,417
Hills, TX
19 Kensington by the Euless, TX 8/26/2015 259 46,200,000 33,538,682 95.4 % 96.5 % 1,469 1,470
Vineyard
20 Monticello by the Euless, TX 9/23/2015 354 52,200,000 41,135,827 94.9 % 95.2 % 1,345 1,315
Vineyard
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Average Monthly Occupancy(1) Average Monthly Rent(2)
Property Name Location Purchase Date Number of Homes Mortgage Debt
Purchase Price Outstanding(3) Mar 31, 2021 Dec 31, 2020 Mar31, 2021 Dec 31, 2020 21 The ShoresOklahoma 9/29/2015 300$ 36,250,000 $ 23,270,706 95.3 % 96.3 %$ 1,029 $ 1,031 City, OK 22 Lakeside atCoppell, TX 10/7/2015 315 60,500,000 47,938,751 95.2 % 94.9 % 1,624 1,708 Coppell 23 Meadows at River Bolingbrook,10/30/2015 374 58,500,000 41,598,867 93.0 % 95.2 % 1,421 1,421 Run IL 24 PeakView atGreeley, CO 12/11/2015 224 40,300,000 (4) 95.1 % 94.2 % 1,340 1,340 T-Bone Ranch 25Park Valley Smyrna, GA 12/11/2015 496 51,400,000 48,655,260 95.0 % 96.4 % 1,045 1,051 Apartments 26 PeakView byLoveland, CO 12/18/2015 222 44,200,000 38,066,676 95.0 % 95.5 % 1,418 1,396 Horseshoe Lake 27Stoneridge Farms Smyrna, TN 12/30/2015 336 47,750,000 45,389,412 94.9 % 94.6 % 1,257 1,239 28 Fielder's CreekEnglewood ,3/23/2016 217 32,400,000 (4) 96.8 % 94.9 % 1,214 1,180 CO 29 Landings ofBrentwood ,5/18/2016 724 110,000,000 - 96.0 % 95.4 % 1,252 1,252 Brentwood TN 30 1250 WestMarietta, GA 8/12/2016 468 55,772,500 (4) 94.2 % 96.4 % 1,107 1,051 Apartments 31 Sixteen50 @ LakeRockwall, TX 9/29/2016 334 66,050,000 (4) 95.2 % 96.4 % 1,480 1,485 Ray Hubbard 32Garrison Station (5)Murfreesboro ,5/30/2019 24 26,370,157 10,849,189 8.3 % - % - - TN 33 Eleven10 @Dallas, TX 1/28/2020 313 62,063,929 35,355,991 93.6 % 94.2 % 1,348 1,379 Farmers Market 34Patina Flats at theLoveland, CO 2/11/2020 155 45,123,782 (4) 94.8 % 93.5 % 1,286 1,275 Foundry 35Clarion Park Olathe, KS 3/6/2020 220 21,121,795 12,659,963 95.0 % 93.6 % 820 843 Apartments(6) 36Spring Creek Edmond, OK 3/6/2020 252 28,186,894 17,056,696 94.8 % 96.0 % 899 895 Apartments(6) Montclair Parc Oklahoma 37 Apartment City, OK3/6/2020 360 40,352,125 (7) 94.7 % 96.1 % 904 905 Homes(6) 38Hilliard Park Columbus ,3/6/2020 201 28,599,225 11,762,680 98.0 % 97.0 % 1,170 1,149 Apartments(6) OH 39Sycamore Terrace Terre Haute ,3/6/2020 250 34,419,259 23,014,253 96.8 % 94.8 % 1,186 1,155 Apartments(6) IN 40Hilliard Summit Columbus ,3/6/2020 208 31,087,442 14,223,166 96.2 % 95.7 % 1,260 1,260 Apartments(6) OH 41 Forty 57 Lexington,3/6/2020 436 63,030,831 33,715,809 95.0 % 95.2 % 966 964 Apartments(6) KY 42Riverford Crossing Frankfort, KY 3/6/2020 300 38,139,145 19,231,866 96.3 % 95.7 % 1,031 1,002 Apartments(6) 43Hilliard Grand Dublin, OH 3/6/2020 314 50,549,232 23,851,716 95.2 % 94.3 % 1,291 1,280 Apartments(6) 61
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Average Monthly Occupancy(1) Average Monthly Rent(2)
Mortgage Debt
Property Name Location Purchase Date Number of Homes Purchase Price Outstanding(3) Mar 31, 2021 Dec 31, 2020 Mar 31, 2021 Dec 31, 2020
44 Deep Deuce at Oklahoma 3/6/2020 294 $ 52,519,973 $ 33,381,171 95.2 % 95.2 % $ 1,231 $ 1,242
Bricktown(6) City, OK
45 Retreat at Quail Oklahoma 3/6/2020 240 31,945,162 13,515,176 97.1 % 97.1 % 998 986
North(6) City, OK
46 Tapestry Park Birmingham , 3/6/2020 354 68,840,769 48,698,085 95.5 % 97.2 % 1,388 1,380
Apartments(6) AL
BriceGrove Park Canal
47 Apartments(6) Winchester, 3/6/2020 240 27,854,616 (7) 95.4 % 94.6 % 956 936
OH
48 Retreat at Lexington , 3/6/2020 150 21,341,085 (7) 94.7 % 97.3 % 1,014 1,026
Hamburg Place(6) KY
49 Villas at Houston, TX 3/6/2020 294 41,720,117 27,285,952 96.6 % 97.6 % 1,177 1,190
Huffmeister(6)
50 Villas of Kingwood , 3/6/2020 330 54,428,708 34,711,888 94.5 % 95.5 % 1,195 1,207
Kingwood(6) TX
51 Waterford Place at Cypress, TX 3/6/2020 228 28,278,262 (7) 97.8 % 95.2 % 1,129 1,122
Riata Ranch(6)
52 Carrington Place (6) Houston, TX 3/6/2020 324 42,258,525 (7) 93.5 % 95.7 % 1,027 1,059
Carrington at
53 Champion Houston, TX 3/6/2020 284 37,280,704 (7) 95.1 % 94.7 % 1,093 1,103
Forest(6)
54 Carrington Park at Cypress, TX 3/6/2020 232 33,032,451 20,861,057 96.1 % 97.0 % 1,191 1,179
