Steadfast Apartment REIT, Inc. - FORM 10-Q - November 12, 2015

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EX-32.1 - EXHIBIT 32.1 - Steadfast Apartment REIT, Inc.ex321-star9302015.htm

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
 
 
 
þ     
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
For the quarterly period ended September 30, 2015
OR
 
 
 
o     
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
For the transition period from _________ to _________
Commission file number 000-55428
STEADFAST APARTMENT REIT, INC.
(Exact Name of Registrant as Specified in Its Charter)
 
 
 
Maryland
 
36-4769184
(State or Other Jurisdiction of
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)
 
 
 
18100 Von Karman Avenue,  Suite 500
 
 
Irvine, California
 
92612
(Address of Principal Executive Offices)
 
(Zip Code)
 (949) 852-0700
(Registrant’s Telephone Number, Including Area Code)
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 þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
 
Large Accelerated filer o
Accelerated filer o
 
 
Non-Accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
As of November 6, 2015, there were 30,140,512 shares of the Registrant’s common stock issued and outstanding.
 



STEADFAST APARTMENT REIT, INC.
INDEX
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

1

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements



STEADFAST APARTMENT REIT, INC.

CONSOLIDATED BALANCE SHEETS

 
September 30, 2015
 
December 31, 2014
 
(Unaudited)
 
 
ASSETS
Assets:
 
 
 

Real Estate:
 
 
 
Land
$
104,706,656

 
$
34,558,732

Building and improvements
814,066,819

 
234,259,502

Tenant origination and absorption costs
12,496,253

 
5,578,528

Total real estate, cost
931,269,728

 
274,396,762

Less accumulated depreciation and amortization
(20,361,293
)
 
(4,409,133
)
Total real estate, net
910,908,435

 
269,987,629

Cash and cash equivalents
49,952,282

 
28,595,826

Restricted cash
13,360,728

 
2,792,589

Rents and other receivables
2,780,924

 
2,056,147

Deferred financing costs and other assets, net
12,219,066

 
3,038,306

Total assets
$
989,221,435

 
$
306,470,497

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
 
 
 

Accounts payable and accrued liabilities
$
16,210,919

 
$
3,386,648

Notes payable:
 
 
 
Mortgage notes payable
552,810,019

 
196,930,600

Revolving credit facility
114,600,000

 
—

Total notes payable
667,410,019

 
196,930,600

Distributions payable
1,965,054

 
608,904

Due to affiliates
1,642,295

 
1,499,869

Total liabilities
687,228,287

 
202,426,021

Commitments and contingencies (Note 9)

 

Redeemable common stock
6,257,053

 
660,089

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; 999,999,000 shares authorized, 27,577,172 and 9,179,536 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively
275,772

 
91,795

Convertible stock, $0.01 par value per share; 1,000 shares authorized, issued and outstanding as of September 30, 2015 and December 31, 2014, respectively
10

 
10

Additional paid-in capital
355,334,812

 
117,443,760

Cumulative distributions and net losses
(59,874,499
)
 
(14,151,178
)
Total stockholders’ equity
295,736,095

 
103,384,387

Total liabilities and stockholders’ equity
$
989,221,435

 
$
306,470,497

 
See accompanying notes to consolidated financial statements.

2

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

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Revenues:
 
 
 
 
 
 
 
Rental income
$
18,010,874

 
$
1,601,385

 
$
36,487,551

 
$
1,785,964

Tenant reimbursements and other
2,181,812

 
138,663

 
4,199,702

 
146,948

Total revenues
20,192,686

 
1,740,048

 
40,687,253

 
1,932,912

Expenses:
 
 
 
 
 
 
 
Operating, maintenance and management
5,607,063

 
441,824

 
11,082,156

 
498,382

Real estate taxes and insurance
2,239,371

 
284,297

 
5,270,842

 
304,649

Fees to affiliates
7,751,727

 
953,666

 
17,335,703

 
1,713,203

Depreciation and amortization
12,493,027

 
1,204,076

 
25,562,812

 
1,354,372

Interest expense
4,086,542

 
287,399

 
7,938,509

 
405,468

General and administrative expenses
610,641

 
486,056

 
2,018,031

 
1,075,227

Acquisition costs
1,624,174

 
515,705

 
4,662,394

 
940,535

Total expenses
34,412,545

 
4,173,023

 
73,870,447

 
6,291,836

Net loss
$
(14,219,859
)
 
$
(2,432,975
)
 
$
(33,183,194
)
 
$
(4,358,924
)
Loss per common share — basic and diluted
$
(0.58
)
 
$
(0.86
)
 
$
(1.78
)
 
$
(3.56
)
Weighted average number of common shares outstanding — basic and diluted
24,641,077

 
2,833,846

 
18,654,201

 
1,224,298

Distributions declared per share
$
0.227

 
$
0.227

 
$
0.673

 
$
0.436

 
See accompanying notes to consolidated financial statements.

3

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

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2014 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 (Unaudited)
 
 
 
Common Stock
 
Convertible Stock
 
Additional
Paid-In Capital
 
Cumulative Distributions & Net Losses
 
Total
Stockholders’ Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
BALANCE, December 31, 2013
 
13,500

 
$
135

 
1,000

 
$
10

 
$
203,355

 
$
(86,644
)
 
$
116,856

Issuance of common stock
 
9,166,036

 
91,660

 
—

 
—

 
136,296,232

 
—

 
136,387,892

Commissions on sales of common stock and related dealer manager fees to affiliates
 
—

 
—

 
—

 
—

 
(12,789,627
)
 
—

 
(12,789,627
)
Transfers to redeemable common stock
 
—

 
—

 
—

 
—

 
(693,640
)
 
—

 
(693,640
)
Other offering costs to affiliates
 
—

 
—

 
—

 
—

 
(5,667,857
)
 
—

 
(5,667,857
)
Distributions declared
 
—

 
—

 
—

 
—

 
—

 
(2,224,079
)
 
(2,224,079
)
Amortization of stock-based compensation
 
—

 
—

 
—

 
—

 
95,297

 
—

 
95,297

Net loss
 
—

 
—

 
—

 
—

 
—

 
(11,840,455
)
 
(11,840,455
)
BALANCE, December 31, 2014
 
9,179,536

 
91,795

 
1,000

 
10

 
117,443,760

 
(14,151,178
)
 
103,384,387

Issuance of common stock
 
18,411,137

 
184,112

 
—

 
—

 
274,664,530

 
—

 
274,848,642

Commissions on sales of common stock and related dealer manager fees to affiliates
 
—

 
—

 
—

 
—

 
(26,025,010
)
 
—

 
(26,025,010
)
Transfers to redeemable common stock
 
—

 
—

 
—

 
—

 
(5,640,163
)
 
—

 
(5,640,163
)
Redemption of common stock
 
(13,501
)
 
(135
)
 
—

 
—

 
(202,182
)
 
—

 
(202,317
)
Other offering costs to affiliates
 
—

 
—

 
—

 
—

 
(4,969,605
)
 
—

 
(4,969,605
)
Distributions declared
 
—

 
—

 
—

 
—

 
—

 
(12,540,127
)
 
(12,540,127
)
Amortization of stock-based compensation
 
—

 
—

 
—

 
—

 
63,482

 
—

 
63,482

Net loss
 
—

 
—

 
—

 
—

 
—

 
(33,183,194
)
 
(33,183,194
)
BALANCE, September 30, 2015
 
27,577,172

 
$
275,772

 
1,000

 
$
10

 
$
355,334,812

 
$
(59,874,499
)
 
$
295,736,095

 
See accompanying notes to consolidated financial statements.

4

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

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Nine Months Ended September 30,
 
2015
 
2014
Cash Flows from Operating Activities:
 
 
 

Net loss
$
(33,183,194
)
 
$
(4,358,924
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
25,562,812

 
1,354,372

Amortization of deferred financing costs
220,287

 
11,520

Amortization of stock-based compensation
63,482

 
81,230

Change in fair value of interest rate cap agreements
2,206,162

 
140,339

Bad debt expense
420,340

 
7,613

Changes in operating assets and liabilities:
 
 
 
Restricted cash for operating activities
(9,846,842
)
 
(900,706
)
Rents and other receivables
(1,558,829
)
 
(28,566
)
Other assets
(1,214,660
)
 
(292,011
)
Accounts payable and accrued liabilities
12,304,416

 
1,795,234

Due to affiliates, net
(598,782
)
 
460,036

Net cash used in operating activities
(5,624,808
)
 
(1,729,863
)
Cash Flows from Investing Activities:
 
 
 
Acquisition of real estate investments
(617,662,481
)
 
(85,518,265
)
Additions to real estate investments
(8,323,406
)
 
(107,630
)
Escrow deposits for pending real estate acquisitions
(20,073,700
)
 
(3,931,200
)
Restricted cash for investing activities
(721,297
)
 
(167,024
)
Purchase of interest rate cap agreements
(2,248,826
)
 
(502,483
)
Cash used in investing activities
(649,029,710
)
 
(90,226,602
)
Cash Flows from Financing Activities:
 
 
 
Proceeds from issuance of mortgage notes payable
331,070,500

 
60,970,000

Borrowings from revolving credit facility
114,600,000

 
—

Proceeds from issuance of common stock
269,681,317

 
60,905,353

Payments of commissions on sale of common stock and related dealer manager fees
(26,025,010
)
 
(5,649,279
)
Reimbursement of other offering costs to affiliates
(4,228,397
)
 
(3,388,203
)
Payment of deferred financing costs
(3,543,623
)
 
(498,240
)
Distributions to common stockholders
(5,341,496
)
 
(328,594
)
Redemptions of common stock
(202,317
)
 
—

Net cash provided by financing activities
676,010,974

 
112,011,037

Net increase in cash and cash equivalents
21,356,456

 
20,054,572

Cash and cash equivalents, beginning of period
28,595,826

 
203,500

Cash and cash equivalents, end of period
$
49,952,282

 
$
20,258,072


5

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

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)

 
Nine Months Ended September 30,
 
2015
 
2014
Supplemental Disclosures of Cash Flow Information:
 
 
 
Interest paid
$
4,632,711

 
$
146,120

Supplemental Disclosures of Noncash Transactions:
 
 
 
Increase in distributions payable
$
1,356,150

 
$
271,654

Application of escrow deposits to acquire real estate
$
15,473,600

 
$
1,545,985

Assumption of mortgage notes payable to acquire real estate
$
24,808,919

 
$
—

Increase in amounts receivable from transfer agent
$
—

 
$
441,030

Increase in amounts payable to affiliates for other offering costs
$
741,208

 
$
121,593

Distributions paid to common stockholders through common stock issuances pursuant to the distribution reinvestment plan
$
5,842,481

 
$
200,556

Increase in redeemable common stock
$
5,640,163

 
$
200,556

Increase in redemptions payable
$
43,199

 
$
—

Increase in accounts payable and accrued liabilities from additions to real estate investments
$
476,656

 
$
—

 
See accompanying notes to consolidated financial statements.

6

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)


1.         Organization and Business
Steadfast Apartment REIT, Inc. (the “Company”) was formed on August 22, 2013, as a Maryland corporation that has 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”) as described in Note 6.
Substantially all of the Company’s business is conducted through Steadfast Apartment REIT Operating Partnership, L.P. (the “Operating Partnership”), a Delaware limited partnership formed on August 27, 2013. The Company is the general partner of the Operating Partnership. The Company and Steadfast Apartment REIT Limited Partner, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company, entered into a Limited Partnership Agreement (the “Partnership Agreement”) on September 3, 2013. As the Company accepts subscriptions for shares of its common stock, the Company transfers substantially all of the net offering proceeds from its Public Offering (defined below) to the Operating Partnership as a contribution in exchange for partnership interests and the Company’s percentage ownership in the Operating Partnership increases proportionately.
As of September 30, 2015, the Company owned 24 multifamily properties comprising a total of 7,891 apartment homes. For more information on the Company’s real estate portfolio, see Note 3.
Public Offering
On December 30, 2013, the Company commenced its initial public offering pursuant to a registration statement on Form S-11, filed with the Securities and Exchange Commission (the “SEC”), 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 may, from time to time, in its sole discretion, change the price at which the Company offers shares to the public in the Primary Offering or 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. The Company may reallocate shares of common stock registered in the Public Offering between the Primary Offering and the DRP.
Pursuant to the terms of the Public Offering, offering proceeds were held in an escrow account until the Company raised the minimum offering amount of $2,000,000. On February 27, 2014, the Company raised the minimum offering amount and the offering proceeds held in escrow were released to the Company. As of September 30, 2015, the Company had sold 27,557,178 shares of common stock in the Public Offering for gross proceeds of $411,236,534. The Company will continue to offer shares of the Company’s common stock in the Public Offering until March 25, 2016, or the date the maximum offering amount has been sold. The Company reserves the right to terminate the Public Offering at any time.
The Company intends to use substantially all of the net proceeds from the Public Offering to invest in and manage a diverse portfolio of multifamily properties located in targeted markets throughout the United States. In addition to the Company’s focus on multifamily properties, the Company may also make selective strategic acquisitions of other types of commercial properties. The Company may also acquire or originate mortgage, mezzanine, bridge and other real estate loans and equity securities of other real estate companies. 