Huffmeister(6)
Heritage Grand at Missouri City,
55 Sienna TX 3/6/2020 240 32,796,345 14,133,098 95.0 % 95.4 % 1,073 1,104
Plantation(6)
56 Mallard Crossing Loveland, OH 3/6/2020 350 52,002,345 (7) 94.9 % 94.9 % 1,152 1,150
Apartments(6)
57 Reserve at Chattanooga , 3/6/2020 192 24,522,910 15,043,836 97.4 % 95.8 % 1,134 1,096
Creekside(6) TN
58 Oak Crossing Fort Wayne , 3/6/2020 222 32,391,032 21,607,510 97.3 % 94.6 % 1,061 1,026
Apartments(6) IN
59 Double Creek Plainfield, IN 3/6/2020 240 35,490,439 23,620,915 95.8 % 95.8 % 1,078 1,075
Flats(6)
Jefferson at Dunwoody,
60 Perimeter GA 3/6/2020 504 113,483,898 72,995,856 95.6 % 96.2 % 1,344 1,334
Apartments(6)
61 Bristol Village Aurora, CO 3/6/2020 240 62,019,009 35,002,200 97.5 % 96.7 % 1,404 1,400
Apartments(6)
Canyon Resort at
62 Great Hills Austin, TX 3/6/2020 256 48,319,858 31,641,477 93.8 % 95.3 % 1,371 1,371
Apartments(6)
Reflections on Lawrenceville,
63 Sweetwater GA 3/6/2020 280 47,727,470 30,855,744 97.1 % 97.5 % 1,152 1,148
Apartments(6)
64 The Pointe at Vista Lewisville , 3/6/2020 300 51,625,394 31,047,597 96.0 % 96.0 % 1,286 1,282
Ridge(6) TX
65 Belmar Villas (6) Lakewood , 3/6/2020 318 79,351,923 47,054,300 95.0 % 94.7 % 1,356 1,355
CO
66 Sugar Mill Lawrenceville , 3/6/2020 244 42,784,645 24,952,002 97.5 % 96.7 % 1,174 1,154
Apartments(6) GA
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Average Monthly Occupancy(1) Average Monthly Rent(2)
Mortgage Debt
Property Name Location Purchase Date Number of Homes Purchase Price Outstanding(3) Mar 31, 2021 Dec 31, 2020 Mar 31, 2021 Dec 31, 2020
67 Avery Point Indianapolis , 3/6/2020 512 $ 55,706,852 $ 31,423,110 95.9 % 95.3 % $ 853 $ 841
Apartments(6) IN
Cottage Trails at Chesapeake,
68 Culpepper VA 3/6/2020 183 34,657,950 23,186,180 96.7 % 97.8 % 1,432 1,410
Landing(6)
69 Arista at Broomfield , 3/13/2020 - 8,731,725 - - % - % - -
Broomfield(8) CO
70 VV&M Dallas, TX 4/21/2020 310 59,969,074 45,354,179 94.5 % 92.6 % 1,345 1,363
Apartments
71 Flatirons Broomfield , 6/19/2020 - 8,903,070 - - % - % - -
Apartments(9) CO
72 Los Robles San Antonio , 11/19/2020 306 51,620,836 - 93.8 % 90.5 % 1,177 1,261
TX
21,591 $ 3,172,915,713 $ 1,386,853,350 95.3 % 95.4 %$ 1,180 $ 1,173 _____________________ (1)As ofMarch 31, 2021 , our portfolio was approximately 96.9% leased, calculated using the number of occupied and contractually leased apartment homes divided by total apartment homes. As ofMarch 31, 2021 , no single residence accounted for greater than 10% of our 2021 gross annualized revenues. (2)Average monthly rent is based upon the effective rental income for the month ofMarch 2021 after considering the effect of vacancies, concessions and write-offs. (3)Mortgage debt outstanding is net of deferred financing costs, net and premiums and discounts, net associated with the loans for each individual property listed above but excludes the principal balance of$750,477,000 and associated deferred financing costs of$5,404,112 related to the refinancings pursuant to our credit facilities and revolver, each as described herein. (4)Properties secured under the terms of the Master Credit Facility Agreement, or MCFA, with Newmark Group Inc., formerlyBerkeley Point Capital, LLC , or the Facility Lender. (5)We acquired theGarrison Station property onMay 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 with 176 apartment homes of 1, 2 and 3-bedrooms with a typical mix for this market. OnOctober 16, 2019 , we obtained a loan fromPNC Bank, National Association , or PNC Bank, in an amount up to a maximum principal balance of$19,800,000 to finance a portion of the development and construction. As ofMarch 31, 2021 , one building comprising of 24 apartment homes was placed into service and was 31.8% leased, and is included within total real estate held for investment, net in the accompanying consolidated balance sheets. (6)We acquired 36 real estate properties in the Mergers onMarch 6, 2020 , for an aggregate purchase price of$1,575,891,924 , which represents the fair value of the acquired real estate assets including capitalized transaction costs. (7)Properties secured under the terms of the Master Credit Facility Agreement with PNC Bank, or the PNC MCFA. (8)We acquired the Arista atBroomfield property onMarch 13, 2020 , which included unimproved land, currently zoned as a PUD. The current zoning permits the development of the property into a multifamily community with 325 apartment homes of 1, 2 and 3-bedrooms with a typical mix for this market. (9)We acquired the Flatirons property onJune 19, 2020 , which included unimproved land, currently zoned as a PUD. The current zoning permits the development of the property into a multifamily community with 296 units of studio, 1 and 2-bedrooms with a typical mix for this market. Critical Accounting Policies The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial 63
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statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. Our critical accounting policies are described in more detail in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K, filed with theSEC onMarch 12, 2021 . There have been no significant changes in our critical accounting policies from those reported in our Annual Report, or the Annual Report, except for the accounting policy regarding casualty loss, which is described below. With respect to these critical accounting policies, we believe that the application of judgments and assessments is consistently applied and produces financial information that fairly depicts the results of operations for all periods presented. Casualty loss We carry liability insurance to mitigate our exposure to certain losses, including those relating to property damage and business interruption. We record the estimated amount of expected insurance proceeds for property damage and other losses incurred as an asset (typically a receivable from the insurer) and income up to the amount of the losses incurred when receipt of insurance proceeds is deemed probable. Any amount of insurance recovery in excess of the amount of the losses incurred is considered a gain contingency and is recorded in other income when the proceeds are received. During the three months endedMarch 31, 2021 , we incurred property damage and other losses of$27,408,651 , which was recorded as general and administrative expenses, with a corresponding insurance recoveries income up to the amount of losses incurred (as described above) within general and administrative expenses in the accompanying consolidated statements of operations. Distributions Our board of directors has declared daily distributions that are paid on a monthly basis. We expect to continue paying monthly distributions unless our results of operations, our general financial condition, general economic conditions or other factors prohibit us from doing so. We may declare distributions in excess of our funds from operations. As a result, our distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for tax purposes, we must make distributions equal to at least 90% of our "REIT taxable income" each year. Distributions declared (1) accrued daily to our stockholders of record as of the close of business on each day, (2) are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month and (3) were calculated at a rate of$0.002466 per share per day during the month ofJanuary 2021 , which if paid each day over a 365-day period, is equivalent to$0.90 per share, and were calculated at a rate of$0.001438 per share per day commencing onFebruary 1, 2021 throughMarch 31, 2021 , which if paid each day over a 365-day period, is equivalent to$0.525 per share. The distributions declared and paid during the first fiscal quarter endedMarch 31, 2021 , along with the amount of distributions reinvested pursuant to the distribution reinvestment plan were as follows: Distributions Paid(3) Sources of Distributions Paid Funds Equal to Distributions Amounts Reinvested Net Cash Provided Distributions Declared Per Cash Flow From in our Distribution by Operating Period Declared(1) Share(1)(2) Cash Reinvested Total Operations Reinvestment Plan Activities First Quarter 2021$ 