7

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

The business of the Company is externally managed by the Advisor, pursuant to the Advisory Agreement dated December 13, 2013, by and among the Company, the Operating Partnership and the Advisor (as amended, the “Advisory Agreement”). The Advisory Agreement is subject to annual renewal by the Company’s board of directors.  The current term of the Advisory Agreement expires on December 13, 2016. Subject to certain restrictions and limitations, the Advisor manages the Company’s day-to-day operations, manages the Company’s portfolio of properties and real estate-related assets, 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 advisory services to the Company on behalf of the Advisor. The Company has retained Steadfast Capital Markets Group, LLC (the “Dealer Manager”), an affiliate of the Company, to serve as the dealer manager for the Public Offering. The Dealer Manager is responsible for marketing the Company’s shares of common stock being offered pursuant to the Public Offering. The Advisor, along with the Dealer Manager, also provides offering services, marketing, investor relations and other administrative services on the Company’s behalf. 
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 of 1986, as amended (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 will pay all of the Company’s administrative costs and expenses, and such expenses will be treated as expenses of the Operating Partnership.
The Company commenced its real estate operations on May 22, 2014, upon acquiring a fee simple interest in a multifamily property located in Spring Hill, Tennessee.
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, 2014. 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, 2014 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 16, 2015. 
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of the Company, the 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 and nine months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. 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, 2014.

8

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

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.
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.
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 - 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 deferred financing costs and 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.

9

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

The following table reflects the Company’s assets required to be measured at fair value on a recurring basis on the consolidated balance sheets:
 
 
September 30, 2015
 
 
Fair Value Measurements Using
 
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
  Interest rate cap agreements
 
$
—

 
$
691,078

 
$
—

 
 
December 31, 2014
 
 
Fair Value Measurements Using
 
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
  Interest rate cap agreements
 
$
—

 
$
648,414

 
$
—

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, due to affiliates and notes payable.
The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables and accounts payable and accrued liabilities 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 are classified as Level 3 within the fair value hierarchy.
The fair value of the notes payable is estimated using a discounted cash flow analysis using borrowing rates available to the Company for debt instruments with similar terms and maturities. As of September 30, 2015 and December 31, 2014, the fair value of the notes payable was $641,535,193 and $191,983,420, respectively, compared to the carrying value of $667,410,019 and $196,930,600, respectively.
Distribution Policy
The Company elected to be taxed 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). On April 4, 2014, the Company’s board of directors declared a dividend which began to accrue on April 7, 2014. Distributions paid during the nine months ended September 30, 2015 were based on daily record dates and calculated at a rate of $0.002466 per share per day. Each day during the period from January 1, 2015 to September 30, 2015 was a record date for distributions. 

10

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to qualify as a REIT under the Internal Revenue Code. During the three and nine months ended September 30, 2015, the Company declared distributions totaling $0.227 and $0.673 per share of common stock, respectively. During the three and nine months ended September 30, 2014, the Company declared distributions totaling $0.227 and $0.436 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 assumes each share was issued and outstanding each day during the period. Nonvested shares of the Company’s restricted common stock give rise to potentially dilutive shares of the Company’s common stock but such shares were excluded from the computation of diluted earnings per share because such shares were anti-dilutive during the period.
Segment Disclosure
The Company has determined that it has 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, tenants and products and services, its assets have been aggregated into one reportable segment.
Recent Accounting Pronouncements
In May 2014, the FASB issued Accounting Standard Updates (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). The new guidance requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new guidance supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification. The new guidance does not apply to lease contracts within the scope of Leases (Topic 840). In July 2015, the FASB decided to delay the effective date of the new guidance by one year, which will result in the new guidance being effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and is to be applied retrospectively. Early adoption is permitted, but can be no earlier than the original public entity effective date of fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company is still evaluating the impact of adopting the new guidance on its financial statements, but does not expect the adoption to have a material impact on its financial statements.
In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, that requires management to evaluate whether there are conditions and events that raise substantial doubt about an entity’s ability to continue as a going concern. Until now, the requirement to perform a going concern evaluation existed only in auditing standards. The new guidance requires management to evaluate relevant conditions, events and certain management plans that are known or reasonably knowable as of the evaluation date when determining whether substantial doubt about an entity’s ability to continue as a going concern exists. Management will be required to make this evaluation for both annual and interim reporting periods. The standard states substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. The guidance is effective for annual periods ending after December 15, 2016 and for annual periods and interim periods thereafter. Early adoption is permitted. The Company does not expect there to be a material impact from adopting this new guidance.

11

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

In January 2015, the FASB issued ASU 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, that eliminates the concept of the extraordinary items from GAAP. The objective of the new guidance is to simplify the income statement presentation requirements of GAAP. Eliminating the extraordinary classification simplifies income statement presentation by altogether removing the concept of extraordinary items from consideration. The guidance is effective for annual periods, including interim periods within that period, beginning after December 15, 2015. Early adoption is permitted. The Company does not expect there to be a material impact from adopting this new guidance.
In February 2015, the FASB issued ASU 2015-02, Consolidation, that provides amendments to the consolidation analysis. The amendments in this new guidance affect reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. The guidance is effective for annual periods, including interim periods within that period, beginning after December 15, 2015. Early adoption is permitted. The Company does not expect there to be a material impact from adopting this new guidance.
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, as amended in August 2015 by ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, that will require that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of a debt liability, consistent with debt discounts or premiums. The FASB will permit debt issuance costs related to line-of-credit arrangements to be deferred and presented as an asset and subsequently amortized over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The recognition and measurement guidance for debt issuance costs will not be affected by the new guidance. The guidance requires retrospective application and is effective for annual periods, including interim periods within that period, beginning after December 15, 2015. Early adoption is permitted. Upon adoption, the Company will reclassify debt issuance costs from deferred financing costs and other assets, net to notes payable on the consolidated balance sheet.
3.          Real Estate
As of September 30, 2015, the Company owned 24 multifamily properties comprising a total of 7,891 apartment homes. The total acquisition price of the Company’s real estate portfolio was $932,509,250. As of September 30, 2015 and December 31, 2014, the Company’s portfolio was approximately 94.3% and 94.2% occupied and the average monthly rent was $1,000 and $884, respectively.

12

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

Current Year Acquisitions
During the nine months ended September 30, 2015, the Company acquired the following properties:
 
 
 
 
 
 
 
 
Purchase Price Allocation
Property Name
 
Location
 
Purchase Date
 
Units
 
Land
 
Buildings and Improvements
 
Tenant Origination and Absorption Costs
 
Other Accounts Receivable
 
Total Purchase Price
Columns on Wetherington
 
Florence, KY
 
2/26/2015
 
192

 
$
1,276,787

 
$
23,172,820

 
$
550,393

 
$
—

 
$
25,000,000

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

 
5,813,218

 
43,594,089

 
1,592,693

 
—

 
51,000,000

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

 
1,607,980

 
16,933,827

 
658,193

 
—

 
19,200,000

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

 
3,299,502

 
25,458,315

 
480,739

 
261,444

 
29,500,000

Randall Highlands Apartments
 
North Aurora, IL
 
3/31/2015
 
146

 
2,499,350

 
28,865,543

 
750,107

 
—

 
32,115,000

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

 
1,697,036

 
7,772,323

 
180,641

 
—

 
9,650,000

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

 
3,599,586

 
12,563,661

 
286,753

 
—

 
16,450,000

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

 
7,747,295

 
62,446,959

 
1,805,746

 
—

 
72,000,000

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

 
5,895,389

 
30,901,144

 
803,467

 
—

 
37,600,000

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

 
7,219,143

 
44,787,119

 
1,393,738

 
—

 
53,400,000

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

 
7,553,349

 
57,517,403

 
1,729,248

 
—

 
66,800,000

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

 
2,517,886

 
36,060,358

 
901,756

 
—

 
39,480,000

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

 
3,941,458

 
33,550,081

 
1,008,461

 
—

 
38,500,000

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

 
4,054,337

 
27,615,674

 
929,989

 
—

 
32,600,000

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

 
3,938,677

 
41,017,607

 
1,243,716

 
—

 
46,200,000

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

 
5,386,400

 
45,510,628

 
1,302,972

 
—

 
52,200,000

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

 
2,100,531

 
33,239,703

 
909,766

 
—

 
36,250,000

 
 
 
 
 
 
5,396

 
$
70,147,924

 
$
571,007,254

 
$
16,528,378

 
$
261,444

 
$
657,945,000


13

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

As of September 30, 2015 and December 31, 2014, accumulated depreciation and amortization related to the Company’s consolidated real estate properties and related intangibles were as follows:
 
 
September 30, 2015
 
 
Assets
 
 
Land
 
Building and Improvements
 
Tenant Origination and Absorption
 
Total Real Estate
Investments in real estate
 
$
104,706,656

 
$
814,066,819

 
$
12,496,253

 
$
931,269,728

Less: Accumulated depreciation and amortization
 
—

 
(15,740,214
)
 
(4,621,079
)
 
(20,361,293
)
Net investments in real estate and related lease intangibles
 
$
104,706,656

 
$
798,326,605

 
$
7,875,174

 
$
910,908,435

 
 
December 31, 2014
 
 
Assets
 
 
Land
 
Building and Improvements
 
Tenant Origination and Absorption
 
Total Real Estate
Investments in real estate
 
$
34,558,732

 
$
234,259,502

 
$
5,578,528

 
$
274,396,762

Less: Accumulated depreciation and amortization
 
—

 
(2,206,072
)
 
(2,203,061
)
 
(4,409,133
)
Net investments in real estate and related lease intangibles
 
$
34,558,732

 
$
232,053,430

 
$
3,375,467

 
$
269,987,629

Depreciation and amortization expense was $12,493,027 and $25,562,812 for the three and nine months ended September 30, 2015, and $1,204,076 and $1,354,372 for the three and nine months ended September 30, 2014, respectively.
Depreciation of the Company’s buildings and improvements was $6,786,834 and $13,534,142 for the three and nine months ended September 30, 2015, and $485,661 and $540,747 for the three and nine months ended September 30, 2014, respectively.
Amortization of the Company’s tenant origination and absorption costs was $5,706,193 and $12,028,670 for the three and nine months ended September 30, 2015, and $718,415 and $813,625 for the three and nine months ended September 30, 2014, respectively. Tenant origination and absorption costs had a weighted-average amortization period as of the date of acquisition of less than one year.
Operating Leases
As of September 30, 2015, the Company’s real estate portfolio comprised 7,891 residential units and was 94.3% occupied by a diverse group of residents. The residential lease terms consist of lease durations equal to twelve months or less.
Some residential leases contain provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in accounts payables and accrued liabilities in the accompanying consolidated balance sheets and totaled $1,691,451 and $459,707 as of September 30, 2015 and December 31, 2014, respectively.