18,909,212 $ 0.161$ 18,012,522 $ 4,600,603 $ 22,613,125 $ 4,040,865 $ 18,572,260 $ 4,040,865 ____________________ (1)Distributions during the month endedJanuary 2021 were based on daily record dates and calculated at a rate of$0.002466 per share per day. OnJanuary 12, 2021 , our board of directors determined to reduce the distribution rate to$0.001438 per share per day commencing onFebruary 1, 2021 and endingFebruary 28, 2021 , which was extended throughMarch 31, 2021 , and which if paid each day over a 365-day period is equivalent to$0.525 per share. (2)Assumes each share was issued and outstanding each day during the period presented. (3)Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately three days following month end. For the three months endedMarch 31, 2021 , we paid aggregate distributions of$22,613,125 , which was comprised of$18,012,522 of distributions paid in cash and 302,075 shares of our common stock issued pursuant to our distribution reinvestment plan for$4,600,603 . For the three months endedMarch 31, 2021 , our net loss was$14,809,563 , we had funds 64
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from operations, or FFO, of$18,841,765 and net cash provided by operations of$4,040,865 . For the three months endedMarch 31, 2021 , we funded$4,040,865 , or 18%, of total distributions paid, including shares issued pursuant to our distribution reinvestment plan, from net cash provided by operating activities and$18,572,260 , or 82%, from funds equal to our distribution reinvestment plan. Since inception, of the$309,010,185 in total distributions paid throughMarch 31, 2021 , including shares issued pursuant to our distribution reinvestment plan, 65% of such amounts were funded from cash flow from operations, 28% were funded from funds equal to amounts reinvested in our distribution reinvestment plan and 7% were funded from net public offering proceeds. For information on how we calculate FFO and the reconciliation of FFO to net loss, see "-Funds from Operations and Modified Funds from Operations." Our long-term policy is to pay distributions solely from cash flow from operations. Because we may receive income from interest or rents at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period, and we expect to pay these distributions in advance of our actual receipt of these funds. In these instances, our board of directors has the authority under our organizational documents, to the extent permitted byMaryland law, to fund distributions from sources such as borrowings or offering proceeds. We have not established a limit on the amount of proceeds we may use from sources other than cash flow from operations to fund distributions. If we pay distributions from sources other than cash flow from operations, we will have fewer funds available for investments. We continue to monitor the COVID-19 pandemic and its impact on our liquidity. Our operations could be materially negatively affected if the pandemic is prolonged, which could adversely affect our operating results and therefore our ability to pay our distributions. Inflation Substantially all of our multifamily property leases are for a term of one year or less. In an inflationary environment, this may allow us to realize increased rents upon renewal of existing leases or the beginning of new leases. Short-term leases generally will minimize our risk from the adverse effects of inflation, although these leases generally permit residents to leave at the end of the lease term and therefore will expose us to the effects of a decline in market rents. In a deflationary rent environment, we may be exposed to declining rents more quickly under these shorter term leases. With respect to other commercial property tenants, we expect in the future to include provisions in our leases designed to protect us from the impact of inflation. These provisions include reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements, or in some cases annual reimbursement of operating expenses above a certain allowance. As ofMarch 31, 2021 , we had not entered into any material leases as a lessee, except for a sub-lease entered into in connection with the Internalization Transaction onSeptember 1, 2020 . See Note 10 (Related Party Arrangements) to our consolidated financial statements in this Quarterly Report for details. REIT Compliance To continue to qualify as a REIT for tax purposes, we are required to distribute at least 90% of our REIT taxable income (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP) to our stockholders. We must also meet certain asset and income tests, as well as other requirements. We monitor the operations and transactions that may potentially impact our REIT status. If we fail to qualify as a REIT in any taxable year following the year we initially elected to be taxed as a REIT, we would be subject to federal income tax on our taxable income at regular corporate rates. Liquidity and Capital Resources We use secured borrowings, and intend to use in the future secured and unsecured borrowings. AtMarch 31, 2021 , our debt was approximately 57% of the value of our properties, as determined by the most recent valuations performed by an independent third-party appraiser as ofDecember 31, 2020 . Going forward, we expect that our borrowings (after debt amortization) will be approximately 55% to 60% of the value of our properties and other real estate-related assets. Under our charter, we are prohibited from borrowing in excess of 300% of the value of our net assets, which generally approximates to 75% of the aggregate cost of our assets, though we may exceed this limit only under certain circumstances. 65
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Our principal demand for funds will be to fund value-enhancement, a portion of development projects and other capital improvement projects, to pay operating expenses and interest on our outstanding indebtedness and to make distributions to our stockholders. Over time, we intend to generally fund our cash needs, other than asset acquisitions, from operations. Otherwise, we expect that our principal sources of working capital will include: •unrestricted cash balance, which was$242,291,317 as ofMarch 31, 2021 ; •various forms of secured and unsecured financing; •equity capital from joint venture partners; and •proceeds from our distribution reinvestment plan. Over the short term, we believe that our sources of capital, specifically our cash balances, cash flow from operations, our ability to raise equity capital from joint venture partners and our ability to obtain various forms of secured and unsecured financing will be adequate to meet our liquidity requirements and capital commitments. Over the longer term, in addition to the same sources of capital we will rely on to meet our short-term liquidity requirements, we may also conduct additional public or private offerings of our securities, refinance debt or dispose of assets to fund our operating activities, debt service, distributions and future property acquisitions and development projects. We expect these resources will be adequate to fund our ongoing operating activities as well as providing capital for investment in future development and other joint ventures along with potential forward purchase commitments. Credit Facilities Master Credit Facility OnJuly 31, 2018 , 16 of our indirect wholly-owned subsidiaries terminated the existing mortgage loans with their lenders for an aggregate principal amount of$479,318,649 and entered into the MCFA with the Facility Lender, for an aggregate principal amount of$551,669,000 . OnFebruary 11, 2020 , in connection with the financing ofPatina Flats at the Foundry (see Note 4 Real Estate to our consolidated financial statements in this Quarterly Report), we and the Facility Lender amended the MCFA to includePatina Flats at the Foundry and an unencumbered multifamily property owned by us as substitute collateral for three multifamily properties disposed of and released from the MCFA. We also increased our outstanding borrowings pursuant to the MCFA by$40,468,000 , a portion of which was attributable to the acquisition ofPatina Flats at the Foundry. The