14

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)


As of September 30, 2015 and 2014, no tenant represented over 10% of the Company’s annualized base rent.
4.          Deferred Financing Costs and Other Assets
As of September 30, 2015 and December 31, 2014, deferred financing costs and other assets, net of accumulated amortization, consisted of:
 
September 30, 2015
 
December 31, 2014
Deferred financing costs
$
4,862,064

 
$
1,318,441

Less: accumulated amortization
(259,532
)
 
(39,245
)
 
4,602,532

 
1,279,196

Prepaid expenses
1,135,450

 
360,316

Interest rate cap agreements
691,078

 
648,414

Escrow deposits for pending real estate acquisitions
5,100,100

 
500,000

Other deposits
689,906

 
250,380

 
$
12,219,066

 
$
3,038,306

5.          Debt
Mortgage Notes Payable
The following is a summary of mortgage notes payable secured by real property as of September 30, 2015 and December 31, 2014.
 
 
September 30, 2015
 
 
 
 
 
 
Interest Rate Range
 
Weighted Average Interest Rate
 
 
Type
 
Number of Instruments
 
Maturity Date Range
 
Minimum
 
Maximum
 
 
Principal Outstanding
Variable rate(1)
 
19
 
12/1/2021 - 9/1/2025
 
1-Mo LIBOR + 1.68%

 
1-Mo LIBOR + 2.48%

 
2.23%
 
$
528,001,100

Fixed rate
 
1
 
5/1/2054
 
4.34
%
 
4.34
%
 
4.34%
 
24,808,919

 
 
20
 
 
 
 
 
 
 
2.33%
 
$
552,810,019

 
 
December 31, 2014
 
 
 
 
 
 
Interest Rate Range
 
Weighted Average Interest Rate
 
 
Type
 
Number of Instruments
 
Maturity Date Range
 
Minimum
 
Maximum
 
 
Principal Outstanding
Variable rate(1)
 
7
 
12/1/2021 - 11/1/2024
 
1-Mo LIBOR + 1.70%
 
1-Mo LIBOR + 2.13%
 
1.99%
 
$
196,930,600

___________

15

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

(1)
See Note 10 for a discussion of the interest rate cap agreements used to manage the exposure to interest rate movement on the Company’s variable rate loans.
Revolving Credit Facility
On August 26, 2015, the Company entered into a revolving credit facility (the “Credit Facility”) with PNC Bank, National Association (“PNC Bank”) which provides for advances to purchase properties or refinance existing properties from time to time in an amount not to exceed $200,000,000 during 2015 (subject to certain debt service and loan to value requirements). During 2016, the maximum amount that may be drawn under the Credit Facility may be increased up to $350,000,000, as further described in the Credit Agreement (the “Credit Agreement”) entered into by certain of the Company’s wholly-owned subsidiaries with PNC Bank in connection with the property acquisitions. For each advance drawn under the Credit Facility, an Addition Fee, as defined in the Credit Agreement, is incurred. The Credit Facility has a maturity date of September 1, 2020, subject to extension (the “Maturity Date”). Advances made under the Credit Facility will be secured by the property for which such advances are used (each a “Loan”), as evidenced by the Credit Agreement, Multifamily Loan and Security Agreement (the “Loan Agreement”), the Multifamily Revolving Credit Note (the “Note”) and a Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (the “Mortgage”) and a Guaranty from the Company (as described below, the “Guaranty,” together with the Credit Agreement, the Loan Agreement, the Note and the Mortgage, the “Loan Documents”). Each Loan will be purchased from PNC Bank by the Federal Home Loan Mortgage Corporation (“Freddie Mac”).
As of September 30, 2015, the advances obtained under the Credit Facility are summarized in the following table. Each property is pledged as collateral for repayment of amounts advanced under the Credit Facility.
Collateralized Property
 
Date of Advance
 
Amount of Advance
Delano at North Richland Hills
 
August 26, 2015
 
$
28,875,000

Meadows at North Richland Hills
 
August 26, 2015
 
24,450,000

Reveal on Cumberland
 
September 3, 2015
 
22,125,000

Monticello by the Vineyard
 
September 23, 2015
 
39,150,000

 
 
 
 
$
114,600,000

Monthly interest payments on the outstanding principal balances of the Loans accrue at the one-month London Interbank Offered Rate (LIBOR) plus (1) the servicing spread of 0.05% and (2) the net spread, based on the debt service coverage ratio, of between 1.80% and 2.10%, as further described in the applicable Notes, and are due and payable on the first date of each month until the Maturity Date. The entire outstanding principal balance and any accrued and unpaid interest on the Loans are due and payable in full on the Maturity Date. The interest rate was 2.34% as of September 30, 2015. In addition to monthly interest payments, an unused commitment fee equal to 0.1% of the average daily difference between the amount of (i) the commitment and (ii) the maximum facility available is due and payable monthly. Additionally, an unused capacity fee equal to 1.0% of the average daily difference between the amount of the (i) maximum facility available and (ii) the outstanding borrowing tranches, each as defined in the Credit Agreement, is due and payable monthly. Upon the second anniversary of each advance pursuant to the Credit Facility, a seasoning fee equal to 0.25% of such advance is due and payable monthly. The seasoning fee will increase by 0.25% on each subsequent anniversary until the Maturity Date.
The following is a summary of the Company’s aggregate maturities as of September 30, 2015:
 
 
 
 
 
 
Maturities During the Years Ending December 31,
 
 
Contractual Obligations
 
Total
 
Remainder of 2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
Principal payments on outstanding debt
 
$
667,410,019

 
$
77,165

 
$
238,436

 
$
335,561

 
$
2,147,927

 
$
3,975,393

 
$
660,635,537


16

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

The Company’s notes payable contain customary financial and non-financial debt covenants. As of September 30, 2015, the Company was in compliance with all financial and non-financial debt covenants.
For the three and nine months ended September 30, 2015, the Company incurred interest expense of $4,086,542 and $7,938,509, respectively. Interest expense for the three and nine months ended September 30, 2015 includes amortization of deferred financing costs of $117,487 and $220,287, net unrealized losses from the change in fair value of interest rate cap agreements of $1,038,080 and $2,206,162 and credit facility commitment fees of $11,968 and $11,968, respectively.
For the three and nine months ended September 30, 2014, the Company incurred interest expense of $287,399 and $405,468, respectively. Interest expense for the three and nine months ended September 30, 2014 includes amortization of deferred financing costs of $9,151 and $11,520 and net unrealized losses from the change in fair value of interest rate cap agreements of $57,127 and $140,339, respectively.
Interest expense of $1,164,744 and $285,395 was payable as of September 30, 2015 and December 31, 2014, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.
6.         Stockholders’ Equity
 General
Under the Company’s Articles of Amendment and Restatement (the “Charter”), the total number of shares of capital stock authorized for issuance is 1,100,000,000 shares, consisting of 999,999,000 shares of common stock with a par value of $0.01 per share, 1,000 shares of convertible stock with a par value of $0.01 per share and 100,000,000 shares designated as preferred stock with a par value of $0.01 per share.
Common Stock
The shares of the Company’s common stock entitle the holders to one vote per share on all matters upon which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law. The common stock has no preferences or preemptive, conversion or exchange rights.
On September 3, 2013, the Company issued 13,500 shares of common stock to the Sponsor for $202,500. From inception through September 30, 2015, the Company had issued 27,557,178 shares of common stock in its Public Offering for offering proceeds of $361,784,435, including 458,675 shares of common stock issued pursuant to the DRP for total proceeds of $6,536,120, net of offering costs of $49,452,099. The offering costs primarily consist of selling commissions and dealer manager fees. Offering proceeds include $1,104,462 and $1,779,618 of amounts due from the Company’s transfer agent as of September 30, 2015 and December 31, 2014, respectively, which are included in rents and other receivables in the accompanying consolidated balance sheets.
On February 27, 2014, the Company granted 3,333 shares of restricted common stock to each of its three independent directors pursuant to the Company’s independent directors’ compensation plan at a fair value of $15.00 per share in connection with the Company raising $2,000,000 in the Public Offering. On both August 7, 2014 and August 13, 2015, the Company granted 1,666 shares of restricted common stock to each of its three independent directors pursuant to the Company’s independent directors’ compensation plan at a fair value of $15.00 per share as compensation for services in connection with their re-election to the board of directors at the Company’s annual meeting of stockholders. The shares of restricted common stock vest and become non-forfeitable in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant or will become fully vested and become non-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company.

17

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

The issuance and vesting activity for the nine months ended September 30, 2015 and year ended December 31, 2014 for the restricted stock issued to the Company’s independent directors as compensation for services in connection with the Company raising $2,000,000 in the Public Offering and the independent directors’ re-election to the board of directors at the Company’s 2014 and 2015 annual meetings is as follows:
 
 
Nine Months Ended September 30, 2015
 
Year Ended December 31, 2014
Nonvested shares at the beginning of the period
 
11,248

 
—

Granted shares
 
4,998

 
14,997

Vested shares
 
(4,999
)
 
(3,749
)
Nonvested shares at the end of the period
 
11,247

 
11,248

Included in general and administrative expenses is $35,348 and $63,482 for the three and nine months ended September 30, 2015 and $30,967 and $81,230 for the three and nine months ended September 30, 2014, respectively, for compensation expense related to the issuance of restricted common stock. The weighted average remaining term of the restricted common stock was 1.33 years years as of September 30, 2015. As of September 30, 2015, no shares of restricted common stock issued to the independent directors have been forfeited.
Convertible Stock
The Company issued 1,000 shares of Convertible Stock to the Advisor for $1,000. The Convertible Stock will convert into shares of common stock if and when: (A) the Company has made total distributions on the then-outstanding shares of its common stock equal to the original issue price of those shares plus an aggregate 6.0% cumulative, non-compounded, annual return on the original issue price of those shares, (B) the Company lists its common stock for trading on a national securities exchange, or (C) the Advisory Agreement is terminated or not renewed (other than for “cause” as defined in the Advisory Agreement). In the event of a termination or non-renewal of the Advisory Agreement for cause, all of the shares of the Convertible Stock will be redeemed for $1.00. In general, each share of Convertible Stock will convert into a number of shares of common stock equal to 1/1000 of the quotient of (A) 15% of the excess of (1) the Company’s “enterprise value” plus the aggregate value of distributions paid to date on the then outstanding shares of the Company’s common stock over (2) the aggregate purchase price paid by stockholders for those outstanding shares of common stock plus an aggregated 6.0% cumulative, non-compounded, annual return on the original issue price of those outstanding shares, divided by (B) the Company’s enterprise value divided by the number of outstanding shares of common stock on an as-converted basis, in each case calculated as of the date of the conversion.
Preferred Stock
The Charter also provides the Company’s board of directors with the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such shares of preferred stock, the board of directors shall have the power from time to time to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares of preferred stock. The Company’s board of directors is authorized to amend the Charter without the approval of the stockholders to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue. As of September 30, 2015 and December 31, 2014, no shares of the Company’s preferred stock were issued and outstanding.

18

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

Distribution Reinvestment Plan
The Company’s board of directors has approved the DRP through which common stockholders may elect to reinvest an amount equal to the distributions declared on their shares of common stock in additional shares of the Company’s common stock in lieu of receiving cash distributions. The purchase price per share under the DRP is $14.25. The Company’s board of directors may, in its sole discretion, from time to time, change this price based upon changes in the Company’s estimated value per share, the then current price of shares of the Company’s common stock offered in the Public Offering and other factors that the Company’s board of directors deems relevant.
No sales commissions or dealer manager fees are payable on shares sold through the DRP. The Company’s board of directors may amend, suspend or terminate the DRP at its discretion at any time upon ten days notice to the Company’s stockholders. Following any termination of the DRP, all subsequent distributions to stockholders will be made in cash.
Share Repurchase Plan and Redeemable Common Stock
The Company’s share repurchase plan may provide an opportunity for stockholders to have their shares of common stock repurchased by the Company, subject to certain restrictions and limitations. No shares can be repurchased under the Company’s share repurchase plan until after the first anniversary of the date of purchase of such shares; provided, however, that this holding period shall not apply to repurchases requested within two years after the death or disability of a stockholder.
Prior to the date the Company publishes an estimated value per share of its common stock, the purchase price for shares repurchased under the Company’s share repurchase plan will be as follows:
Share Purchase Anniversary
 
Repurchase Price
on Repurchase Date(1)
Less than 1 year
 
No Repurchase Allowed
1 year
 
92.5% of Purchase Price
2 years
 
95.0% of Purchase Price
3 years
 
97.5% of Purchase Price
4 years
 
100.0% of Purchase Price
In the event of a stockholder’s death or disability(2)
 
Average Issue Price for Shares(3)
Following the date the Company publishes an estimated value per share of its common stock, the purchase price for shares repurchased under the Company’s share repurchase plan will be as follows:
Share Purchase Anniversary
 
Repurchase Price
on Repurchase Date(1)
Less than 1 year
 
No Repurchase Allowed
1 year
 
92.5% of Estimated Value per Share(4)
2 years
 
95.0% of Estimated Value per Share(4)
3 years
 
97.5% of Estimated Value per Share(4)
4 years
 
100.0% of Estimated Value per Share(4)
In the event of a stockholder’s death or disability(2)
 
Average Issue Price for Shares(3)
________________
(1) 
As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock. Repurchase price includes the full amount paid for each share, including all sales commissions and dealer manager fees. 