MCFA provides for four tranches: (1) a fixed rate loan in the aggregate principal amount of$331,001,400 that accrues interest at 4.43% per annum; (2) a fixed rate loan in the aggregate principal amount of$137,917,250 that accrues interest at 4.57% per annum; (3) a variable rate loan in the aggregate principal amount of$82,750,350 that accrues interest at the one-month London Interbank Offered Rate, or LIBOR, plus 1.70% per annum; and (4) a fixed rate loan in the aggregate principal amount of$40,468,000 that accrues interest at 3.34% per annum. The first three tranches have a maturity date ofAugust 1, 2028 , and the fourth tranche has a maturity date ofMarch 1, 2030 , unless, in each case, the maturity date is accelerated in accordance with the terms of the loan documents. Interest only payments are payable monthly throughAugust 1, 2025 andApril 1, 2027 on the first three tranches and fourth tranche, respectively, with interest and principal payments due monthly thereafter. We paid$2,072,480 in the aggregate in loan origination fees to the Facility Lender in connection with the refinancings, and paid our Former Advisor a loan coordination fee of$3,061,855 . PNC Master Credit Facility OnJune 17, 2020 , seven of our indirect wholly-owned subsidiaries, each a "Borrower" and collectively, the "Facility Borrowers", entered into the PNC MCFA with PNC Bank, for an aggregate principal amount of$158,340,000 . The PNC MCFA provides for two tranches: (1) a fixed rate loan in the aggregate principal amount of$79,170,000 that accrues interest at 2.82% per annum; and (2) a variable rate loan in the aggregate principal amount of$79,170,000 that accrues interest at the one-month LIBOR plus 2.135% per annum. If LIBOR is no longer posted through electronic transmission, is no longer available or, in PNC Bank's determination, is no longer widely accepted or has been replaced as the index for similar financial instruments, PNC Bank will choose a new index taking into account general comparability to LIBOR and other factors, including any adjustment factor to preserve the relative economic positions of theFacility Borrowers and PNC Bank with respect to any advances made pursuant to the PNC MCFA. We paid$633,360 in the aggregate in loan origination fees to PNC Bank in connection with the financings, and paid the Former Advisor a loan coordination fee of$791,700 . 66
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PART I - FINANCIAL INFORMATION (continued)
Revolving Credit Loan Facility OnJune 26, 2020 , we entered into a revolving credit loan facility, or the Revolver, with PNC Bank in an amount not to exceed$65,000,000 . The Revolver provides for advances, each, a "Revolver Loan", solely for the purpose of financing the costs in connection with acquisitions and development of real estate projects and for general corporate purposes (subject to certain debt service and loan to value requirements). The Revolver has a maturity date ofJune 26, 2023 , subject to extension, as further described in the loan agreement. Advances made under the Revolver are secured by the Landings atBrentwood property. We have the option to select the interest rate in respect of the outstanding unpaid principal amount of each Revolver Loan from the following options: (1) a fluctuating rate per annum equal to the sum of the daily LIBOR rate plus the daily LIBOR rate spread or (2) a fluctuating rate per annum equal to the base rate plus the alternate rate spread. No amounts were outstanding on the Revolver atMarch 31, 2021 . As ofMarch 31, 2021 andDecember 31, 2020 , the advances obtained and certain financing costs incurred under the MCFA, PNC MCFA and the Revolver, which is included in credit facilities, net, in the accompanying consolidated balance sheets, are summarized in the following table. Amount of
Advances as of
March 31, 2021
Principal balance on MCFA, gross$ 592,137,000 $ 592,137,000 Principal balance on PNC MCFA, gross 158,340,000 158,340,000 Deferred financing costs, net on MCFA(1) (3,320,332) (3,436,850) Deferred financing costs, net on PNC MCFA(2) (1,644,807) (1,689,935) Deferred financing costs, net on Revolver(3) (438,973) (487,329) Credit facilities, net$ 745,072,888 $ 744,862,886