19

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

(2)
The required one year holding period to be eligible to redeem shares under the Company’s share repurchase plan does not apply in the event of death or disability of a stockholder.
(3)
The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares.
(4)
The Company’s board of directors will determine an estimated value per share of the Company’s common stock based on valuations by independent third-party appraisers or qualified valuation experts. Pursuant to current rules and regulations, the Company will establish an estimated value per share no later than 150 days following the second anniversary of breaking escrow in the Public Offering, or such earlier date as may be determined by the board of directors.
The purchase price per share for shares repurchased pursuant to the Company’s share repurchase plan will be further reduced by the aggregate amount of net proceeds per share, if any, distributed to the Company’s stockholders prior to the repurchase date as a result of the sale of one or more of the Company’s assets that constitutes a return of capital distribution as a result of such sales.
Repurchases of shares of the Company’s common stock will be made quarterly upon written request to the Company at least 15 days prior to the end of the applicable quarter. Repurchase requests will be honored approximately 30 days following the end of the applicable quarter (the “Repurchase Date”). Stockholders may withdraw their repurchase request at any time up to three business days prior to the Repurchase Date. During the three and nine months ended September 30, 2015, the Company redeemed a total of 6,601 and 13,501 shares with a total redemption value of $98,862 and $202,317 and received requests for the redemption of 5,267 and 16,503 shares with a total redemption value of $76,750 and $245,164, respectively. During the three and nine months ended September 30, 2014, the Company did not redeem any shares or receive requests for the redemption of any shares.
As of September 30, 2015, the Company had 5,267 shares of outstanding and unfulfilled redemption requests and recorded $76,750 in accounts payable and accrued liabilities on the accompanying consolidated balance sheet related to these unfulfilled redemption requests. The Company redeemed the outstanding redemption requests as of September 30, 2015 of $76,750 on the October 30, 2015 Repurchase Date.
The Company cannot guarantee that the funds set aside for the share repurchase plan will be sufficient to accommodate all repurchase requests made in any quarter. In the event that the Company does not have sufficient funds available to repurchase all of the shares of the Company’s common stock for which repurchase requests have been submitted in any quarter, priority will be given to redemption requests in the case of the death or disability of a stockholder. If the Company repurchases less than all of the shares subject to a repurchase request in any quarter, with respect to any shares which have not been repurchased, the Company will treat the shares that have not been repurchased as a request for repurchase in the following quarter pursuant to the limitations of the share repurchase plan and when sufficient funds are available, unless the stockholder withdraws the request for repurchase. Such pending requests will be honored among all requests for redemptions in any given repurchase period as follows: first, pro rata as to repurchases sought upon a stockholder’s death or disability; and, next, pro rata as to other repurchase requests.
The Company is not obligated to repurchase shares of its common stock under the share repurchase plan. The share repurchase plan limits the number of shares to be repurchased in any calendar year to (1) 5% of the weighted average number of shares of common stock outstanding during the prior calendar year and (2) those that could be funded from the net proceeds from the sale of shares under the DRP in the prior calendar year, plus such additional funds as may be reserved for that purpose by the Company’s board of directors. Such sources of funds could include cash on hand, cash available from borrowings and cash from liquidations of securities investments as of the end of the applicable month, to the extent that such funds are not otherwise dedicated to a particular use, such as working capital, cash distributions to stockholders or purchases of real estate assets. There is no fee in connection with a repurchase of shares of the Company’s common stock pursuant to the Company’s share repurchase plan.

20

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

The Company’s board of directors may, in its sole discretion, amend, suspend or terminate the share repurchase plan at any time upon 30 days’ notice to its stockholders if it determines that the funds available to fund the share repurchase plan are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase plan is in the best interest of the Company’s stockholders. Therefore, a stockholder may not have the opportunity to make a repurchase request prior to any potential termination of the Company’s share repurchase plan. The share repurchase plan will terminate in the event that a secondary market develops for the Company’s shares of common stock.
Pursuant to the share repurchase plan, for the three and nine months ended September 30, 2015, the Company reclassified $2,645,676 and $5,640,163, net of $98,862 and $202,317 of fulfilled redemption requests, and for the three and nine months ended September 30, 2014, $25,066 and $200,556, net of $0 and $0 of fulfilled redemption requests, respectively, from permanent equity to temporary equity, which is included as redeemable common stock on the accompanying consolidated balance sheets.
Distributions
The Company’s long-term policy is to pay distributions solely from cash flow from operations. However, the Company expects to have insufficient cash flow from operations available for distribution until the Company makes substantial investments. Further, because the Company may receive income from interest or rents at various times during the Company’s fiscal year and because the Company may need cash flow from operations during a particular period to fund capital expenditures and other expenses, the Company expects that at least during the early stages of the Company’s development and from time to time during the Company’s operational stage, the Company will declare distributions in anticipation of cash flow that the Company expects to receive during a later period, and the Company expects to pay these distributions in advance of its actual receipt of these funds. In these instances, the Company’s board of directors has the authority under its organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or advances and the deferral of fees and expense reimbursements by the Advisor, in its sole discretion. The Company has not established a limit on the amount of proceeds it may use from the Public Offering to fund distributions. If the Company pays distributions from sources other than cash flow from operations, the Company will have fewer funds available for investments and stockholders’ overall return on their investment in the Company may be reduced.
To maintain the Company’s qualification as a REIT, the Company must make aggregate annual distributions to its stockholders of at least 90% of its REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If the Company meets the REIT qualification requirements, the Company generally will not be subject to federal income tax on the income that the Company distributes to its stockholders each year.
Distributions Declared
On April 4, 2014, the Company’s board of directors approved a cash distribution that accrues at a rate of $0.002466 per day for each share of the Company’s common stock, which, if paid over a 365-day period, is equivalent to a 6.0% annualized distribution rate based on a purchase price of $15.00 per share of the Company’s common stock. This distribution began to accrue on April 7, 2014. The distributions declared accrue daily to stockholders of record as of the close of business on each day and are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month. There is no guarantee that the Company will continue to pay distributions at this rate or at all.
Distributions declared for the three and nine months ended September 30, 2015 were $5,586,074 and $12,540,127, including $2,971,637 and $6,597,098, or 208,536 and 462,954 shares of common stock, respectively, attributable to the DRP.
Distributions declared for the three and nine months ended September 30, 2014 were $642,532 and $800,804, including $269,216 and $321,218, or 18,892 and 22,542 shares of common stock attributable to the DRP.
As of September 30, 2015 and December 31, 2014, $1,965,054 and $608,904 of distributions declared were payable, which included $1,048,138 and $293,521, or 73,554 and 20,598 shares of common stock, attributable to the DRP, respectively.

21

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

Distributions Paid
For the three and nine months ended September 30, 2015, the Company paid cash distributions of $2,420,013 and $5,341,496, which related to distributions declared for each day in the period from June 1, 2015 through August 31, 2015 and December 1, 2014 through August 31, 2015, respectively. Additionally, for the three and nine months ended September 30, 2015, 192,599 and 409,999 shares of common stock were issued pursuant to the DRP for gross offering proceeds of $2,744,538 and $5,842,481, respectively. For the three and nine months ended September 30, 2015, the Company paid total distributions of $5,164,551 and $11,183,977, respectively. 
For the three and nine months ended September 30, 2014, the Company paid cash distributions of $279,014 and $328,594, which related to distributions declared for each day in the period from from June 1, 2014 through August 31, 2014 and April 7, 2014 through August 31, 2014. Additionally, for the three and nine months ended September 30, 2014, 12,315 and 14,074 shares of common stock were issued pursuant to the DRP for gross offering proceeds of $175,490 and $200,556, respectively. For the three and nine months ended September 30, 2014, the Company paid total distributions of $454,504 and $529,150, respectively.
7.          Related Party Arrangements
The Company has entered into the Advisory Agreement with the Advisor and a Dealer Manager Agreement with the Dealer Manager with respect to the Public Offering. Pursuant to the Advisory Agreement and Dealer Manager Agreement, the Company is obligated to pay the Advisor and the Dealer Manager specified fees upon the provision of certain services related to the Public Offering, the investment of funds in real estate and real estate-related investments and the management of the Company’s investments and for other services (including, but not limited to, the disposition of investments). Subject to the limitations described below, the Company is also obligated to reimburse the Advisor and its affiliates for organization and offering costs incurred by the Advisor and its affiliates on behalf of the Company, as well as acquisition and origination expenses and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company.

22

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

Amounts attributable to the Advisor and its affiliates incurred for the three and nine months ended September 30, 2015 and 2014 and amounts outstanding to the Advisor and its affiliates as of September 30, 2015 and December 31, 2014 are as follows:
 
 
Incurred For the
 
Incurred For the
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
Payable as of
 
 
2015
 
2014
 
2015
 
2014
 
September 30, 2015
 
December 31, 2014
Consolidated Statements of Operations:
 
 
 
 
 
 
 
 
 
 
 
 
Expensed
 
 
 
 
 
 
 
 
 
 
 
 
Organization costs(1)
 
$
—

 
$
—

 
$
—

 
$
42,882

 
$
—

 
$
—

Investment management fees(2)
 
2,065,532

 
80,155

 
4,198,328

 
88,740

 
22,907

 
147,946

Acquisition fees(2)
 
2,561,266

 
488,962

 
6,891,098

 
930,405

 
—

 
581,418

Acquisition expenses(3)
 
927,643

 
307,183

 
2,780,293

 
516,067

 
138,910

 
22,157

Loan coordination fees(2)
 
2,353,989

 
315,000

 
4,704,794

 
609,700

 
—

 
280,000

Property management:
 
 
 
 
 
 
 
 
 
 
 
 
Fees(2)
 
582,945

 
50,915

 
1,182,106

 
58,037

 
229,811

 
65,882

Reimbursement of onsite personnel(4)
 
1,932,568

 
141,426

 
3,874,342

 
163,500

 
352,958

 
66,268

Other fees(2)
 
187,995

 
18,634

 
359,377

 
26,321

 
22,502

 
6,799

Other operating expenses(1)
 
303,260

 
173,320

 
954,635

 
430,672

 
88,482

 
322,804

Consolidated Balance Sheets:
 
 
 
 
 
 
 
 
 
 
 
 
Capitalized to real estate
 
 
 
 
 
 
 
 
 
 
 
 
Construction management fees
 
244,614

 
5,439

 
535,040

 
5,524

 
45,517

 
6,595

Additional paid-in capital
 
 
 
 
 
 
 
 
 
 
 
 
Other offering costs reimbursement
 
1,853,313

 
2,061,463

 
4,969,605

 
3,509,796

 
741,208

 
—

Selling commissions
 
5,604,446

 
2,486,052

 
17,936,003

 
3,909,240

 
—

 
—

Dealer manager fees
 
2,509,032

 
1,129,004

 
8,089,007

 
1,740,039

 
—

 
—

 
 