_________________
(1)Accumulated amortization related to deferred financing costs in respect of the MCFA as ofMarch 31, 2021 andDecember 31, 2020 , was$1,414,783 and$1,298,265 , respectively. (2)Accumulated amortization related to deferred financing costs in respect of the PNC MCFA as ofMarch 31, 2021 andDecember 31, 2020 , was$144,412 and$99,283 , respectively. (3)As ofMarch 31, 2021 andDecember 31, 2020 , the principal outstanding balance on the Revolver was$0 and$0 , respectively. Accumulated amortization related to deferred financing costs in respect of the Revolver as ofMarch 31, 2021 andDecember 31, 2020 , was$149,905 and$101,549 , respectively. Construction loan OnOctober 16, 2019 , we entered into an agreement with PNC Bank, for a construction loan related to the development ofGarrison Station , a development project inMurfreesboro, TN , in an aggregate principal amount not to exceed$19,800,000 for a thirty-six month initial term and two twelve month mini-perm extensions. The rate of interest on the construction loan is daily LIBOR plus 2.00%, which then reduces to daily LIBOR plus 1.80% upon achieving completion as defined in the construction loan agreement and at a debt service coverage ratio of 1.15x. The loan includes a 0.4% fee at closing, a 0.1% fee upon exercising the mini-perm and a 0.1% fee upon extending the mini-perm, each payable to PNC Bank. There is an exit fee of 1% which will be waived if permanent financing is secured through PNC Bank or one of its affiliates. As ofMarch 31, 2021 andDecember 31, 2020 , the principal outstanding balance on the construction loan was$10,849,189 and$6,264,549 , respectively. Assumed Debt as a Result of the Completion of Mergers OnMarch 6, 2020 , upon consummation of the Mergers, we assumed all of SIR's and STAR III's obligations under the outstanding mortgage loans secured by 29 properties. We recognized the fair value of the assumed notes payable in the Mergers of$795,431,027 , which consists of the assumed principal balance of$791,020,471 and a net premium of$4,410,556 . 67
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PART I - FINANCIAL INFORMATION (continued)
The following is a summary of the terms of the assumed loans on the date of the
Mergers:
Interest Rate Range
Principal
Outstanding At
Type Number of Instruments Maturity Date Range Minimum Maximum Merger Date
1-Mo LIBOR +
Variable rate 2 1/1/2027 - 9/1/2027 1-Mo LIBOR + 2.195% 2.31% $ 64,070,000
Fixed rate 27 10/1/2022 - 10/1/2056 3.19% 4.66% 726,950,471
Assumed Principal
Mortgage Notes Payable 29 $ 791,020,471
Reference Rate Reform
In July 2017 , the Financial Conduct Authority announced it intended to stop
compelling banks to submit rates for the calculation of LIBOR after 2021. We are
monitoring the market transition from the LIBOR and other inter bank offered
rates to alternative reference rates, such as the secured overnight financing
rate, or SOFR, which we refer to as reference rate reform. For more information
on reference rate reform, see Note 2 (Summary of Significant Accounting
Pronouncements) to our consolidated financial statements in this Quarterly
Report for details. We identified the instruments influenced by LIBOR to be our
variable rate mortgage notes payable and interest rate cap agreements, a
majority of which, are expected to continue to use LIBOR through June 2023 or
beyond until lenders and other market participants finalize their transition
plans. Once transition plans are finalized, it is expected that SOFR will be
used. Given the nature of the expected changes to our interest rate cap
agreements (all of which mature by July 1 , 2023 and are not expected to
transition to SOFR) and variable rate mortgage notes payable, we expect to meet
the conditions of the practical expedients provided by the FASB and elect to not
apply the modification accounting requirements to its contracts affected by the
reference rate reform within the permitted period of December 31, 2022 .