$
21,126,603

 
$
7,257,553

 
$
56,474,628

 
$
12,030,923

 
$
1,642,295

 
$
1,499,869

_____________________
(1)
Included in general and administrative expenses in the accompanying consolidated statements of operations.
(2)
Included in fees to affiliates in the accompanying consolidated statements of operations.
(3)
Included in acquisition costs in the accompanying consolidated statements of operations.
(4)
Included in operating, maintenance and management in the accompanying consolidated statements of operations.
Organization and Offering Costs
Organization and offering expenses include all expenses (other than sales commissions and the dealer manager fee) to be paid by the Company in connection with the Public Offering, including legal, accounting, printing, mailing and filing fees, charges of the Company’s transfer agent, expenses of organizing the Company, data processing fees, advertising and sales literature costs, out-of-pocket due diligence costs and amounts to reimburse the Advisor or its affiliates for the salaries of its employees and other costs in connection with preparing supplemental sales materials and providing other administrative services in connection with the Public Offering. Any such reimbursement will not exceed actual expenses incurred by the Advisor. After the termination of the Public Offering, the Advisor will reimburse the Company to the extent total organization

23

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

and offering expenses (including sales commissions and dealer manager fees) borne by the Company exceed 15% of the gross proceeds raised in the Primary Offering. In addition, to the extent the Company does not pay the full sales commissions or dealer manager fee for shares sold in the Public Offering, the Company may also reimburse costs of bona fide training and education meetings held by the Company (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees and cost reimbursement of employees of the Company’s affiliates to attend seminars conducted by broker-dealers and, in certain cases, reimbursement to participating broker-dealers for technology costs associated with the offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of the Company’s shares and the ownership of the Company’s shares by such broker-dealers’ customers; provided, however, that the Company will not pay any of the foregoing costs to the extent that such payment would cause total underwriting compensation paid by the Company to exceed 10% of the gross offering proceeds of the Public Offering, as required by the rules of Financial Industry Regulatory Authority, Inc. (“FINRA”).
Organization and offering costs include payments made to Crossroads Capital Advisors, an affiliate of the Sponsor, for certain specified services provided to the Company on behalf of the Advisor, including, without limitation, establishing operational and administrative processes; engaging and negotiating with vendors; providing recommendations and advice for the development of marketing materials and ongoing communications with investors; and assisting in public relations activities and the administration of the DRP and share repurchase plan. As of September 30, 2015 and December 31, 2014, the Advisor had incurred $2,531,323 and $1,000,008, respectively, of amounts payable to Crossroads Capital Advisors for the services described above on the Company’s behalf, all of which was recorded by the Company as offering costs during the applicable periods.
The amount of reimbursable organization and offering (“O&O”) costs that have been paid or recognized from inception through September 30, 2015 is as follows: 
 
 
Amount
 
Percentage of Gross Offering Proceeds
Gross offering proceeds:
 
$
404,700,414

 
100.00
%
O&O limitation
 
15.00
%
 
 
Total O&O costs available to be paid/reimbursed
 
$
60,705,062

 
15.00
%
 
 
 
 
 
O&O expenses recorded:
 
 
 
 
Sales commissions
 
$
26,751,060

 
6.61
%
Broker dealer fees
 
12,063,577

 
2.98
%
Offering cost reimbursements
 
10,637,462

 
2.63
%
Organizational costs reimbursements
 
42,882

 
0.01
%
Total O&O cost reimbursements recorded by the Company
 
$
49,494,981

 
12.23
%
When recognized, organization costs are expensed as incurred. From inception through September 30, 2015, the Advisor incurred $42,882 of organizational costs on the Company’s behalf, all of which was reimbursed to the Advisor.
Offering costs, including selling commissions and dealer manager fees, are deferred and charged to stockholders’ equity as such amounts are reimbursed to the Advisor, the Dealer Manager or their affiliates from gross offering proceeds. For the three and nine months ended September 30, 2015, the Advisor incurred $2,843,613 and $7,654,926 of offering costs related to the Public Offering. For the three and nine months ended September 30, 2014, the Advisor incurred $2,078,946 and $5,747,990 of offering costs related to the Public Offering. The Advisor has incurred total offering costs related to the Public Offering of $16,875,673 from inception through September 30, 2015, of which $6,238,211 is deferred and may be reimbursable, subject to the limitations described above and the approval of the independent directors.

24

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

The Company accrued $741,208 and $0 for the reimbursement of offering costs in the accompanying consolidated balance sheets as of September 30, 2015 and December 31, 2014. The deferred offering costs of $6,238,211 were not included in the financial statements of the Company because such costs were not a liability of the Company as they exceeded the 10% limitation described above.
Investment Management Fee
The Company paid the Advisor a monthly investment management fee equal to one-twelfth of 0.50% of (1) the cost of the Company’s investments in real properties and real estate-related assets until the aggregate cost of the Company’s investments in real properties and real estate related assets equaled $300,000,000, which occurred in December 2014. Thereafter, the Company pays the Advisor a monthly investment management fee equal to one-twelfth of 1.0% of the cost of the Company’s investments in real properties and real estate-related assets. Such fee will be calculated including acquisition fees, acquisition expenses and any debt attributable to such investments, or the Company’s proportionate share thereof in the case of investments made through joint ventures.
Acquisition Fees and Expenses
The Company pays the Advisor an acquisition fee equal to 1.0% of the cost of investment, which includes the amount actually paid or budgeted to fund the acquisition, origination, development, construction or improvement (i.e. value-enhancement) of any real property or real estate-related asset acquired. In addition to acquisition fees, the Company reimburses the Advisor for amounts directly incurred by the Advisor and amounts the Advisor pays to third parties in connection with the selection, evaluation, acquisition and development of a property or acquisition of real estate-related assets, whether or not the Company ultimately acquires the property or the real estate-related assets.
The Charter limits the Company’s ability to pay acquisition fees if the total of all acquisition fees and expenses relating to the purchase would exceed 4.5% of the contract purchase price. Under the Charter, a majority of the Company’s board of directors, including a majority of the independent directors, is required to approve any acquisition fees (or portion thereof) that would cause the total of all acquisition fees and expenses relating to an acquisition to exceed 4.5% of the contract purchase price. In connection with the purchase of securities, the acquisition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the acquisition fee to a firm that is not a registered broker-dealer. 
Loan Coordination Fee
The Company pays the Advisor or its affiliate a loan coordination fee equal to 1.0% of the initial amount of the new debt financed or outstanding debt assumed in connection with the acquisition, development, construction, improvement or origination of a property or a real estate-related asset. In addition, in connection with any financing or the refinancing of any debt (in each case, other than identified at the time of the acquisition of a property or a real estate-related asset), the Company will pay the Advisor or its affiliate a loan coordination fee equal to 0.75% of the amount of debt financed or refinanced.
Property Management Fees and Expenses
The Company has entered into Property Management Agreements with Steadfast Management Company, Inc., an affiliate of the Sponsor (the “Property Manager”), in connection with the management of each of the Company’s properties. The property management fee payable with respect to each property under the Property Management Agreements (each a “Property Management Agreement”) at September 30, 2015 ranges from 2.5% to 3.0% of the annual gross revenue collected at the property, which is usual and customary for comparable property management services rendered to similar properties in similar geographic markets, as determined by the Advisor and approved by a majority of the Company’s board of directors, including a majority of the independent directors.

25

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

In addition to the property management fee, the Property Management Agreements also specify certain other fees payable to the Property Manager for benefit administration, information technology infrastructure, licenses, and support and training services. The Company also reimburses the Property Manager for the salaries and related benefits of on-site property management employees.
Construction Management Fee 
The Company has entered into Construction Management Agreements with Pacific Coast Land & Construction, Inc., an affiliate of the Sponsor (the “Construction Manager”), in connection with capital improvements and renovation or value-enhancement projects for certain properties the Company acquires. The Construction Management Fee payable with respect to each property under the Construction Management Agreements (each a “Construction Management Agreement”) has ranged from 8.0% to 12.0% of the costs of the improvements for which the Construction Manager has planning and oversight authority. For all properties acquired after October 15, 2014, such fees are an amount equal to 8.0% of the total cost of the project. Generally, each Construction Management Agreement can be terminated by either party with 30 days prior written notice to the other party. Construction management fees are capitalized to the respective real estate properties in the period in which they are incurred as such costs relate to capital improvements and renovations for apartment homes while they undergo the planned renovation.
Other Operating Expense Reimbursement
In addition to the various fees paid to the Advisor, the Company is obligated to pay directly or reimburse all expenses incurred by the Advisor in providing services to the Company, including the Company’s allocable share of the Advisor’s overhead, such as rent, employee costs, utilities and information technology costs. The Company will not reimburse the Advisor for employee costs in connection with services for which the Advisor or its affiliates receive acquisition fees or disposition fees or for the salaries the Advisor pays to the Company’s executive officers.
The Charter limits the Company’s total operating expenses during any four fiscal quarters to the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income for the same period (the “2%/25% Limitation”). The Company may reimburse the Advisor, at the end of each fiscal quarter, for operating expenses incurred by the Advisor; provided, however, that the Company shall not reimburse the Advisor at the end of any fiscal quarter for operating expenses that exceed the 2%/25% Limitation unless the independent directors have determined that such excess expenses were justified based on unusual and non-recurring factors. The Advisor must reimburse the Company for the amount by which the Company’s operating expenses for the preceding four fiscal quarters then ended exceed the 2%/25% Limitation, unless approved by the independent directors. For purposes of determining the 2%/25% Limitation amount, “average invested assets” means the average monthly book value of the Company’s assets invested directly or indirectly in equity interests and loans secured by real estate during the 12-month period before deducting depreciation, bad debts or other non-cash reserves. “Total operating expenses” means all expenses paid or incurred by the Company that are in any way related to the Company’s operation, including the Company’s allocable share of Advisor overhead and investment management fees, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, listing and registration of shares of the Company’s common stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of the Company’s assets; (f) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that the Company does not close); (g) real estate commissions on the resale of investments; and (h) other expenses connected with the acquisition, disposition, management and ownership of investments (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property).
At September 30, 2015, the Company’s total operating expenses, as defined above, did not exceed the 2%/25% Limitation test.

26

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

Disposition Fee
If the Advisor or its affiliates provides a substantial amount of services in connection with the sale of a property or real estate-related asset as determined by a majority of the Company’s independent directors, the Company will pay the Advisor or its affiliates one-half of the brokerage commissions paid, but in no event to exceed 1.0% of the sales price of each property or real estate-related asset sold. To the extent the disposition fee is paid upon the sale of any assets other than real property, it will be included as an operating expense for purposes of the 2%/25% Limitation. In connection with the sale of securities, the disposition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the disposition fee to a firm that is not a registered broker-dealer. As of September 30, 2015 the Company had not sold or otherwise disposed of property or any real estate-related assets. Accordingly, the Company had not incurred any disposition fees as of September 30, 2015. 
Selling Commissions and Dealer Manager Fees
The Company pays the Dealer Manager up to 7% and 3% of the gross offering proceeds from the Primary Offering as selling commissions and dealer manager fees, respectively. A reduced sales commission and dealer manager fee is paid in connection with volume discounts and certain other categories of sales. No sales commission or dealer manager fee is paid with respect to shares of common stock issued pursuant to the DRP. The Dealer Manager reallows 100% of sales commissions earned to participating broker-dealers. The Dealer Manager may also reallow to any participating broker-dealer a portion of the dealer manager fee that is attributable to that participating broker-dealer for certain marketing costs of that participating broker-dealer. The Dealer Manager will negotiate the reallowance of the dealer manager fee on a case-by-case basis with each participating broker-dealer subject to various factors associated with the cost of the marketing program.
8.          Incentive Award Plan and Independent Director Compensation
The Company has adopted an incentive plan (the “Incentive Award Plan”) that provides for the grant of equity awards to its employees, directors and consultants and those of the Company’s affiliates. The Incentive Award Plan authorizes the grant of non-qualified and incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, dividend equivalents and other stock-based awards or cash-based awards.
Under the Company’s independent directors’ compensation plan, which is a sub-plan of the Incentive Award Plan, each of the Company’s independent directors was entitled to receive 3,333 shares of restricted common stock once the Company raised $2,000,000 in gross offering proceeds in the Public Offering. Each subsequent independent director that joins the Company’s board of directors receives 3,333 shares of restricted common stock upon election to the Company’s board of directors. In addition, on the date following an independent director’s re-election to the Company’s board of directors, he or she receives 1,666 shares of restricted common stock. One-fourth of the shares of restricted common stock generally vest and become non-forfeitable upon issuance and the remaining portion will vest in three equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted stock will become fully vested and become non-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company.
On February 27, 2014, the Company raised over $2,000,000 in gross offering proceeds in the Public Offering and granted each of the three independent directors 3,333 shares of restricted common stock. On both August 7, 2014 and August 13, 2015, the Company granted 1,666 shares of restricted common stock to each of its three independent directors upon their re-election to the Company’s board of directors at the 2014 and 2015 annual meetings of stockholders. The Company recorded stock-based compensation expense of $35,348 and $63,482 for the three and nine months ended September 30, 2015 and $30,967 and $81,230 for the three and nine months ended September 30, 2014, respectively, related to the independent directors’ restricted common stock.
In addition to the stock awards, the Company pays each of its independent directors an annual amount of $55,000, prorated for any partial term (the audit committee chairperson receives an additional $10,000 annual amount, prorated for any partial term). In addition, the independent directors are paid for attending meetings as follows: (1) $2,500 for each board meeting

27

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

attended in person, (2) $1,500 for each committee meeting attended in person in such director’s capacity as a committee member, (3) $1,000 for each board meeting attended via teleconference (not to exceed $4,000 for any one set of meetings attended on any given day). All directors also receive reimbursement of reasonable out of pocket expenses incurred in connection with attendance at meetings of the board of directors. Director compensation is an operating expense of the Company that is subject to the operating expense reimbursement obligation of the Advisor discussed in Note 7. The Company recorded an operating expense of, and paid, $55,750 and $180,250 for the three and nine months ended September 30, 2015 and $57,750 and $174,250 for the three and nine months ended September 30, 2014 related to the independent directors annual retainer, which is included in general and administrative expenses in the accompanying consolidated statements of operations.
9.          Commitments and Contingencies
Economic Dependency 
The Company is dependent on the Advisor and the Dealer Manager for certain services that are essential to the Company, including the sale of the Company’s shares of common and preferred stock available for issue; the identification, evaluation, negotiation, purchase and disposition of real estate and real estate-related investments; management of the daily operations of the Company’s real estate and real estate-related investment portfolio; and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other sources. The Company may not be able to retain services from such other sources on favorable terms or at all.
Concentration of Credit Risk
The geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the Atlanta, Georgia, Dallas/Fort Worth, Texas and Denver, Colorado apartment markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition from other apartment communities, decrease in demand for apartments or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.
Environmental
As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.
Legal Matters
From time to time, the Company is subject, or party, to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on the Company’s results of operations or financial condition nor is the Company aware of any such legal proceedings contemplated by government agencies.

28

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

10.          Derivative Financial Instruments
The Company uses interest rate derivatives with the objective of managing exposure to interest rate movements thereby minimizing the effect of interest rate changes and the effect they could have on future cash flows. Interest rate cap agreements are used to accomplish this objective. The following table provides the terms of the Company’s interest rate derivative instruments that were in effect at September 30, 2015 and December 31, 2014:
September 30, 2015
Type
 
Maturity Date Range
 
Based on
 
Number of Instruments
 
Notional Amount
 
Variable Rate
 
Weighted Average Rate Cap
 
Fair Value
Interest Rate Cap
 
6/1/2018 - 10/1/2019
 
One-Month LIBOR
 
19
 
$
528,001,100

 
0.19%
 
2.06%
 
$
691,078

December 31, 2014
Type
 
Maturity Date Range
 
Based on
 
Number of Instruments
 
Notional Amount
 
Variable Rate
 
Weighted Average Rate Cap
 
Fair Value
Interest Rate Cap
 
6/1/2018 - 1/1/2019
 
One-Month LIBOR
 
7
 
$
196,930,600

 
0.17%
 
2.00%
 
$
648,414

The interest rate cap agreements are not designated as effective cash flow hedges. Accordingly, the Company records any changes in the fair value of the interest rate cap agreements as interest expense. The change in the fair value of the interest rate cap agreements for the three and nine months ended September 30, 2015 resulted in an unrealized loss of $1,038,080 and $2,206,162 and for the three and nine months ended September 30, 2014 resulted in an unrealized loss of $57,127 and $140,339, respectively. The fair value of the interest rate cap agreements of $691,078 and $648,414 as of September 30, 2015 and December 31, 2014 is included in deferred financing costs and other assets, net on the accompanying consolidated balance sheets.
11.          Pro Forma Information (unaudited)
The following table summarizes, on an unaudited basis, the consolidated pro forma results of operations of the Company for the three and nine months ended September 30, 2015 and 2014. The Company acquired six properties during the three months ended September 30, 2015 and 17 properties during the nine months ended September 30, 2015. These properties contributed $18,923,673 of revenues and $10,735,023 of net loss, including $14,969,383 of depreciation and amortization, to the Company’s results of operations from the date of acquisition to September 30, 2015. The following unaudited pro forma information for the three and nine months ended September 30, 2015 and 2014 has been provided to give effect to the acquisitions of the properties as if they had occurred on January 1, 2014. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had these acquisitions occurred on this date, nor does it purport to predict the results of operations for future periods.
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Revenues
 
$
24,057,752

 
$
16,496,660

 
$
72,173,255

 
$
49,489,979

Net loss
 
$
(11,968,402
)
 
$
(15,967,096
)
 
$
(35,905,207
)
 
$
(47,901,288
)
Loss per common share, basic and diluted
 
$
(0.43
)
 
$
(0.58
)
 
$
(1.30
)
 
$
(1.74
)

29

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

The pro forma information reflects adjustments for actual revenues and expenses of the properties acquired during the three and nine months ended September 30, 2015 for the respective period prior to acquisition by the Company. Net loss has been adjusted as follows: (1) interest expense has been adjusted to reflect the additional interest expense that would have been charged had the Company acquired the properties on January 1, 2014 under the same financing arrangements as existed as of the acquisition date; (2) depreciation and amortization has been adjusted based on the Company’s basis in the properties; and (3) transaction costs have been adjusted for the acquisition of the properties.
12.          Subsequent Events
Status of Our Offering
As of November 6, 2015, the Company had sold 30,125,783 shares of common stock in the Public Offering for gross proceeds of $449,506,794, including 613,638 shares of common stock issued pursuant to the DRP for gross offering proceeds of $8,744,346.
Distributions Paid
On October 1, 2015, the Company paid distributions of $1,965,054, which related to distributions declared for each day in the period from September 1, 2015 through September 30, 2015 and consisted of cash distributions paid in the amount of $916,916 and $1,048,138 in shares issued pursuant to the DRP.
On November 2, 2015, the Company paid distributions of $2,170,727, which related to distributions declared for each day in the period from October 1, 2015 through October 31, 2015 and consisted of cash distributions paid in the amount of $1,018,189 and $1,152,538 in shares issued pursuant to the DRP.
Acquisition of Lakeside at Coppell
On October 7, 2015, the Company acquired a fee simple interest in Regency by the Lake (the “Lakeside Property”) located in Coppell, Texas for a purchase price of $60,500,000, exclusive of closing costs. The Company has initiated the process to re-name the Lakeside Property to “Lakeside at Coppell.” The Company financed the payment of the Lakeside Property with (1) proceeds from its initial public offering and (2) the proceeds of a secured loan in the aggregate principal amount of $45,375,000 from a financial institution. The Lakeside Property consists of 45 two-story residential buildings, a two-story leasing office/clubhouse, a pool restroom building and a maintenance building. The Lakeside Property contains 315 units consisting of 90 one-bedroom apartments, 135 two-bedroom apartments, 45 three-bedroom apartments and 45 four-bedroom apartments that average 1,221 square feet. The Company has not yet measured the fair value of the tangible and identified intangible assets and liabilities of the acquisition.
Second Amended and Restated Dealer Manager Agreement
On October 15, 2015, the Company entered into the Second Amended and Restated Dealer Manager Agreement with the Dealer Manager and the Operating Partnership. The Company will allow a participating broker-dealer to elect to receive the 7% selling commission at the time of sale or elect to have the selling commission paid on a trailing basis. A participating broker-dealer electing to receive a trailing selling commission will be paid as follows: 2% at the time of sale and the remaining 5% paid ratably (1% per year) on each of the first five anniversaries of the sale. The Dealer Manager may also agree to different payment schedules with a participating broker-dealer in the future; provided the selling commission paid will not exceed 7%. The total amount of all items of compensation from any source payable to the Dealer Manager and the soliciting dealers will not exceed 10% of the gross proceeds from the Primary Offering. The Company has no obligation to pay the trailing selling commission if the applicable shares are no longer outstanding or total underwriting compensation paid by the Company will exceed 10% of the gross offering proceeds from the Primary Offering.
The dealer manager fee remains 3% of the gross proceeds on sales by a participating broker-dealer in the Primary Offering. No sales commissions will be paid for sales pursuant to the DRP.

30

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

STEADFAST APARTMENT REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(unaudited)

Acquisition of Meadows at River Run
On October 30, 2015, the Company acquired a fee simple interest in Meadows at River Run (the “River Run Property”) located in Bolingbrook, Illinois for a purchase price of $58,500,000, exclusive of closing costs. The Company financed the payment of the River Run Property with (1) proceeds from its initial public offering and (2) the assumption of an existing mortgage loan in the principal amount of $43,600,000 from a financial institution. The River Run Property consists of 17 two-, three- and four-story residential buildings, a one-story leasing office/clubhouse, a 24-hour fitness center, a business center, a pet park and a swimming pool. The River Run Property contains 374 units consisting of 194 one-bedroom apartments, 164 two-bedroom apartments and 16 three-bedroom apartments that average 945 square feet. The Company has not yet measured the fair value of the tangible and identified intangible assets and liabilities of the acquisition.
Advisory Agreement Renewal
On November 11, 2015, the Company entered into Amendment No. 2 to the Advisory Agreement, which is effective on December 13, 2015, to renew the term of the Advisory Agreement for an additional one year term ending December 13, 2016.


31

PART I — FINANCIAL INFORMATION (continued)


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the accompanying condensed consolidated unaudited financial statements of Steadfast Apartment REIT, Inc. and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Steadfast Apartment REIT, Inc., a Maryland corporation, and, as required by context, Steadfast Apartment REIT Operating Partnership, L.P., a Delaware limited partnership, which we refer to as our “operating partnership,” and to their subsidiaries.
Forward-Looking Statements
Certain statements included in this Quarterly Report on Form 10-Q 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, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.
The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:
•
the fact that we have a limited operating history and commenced operations on May 22, 2014;
•
the fact that we have had a net loss for each quarterly and annual period since inception; 
•
our ability to raise proceeds in our initial public offering; 
•
our ability to effectively deploy the proceeds raised in our initial public offering; 
•
changes in economic conditions generally and the real estate and debt markets specifically; 
•
our ability to successfully identify and acquire multifamily properties on terms that are favorable to us; 
•
our ability to secure resident leases for our multifamily properties at favorable rental rates; 
•
risks inherent in the real estate business, including resident defaults, potential liability relating to environmental matters and the lack of liquidity of real estate investments; 
•
the fact that we pay fees and expenses to our advisor and its affiliates that were not negotiated on an arm’s length basis and the fact that the payment of these fees and expenses increases the risk that our stockholders will not earn a profit on their investment in us; 
•
our ability to retain our executive officers and other key personnel of our advisor, our property manager and other affiliates of our advisor; 
•
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