Cash Flows Provided by Operating Activities
During the three months ended March 31, 2021 , net cash provided by operating
activities was $4,040,865 compared to cash provided by operating activities of
$5,191,753 for the three months ended March 31, 2020 . The decrease in our net
cash provided by operating activities was primarily due to an increase in cash
outflows from changes in operating assets and liabilities partially offset by a
decrease in net loss adjusted for non-cash items.
Cash Flows (Used in) Provided by Investing Activities
During the three months ended March 31, 2021 , net cash used in investing
activities was $10,150,230 compared to net cash provided by investing activities
of $51,575,593 during the three months ended March 31, 2020 . The decrease in net
cash provided by investing activities was primarily due to the decrease in cash
and restricted cash acquired in connection with the Mergers, net of transaction
costs, an increase in capital projects and a decrease in net proceeds received
from the sale of a real estate property partially offset by the decrease in the
acquisition of multifamily properties, the decrease in acquisition of land held
for the development of apartment homes and the decrease of escrow deposits for
pending real estate transactions, during the three months ended March 31, 2021 ,
compared to the same prior year period. Net cash used in investing activities
during the three months ended March 31, 2021 , consisted of the following:
•$4,818,069 of cash used for improvements to real estate investments;
•$5,732,099 of cash used for additions to real estate held for development;
•$412,138 of cash provided by proceeds from insurance claims; and
•$12,200 of cash used for interest rate cap agreements.
Cash Flows (Used in) Provided by Financing Activities
During the three months ended March 31, 2021 , net cash used in financing
activities was $19,462,847 compared to net cash provided by financing activities
of $28,434,479 during the three months ended March 31, 2020 . The decrease in net
cash provided by financing activities was primarily due to the decrease in
proceeds received from borrowing on our MCFA, an increase in distributions paid
to common stockholders due to the Mergers, an increase in principal payments on
mortgage notes payable and an increase in repurchases of our common stock during
the three months ended March 31, 2021 , compared to the three months ended
March 31, 2020 , partially offset by an increase in proceeds received from
issuance of a mortgage note
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payable and a decrease in payment of deferred financing costs during the three months endedMarch 31, 2021 , compared to the same prior year period. Net cash used in financing activities during the three months endedMarch 31, 2021 , consisted of the following: •$2,549,675 of net cash proceeds from issuance of a mortgage notes payable after a payment of$2,034,966 of principal payments on mortgage notes payable; •$18,012,522 of net cash distributions to our stockholders, after giving effect to distributions reinvested by stockholders of$4,600,603 ; and •$4,000,000 of cash paid for the repurchase of common stock. Contractual Commitments and Contingencies As ofMarch 31, 2021 , we had indebtedness totaling$2,131,926,238 , comprised of an aggregate principal amount of$2,140,356,568 , net deferred financing costs of$11,822,175 and net premiums of$3,391,845 . The following is a summary of our contractual obligations as ofMarch 31, 2021 :
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