32

PART I — FINANCIAL INFORMATION (continued)


quarterly report will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this 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 light of the factors identified in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission, or the SEC, on March 16, 2015.
Overview
We were formed on August 22, 2013, as a Maryland corporation that has elected to qualify as a real estate investment trust, or REIT, commencing with the taxable year ended December 31, 2014. We intend to use substantially all of the net proceeds from our ongoing initial public offering to invest in and manage a diverse portfolio of multifamily properties located in targeted markets throughout the United States. In addition to our focus on multifamily properties, we may also make selective strategic acquisitions of other types of commercial properties. We may also acquire or originate mortgage, mezzanine, bridge and other real estate loans and equity securities of other real estate companies.
On December 30, 2013, we commenced our initial public offering pursuant to a registration statement on Form S-11 filed with the SEC, 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 (subject to certain discounts). We are also offering up to 7,017,544 shares of common stock pursuant to our distribution reinvestment plan at an initial price of $14.25 per share. Our board of directors may, in its sole discretion and from time to time, change the price at which we offer shares to the public in the primary offering or 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. If we revise the price at which we offer our shares of common stock based upon changes in our estimated value per share, we do not anticipate that we will do so more frequently than quarterly. Our estimated value per share will be approved by our board of directors and calculated by our advisor based upon current available information which may include valuations of our assets obtained by independent third party appraisers or qualified independent valuation experts.
Pursuant to the terms of our initial public offering, offering proceeds were held in an escrow account until we met the minimum offering amount of $2,000,000. On February 27, 2014, we raised the minimum offering amount and the offering proceeds held in escrow were released to us. As of November 6, 2015, we had sold 30,125,783 shares of common stock in our public offering for gross proceeds of $449,506,794, including 613,638 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $8,744,346. We intend to terminate our initial public offering on or before March 25, 2016. We intend to continue offering shares pursuant to our distribution reinvestment plan after the termination of our public offering.
Steadfast Apartment Advisor, LLC is our advisor. Subject to certain restrictions and limitations, our advisor manages our day-to-day operations and our portfolio of properties and real estate-related assets. Our advisor sources and presents investment opportunities to our board of directors. Our advisor also provides investment management, marketing, investor relations and other administrative services on our behalf.
Substantially all of our business is conducted through Steadfast Apartment REIT Operating Partnership, L.P., our operating partnership. We are the sole general partner of our operating partnership and one of our wholly-owned subsidiaries is the only limited partner of our operating partnership. As we accept subscriptions for shares of common stock, we transfer substantially all of the net proceeds of the offering to our operating partnership as a capital contribution. The limited partnership agreement of our operating partnership provides that our operating partnership will be operated in a manner that will enable us to (1) satisfy the requirements for being classified as a REIT for federal income tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that our operating partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, which classification could result in our operating partnership being taxed as a corporation, rather than as a disregarded entity. In addition to the administrative and operating costs and expenses incurred by our operating partnership in acquiring and operating our investments, our operating partnership will pay all of our administrative costs and expenses, and such expenses will be treated as expenses of our operating partnership. We will experience a relative increase in liquidity as additional subscriptions for shares of our common stock are received and a relative decrease in liquidity as offering proceeds are used to acquire and operate our assets.

33

PART I — FINANCIAL INFORMATION (continued)


We have elected to be taxed as a REIT under the Internal Revenue Code commencing with our taxable year ended December 31, 2014. As a REIT, we generally will not be subject to federal income tax to the extent that we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates and will 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.

34

PART I — FINANCIAL INFORMATION (continued)


Our Real Estate Portfolio
As of September 30, 2015, we owned the 24 multifamily apartment communities listed below:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Monthly Occupancy(1) as of
 
Average Monthly Rent(2) as of
 
 
Property Name
 
City, State
 
Purchase Date
 
Number of Units
 
Contract Purchase Price
 
Mortgage Debt Outstanding
 
Sep 30, 2015
 
Dec 31, 2014
 
Sep 30, 2015
 
Dec 31, 2014
1
 
Villages at Spring Hill Apartments
 
Spring Hill, TN
 
5/22/2014
 
176

 
$
14,200,000

 
$
9,940,000

 
97.2
%
 
97.7
%
 
$
906

 
$
826

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

 
27,864,250

 
19,530,000

 
92.8
%
 
93.2
%
 
834

 
790

3
 
Club at Summer Valley
 
Austin, TX
 
8/28/2014
 
260

 
21,500,000

 
15,050,000

 
93.5
%
 
92.7
%
 
861

 
807

4
 
Terrace Cove Apartment Homes
 
Austin, TX
 
8/28/2014
 
304

 
23,500,000

 
16,450,000

 
93.4
%
 
94.1
%
 
843

 
793

5
 
The Residences on McGinnis Ferry
 
Suwanee, GA
 
10/16/2014
 
696

 
98,500,000

 
73,660,600

 
95.1
%
 
94.1
%
 
1,127

 
1,080

6
 
The 1800 at Barrett Lakes
 
Kennesaw, GA
 
11/20/2014
 
500

 
49,000,000

 
34,300,000

 
94.0
%
 
93.8
%
 
836

 
819

7
 
The Oasis
 
Colorado Springs, CO
 
12/19/2014
 
252

 
40,000,000

 
28,000,000

 
96.0
%
 
95.6
%
 
1,129

 
1,075

8
 
Columns on Wetherington
 
Florence, KY
 
2/26/2015
 
192

 
25,000,000

 
17,500,000

 
89.6
%
 
—
%
 
1,004

 
—

9
 
Preston Hills at Mill Creek
 
Buford, GA
 
3/10/2015
 
464

 
51,000,000

 
35,700,000

 
94.6
%
 
—
%
 
925

 
—

10
 
Eagle Lake Landing Apartments
 
Speedway, IN
 
3/27/2015
 
277

 
19,200,000

 
13,440,000

 
89.9
%
 
—
%
 
811

 
—

11
 
Reveal on Cumberland
 
Fishers, IN
 
3/30/2015
 
220

 
29,500,000

 
22,125,000

 
90.0
%
 
—
%
 
1,054

 
—

12
 
Randall Highlands Apartments
 
North Aurora, IL
 
3/31/2015
 
146

 
32,115,000

 
22,480,500

 
90.4
%
 
—
%
 
1,778

 
—

13
 
Heritage Place Apartments
 
Franklin, TN
 
4/27/2015
 
105

 
9,650,000

 
7,200,000

 
97.1
%
 
—
%
 
933

 
—

14
 
Rosemont at East Cobb
 
Marietta, GA
 
5/21/2015
 
180

 
16,450,000

 
11,515,000

 
93.9
%
 
—
%
 
833

 
—

15
 
Ridge Crossings Apartments
 
Hoover, AL
 
5/28/2015
 
720

 
72,000,000

 
50,400,000

 
96.4
%
 
—
%
 
870

 
—

16
 
Bella Terra at City Center
 
Aurora, CO
 
6/11/2015
 
304

 
37,600,000

 
26,320,000

 
97.7
%
 
—
%
 
951

 
—

17
 
Hearthstone at City Center
 
Aurora, CO
 
6/25/2015
 
360

 
53,400,000

 
37,380,000

 
94.7
%
 
—
%
 
1,049

 
—

18
 
Arbors at Brookfield
 
Mauldin, SC
 
6/30/2015
 
702

 
66,800,000

 
45,300,000

 
91.7
%
 
—
%
 
762

 
—

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

 
39,480,000

 
29,610,000

 
95.3
%
 
—
%
 
995

 
—

20
 
Delano at North Richland Hills
 
North Richland Hills, TX
 
8/26/2015
 
263

 
38,500,000

 
28,875,000

 
95.8
%
 
—
%
 
1,282

 
—

21
 
Meadows at North Richland Hills
 
North Richland Hills, TX
 
8/26/2015
 
252

 
32,600,000

 
24,450,000

 
98.0
%
 
—
%
 
1,224

 
—

22
 
Kensington by the Vineyard
 
Euless, TX
 
8/26/2015
 
259

 
46,200,000

 
34,225,000

 
94.6
%
 
—
%
 
1,563

 
—

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

 
52,200,000

 
39,150,000

 
96.9
%
 
—
%
 
1,244

 
—

24
 
The Shores
 
Oklahoma City, OK
 
9/29/2015
 
300

 
36,250,000

 
24,808,919

 
92.7
%
 
—
%
 
1,029

 
—

 
 
 
 
 
 
 
 
7,891

 
$
932,509,250

 
$
667,410,019

 
94.3
%
 
94.2
%
 
$
1,000

 
$
884

________________
(1)
At September 30, 2015, our portfolio was approximately 97.2% leased.

35

PART I — FINANCIAL INFORMATION (continued)


(2)
Average monthly rent is based upon the effective rental income after considering the effect of vacancies, concessions and write-offs.
Third Quarter Acquisitions
Carrington Park
On August 19, 2015, we acquired a fee simple interest in Carrington Park, or the Carrington Park property, located in Kansas City, Missouri for a purchase price of $39,480,000, exclusive of closing costs. We financed the payment of the purchase price for the Carrington Park property with (1) proceeds from our initial public offering and (2) the proceeds of a secured loan in the aggregate principal amount of $29,610,000 from a financial institution. The Carrington Park property consists of 12 three-story residential buildings and contains 298 units consisting of 116 one-bedroom apartments, 138 two-bedroom apartments and 44 three-bedroom apartments. The apartments range in size from 691 to 1,540 square feet and average 1,112 square feet.
Delano at North Richland Hills
On August 26, 2015, we acquired a fee simple interest in the Delano at North Richland Hills, or the Delano property, located in North Richland Hills, Texas for a purchase price of $38,500,000, exclusive of closing costs. We financed the payment of the purchase price for the Delano property with (1) proceeds from our initial public offering and (2) the proceeds of a secured loan in the aggregate principal amount of $28,875,000 from a financial institution. The Delano property consists of 32 two- and three-story garden-style residential buildings, a clubhouse/leasing office, a garage and a maintenance building and contains 263 units consisting of 118 one-bedroom apartments, 58 two-bedroom apartments, 58 three-bedroom apartments and 29 four-bedroom apartments. The apartments range in size from 722 to 1,954 square feet and average 1,231 square feet.
Meadows at North Richland Hills
On August 26, 2015, we acquired a fee simple interest in the Meadows at North Richland Hills, or the Meadows property, located in North Richland Hills, Texas for a purchase price of $32,600,000, exclusive of closing costs. We financed the payment of the purchase price for the Meadows property with (1) proceeds from our initial public offering and (2) the proceeds of a secured loan in the aggregate principal amount of $24,450,000 from a financial institution. The Meadows property consists of 21 two-story garden-style residential buildings, a clubhouse/leasing office and a maintenance office. The Meadows property contains 252 units consisting of 168 two-bedroom apartments, 60 three-bedroom apartments and 24 four-bedroom apartments. The apartments range in size from 1,013 to 1,407 square feet and average 1,140 square feet.
Kensington by the Vineyard
On August 26, 2015, we acquired a fee simple interest in Kensington by the Vineyard, or the Kensington property, located in Euless, Texas for a purchase price of $46,200,000, exclusive of closing costs. We financed the payment of the purchase price for the Kensington property with (1) proceeds from our initial public offering and (2) the proceeds of a secured loan in the aggregate principal amount of $34,225,000 from a financial institution. The Kensington property consists of 37 two-story garden-style residential buildings, a clubhouse/leasing office and a maintenance building. The Kensington property contains 259 units consisting of 74 one-bedroom apartments, 111 two-bedroom apartments, 37 three-bedroom apartments and 37 four-bedroom apartments. The apartments range in size from 692 to 1,613 square feet and average 1,077 square feet.
Monticello by the Vineyard
On September 23, 2015, we acquired a fee simple interest in Monticello by the Vineyard, or the Monticello property, located in Euless, Texas for a purchase price of $52,200,000, exclusive of closing costs. We financed the payment of the purchase price for the Monticello property with (1) proceeds from our initial public offering and (2) the proceeds of a secured loan in the aggregate principal amount of $39,150,000 from a financial institution. The Monticello property consists of 21 three-story garden-style residential buildings, five garage buildings and a clubhouse/leasing office. The Monticello property contains 354 units consisting of 172 one-bedroom apartments, 150 two-bedroom apartments and 32 three-bedroom apartments. The apartments range in size from 692 to 1,436 square feet and average 993 square feet.
The Delano property, the Meadows property, the Kensington property and the Monticello property were acquired from third-party selling entities ultimately controlled by the same parent company.


36

PART I — FINANCIAL INFORMATION (continued)


The Shores
On September 29, 2015, we acquired a fee simple interest in The Shores, or the Shores property, located in Oklahoma City, Oklahoma for a purchase price of $36,250,000, exclusive of closing costs. We financed the payment of the purchase price for the Shores property with (1) proceeds from our initial public offering and (2) the assumption of an existing mortgage loan in the principal amount of $24,808,919 from a financial institution. The Shores property consists of 11 three-story garden-style residential buildings, 12 two-story townhouse buildings and a clubhouse/leasing office. The Shores property contains 300 units consisting of 104 one-bedroom apartments, 172 two-bedroom apartments and 24 three-bedroom apartments. The apartments range in size from 649 to 1,288 square feet and average 994 square feet.
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 statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. A discussion of the accounting policies that management considers critical in that they involve significant management judgments, assumptions and estimates is included in our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 16, 2015. There have been no significant changes to our accounting policies during the period covered by this quarterly report. See also Note 2 to our condensed consolidated unaudited financial statements in this quarterly report for a discussion of our significant accounting policies.
Organization and Offering Costs
Organization and offering expenses include all expenses (other than sales commissions and the dealer manager fee) to be paid by us in connection with our initial public offering, including legal, accounting, printing, mailing and filing fees, charges of our escrow agent and transfer agent, expenses of organizing our company, data processing fees, advertising and sales literature costs, transfer agent costs, out-of-pocket due diligence costs and amounts to reimburse our advisor or its affiliates for the salaries of its employees and other costs in connection with preparing supplemental sales materials and providing other administrative services in connection with our initial public offering. Any such reimbursement will not exceed actual expenses incurred by our advisor. After the termination of our initial public offering, our advisor will reimburse us to the extent total organization and offering expenses borne by us (including selling commissions and dealer manager fees) exceed 15% of the gross proceeds raised in our initial public offering.
In addition, to the extent we do not pay the full sales commissions or dealer manager fee for shares sold in our initial public offering, we may also reimburse costs of bona fide training and education meetings held by us (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees and cost reimbursement of employees of our affiliates to attend seminars conducted by broker-dealers and, in certain cases, reimbursement to participating broker-dealers for technology costs associated with our initial public offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of our shares and the ownership of our shares by such broker-dealers’ customers; provided, however, that we will not pay any of the foregoing costs to the extent that such payment would cause total underwriting compensation to exceed 10% of the gross offering proceeds of our primary offering, as required by the rules of the Financial Industry Regulatory Authority, Inc.
When recognized, organization costs are expensed as incurred. Offering costs, including selling commissions and dealer manager fees, are deferred and charged to stockholders’ equity as such amounts are reimbursed to the advisor, the dealer manager or their affiliates from gross offering proceeds.
Income Taxes
We have elected to be taxed as a REIT under the Internal Revenue Code and have operated as such commencing with the taxable year ended December 31, 2014. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to our stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax to the extent we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is

37

PART I — FINANCIAL INFORMATION (continued)


lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to stockholders. However, we believe we are organized and operate in such a manner as to qualify for treatment as a REIT.
We follow the income tax guidance under GAAP to recognize, measure, present and disclose in our consolidated financial statements uncertain tax positions that we have taken or expect to take on a tax return. As of September 30, 2015 and December 31, 2014, we did not have any liabilities for uncertain tax positions that we believe should be recognized in our consolidated financial statements. We have not been assessed interest or penalties by any major tax jurisdictions. Our evaluation was performed for the tax years ended December 31, 2014 and 2013.
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.
On April 4, 2014, our board of directors first declared a distribution which began to accrue on April 7, 2014. Distributions declared (1) accrue 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) are calculated at a rate of $0.002466 per share per day, which if paid each day over a 365-day period is equivalent to a 6.0% annualized distribution rate based on a purchase price of $15.00 per share of common stock.
The distributions paid during each of the last five fiscal quarters ended September 30, 2015, along with the amount of distributions reinvested pursuant to the distribution reinvestment plan were as follows:
 
 
 
 
 
 
Distributions Paid(3)
 
Sources of Distributions Paid
 
 
Period
 
Distributions Declared(1)
 
Distributions Declared Per Share(1)(2)
 
Cash
 
Reinvested
 
Total
 
Cash Flow From Operations
 
Offering Proceeds
 
Net Cash Used In Operating Activities
Third Quarter 2014
 
$
642,532

 
$
0.227

 
$
279,014

 
$
175,490

 
$
454,504

 
$
—

 
$
454,504

 
$
(909,864
)
Fourth Quarter 2014
 
1,423,275

 
0.227

 
592,941

 
493,084

 
1,086,025

 
—

 
1,086,025

 
(2,188,785
)
First Quarter 2015
 
2,709,299

 
0.222

 
1,113,641

 
1,096,309

 
2,209,950

 
—

 
2,209,950

 
(1,539,065
)
Second Quarter 2015
 
4,244,754

 
0.224

 
1,807,842

 
2,001,634

 
3,809,476

 
—

 
3,809,476

 
(1,340,411
)
Third Quarter 2015
 
5,586,074

 
0.227

 
2,420,013

 
2,744,538

 
5,164,551

 
—

 
5,164,551

 
(2,745,332
)
 
 
$
14,605,934

 
$
1.127

 
$
6,213,451

 
$
6,511,055

 
$
12,724,506

 
$
—

 
$
12,724,506

 
$
(8,723,457
)
____________________
(1)
Distributions are based on daily record dates and calculated at a rate of $0.002466 per share per day.
(2)
Assumes each share was issued and outstanding each day during the periods presented.
(3)
Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately three days following month end.
For the three and nine months ended September 30, 2015, we paid aggregate distributions of $5,164,551 and $11,183,977, including $2,420,013 and $5,341,496 of distributions paid in cash and 192,599 and 409,999 shares of our common stock issued pursuant to our distribution reinvestment plan for $2,744,538 and $5,842,481. For the three and nine months ended September 30, 2015, our net loss was $14,219,859 and $33,183,194, we had negative funds from operations, or FFO, of $1,726,832 and $7,620,382 and net cash used in operations of $2,745,332 and $5,624,808. For the three and nine months ended September 30, 2015, we funded all distributions paid, which includes net cash distributions and distributions reinvested by stockholders, with proceeds from our public offering. On a cumulative basis, as of September 30, 2015, all distributions have been funded with proceeds from our public offering. For information on how we calculate FFO and the reconciliation of FFO to net loss, see “—Funds from Operations and Modified Funds from Operations.”

38

PART I — FINANCIAL INFORMATION (continued)


Our long-term policy is to pay distributions solely from cash flow from operations. However, we expect to have insufficient cash flow from operations available for distribution until we make substantial investments. Further, 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 at least during the early stages of our development and from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period, and we expect to pay these distributions in advance of our actual receipt of these funds. In these instances, our board of directors has the authority under our organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or advances and the deferral of fees and expense reimbursements by our advisor, in its sole discretion. We have not established a limit on the amount of proceeds we may use from our initial public offering to fund distributions. If we pay distributions from sources other than cash flow from operations, we will have fewer funds available for investments.
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 effect 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.
As of September 30, 2015, we had not entered into any leases as a lessee.
REIT Compliance
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 will monitor the business and transactions that may potentially impact our REIT status. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates.
Liquidity and Capital Resources
If we raise substantially less funds in our initial public offering than the maximum offering amount, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments we make and our results of operations will fluctuate with the performance of the specific assets we acquire. Further, we will have certain fixed operating expenses, including certain expenses as a public REIT, regardless of whether we are able to raise substantial funds in our initial public offering. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions.
We use secured borrowings, and intend to use in the future secured and unsecured borrowings, for the acquisition of properties. After we have invested all of the net offering proceeds from our initial public offering, we expect our borrowings will be approximately 55% to 60% of the value of our properties (after debt amortization and before deducting depreciation and amortization) and other real estate-related assets. For valuation purposes, the value of a property will equal its cost until such property is valued by an independent third party appraiser or qualified independent valuation expert. We expect to temporarily borrow in excess of our long-term targeted debt level during our offering stage in order to facilitate investments in the early stages of our operations. Under our Articles of Amendment and Restatement, or 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.
In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to make certain payments to our advisor and dealer manager. During our organization and offering stage, these payments will include payments to the dealer manager for sales commissions and the dealer manager fee and payments to our advisor for reimbursement of certain organization and offering expenses. However, our advisor has agreed to reimburse us within 60 days of the end of the month in which our initial public offering ends to the extent that sales commissions, the dealer manager fee and other organization and offering expenses incurred by us exceed 15% of our gross offering proceeds. During our operating

39

PART I — FINANCIAL INFORMATION (continued)


stage, we expect to make payments to our advisor in connection with the acquisition of investments, the management of our assets and costs incurred by our advisor in providing services to us.
Our principal demand for funds will be to acquire investments in accordance with our investment strategy, to fund value-enhancement 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:
•
current cash balances;
•
proceeds from our initial public offering;
•
various forms of secured and unsecured financing;
•
borrowings under master repurchase agreements;
•
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, proceeds from our public offering, 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 utilize additional secured and unsecured financings and equity capital from joint venture partners. We may also conduct additional public offerings. We expect these resources will be adequate to fund our operating activities, debt service and distributions, and will be sufficient to fund our ongoing acquisition activities as well as providing capital for investment in future development and other joint ventures along with potential forward purchase commitments.
We may, but are not required to, establish working capital reserves from offering proceeds out of cash flow generated by our investments or out of proceeds from the sale of our investments. We do not anticipate establishing a general working capital reserve; however, we may establish capital reserves with respect to particular investments. We also may, but are not required to, establish reserves out of cash flow generated by investments or out of net sale proceeds in non-liquidating sale transactions. Our lenders also may require working capital reserves.
To the extent that the working capital reserve is insufficient to satisfy our cash requirements, additional funds may be provided from cash generated from operations or through short-term borrowing. In addition, subject to certain limitations described in our charter, we may incur indebtedness in connection with the acquisition of any real estate asset, refinance the debt thereon, arrange for the leveraging of any previously unfinanced property or reinvest the proceeds of financing or refinancing in additional properties.
Cash Flows Used in Operating Activities
We commenced real estate operations with the acquisition of our first multifamily property on May 22, 2014. As of September 30, 2015, we owned 24 multifamily properties. During the nine months ended September 30, 2015, net cash used in operating activities was $5,624,808 compared to $1,729,863 for the nine months ended September 30, 2014. The increase in net cash used in operating activities is primarily due to the acquisition of 20 multifamily properties after September 30, 2014. Our operating cash flows during the nine months ended September 30, 2015 was impacted by our net loss, offset partially by adjustments for non-cash expenses, including depreciation and amortization, amortization of deferred financing costs, stock compensation, the change in fair value of the interest rate cap agreements and bad debt expense, and by adjustments for restricted cash, amounts due to affiliates and accounts payable and accrued liabilities. We expect cash used in operating activities to increase in future periods as a result of the acquisition fees and expenses incurred for anticipated future acquisitions of real estate and real estate-related investments. However, we expect to generate cash flows from operations as we expand our property portfolio, complete the value-enhancement program and stabilize its operations.
Cash Flows Used in Investing Activities
Our cash used in investing activities will vary based on how quickly we raise funds in our ongoing initial public offering and how quickly we invest those funds towards acquisitions of real estate and real-estate related investments. During the nine months ended September 30, 2015, net cash used in investing activities was $649,029,710 compared to $90,226,602 during the nine months ended September 30, 2014. The increase in net cash used in investing activities was primarily the result of our

40

PART I — FINANCIAL INFORMATION (continued)


acquisition of 17 multifamily properties during the nine months ended September 30, 2015 compared to four acquisitions of multifamily properties during the nine months ended September 30, 2014. Net cash used in investing activities during the nine months ended September 30, 2015 consisted of the following:
•
$617,662,481 of cash used related to the acquisition of 17 multifamily properties;
•
$8,323,406 of cash used for improvements to real estate investments;
•
$20,073,700 of cash used for deposits for potential real estate investments;
•
$721,297 of cash used in restricted cash accounts related to replacement reserves; and
•
$2,248,826 of cash used to purchase interest rate cap agreements.
Cash Flows from Financing Activities
During the nine months ended September 30, 2015, net cash provided by financing activities was $676,010,974 compared to $112,011,037 during the nine months ended September 30, 2014. The increase in net cash provided by financing activities is due primarily to increased net proceeds from our ongoing initial public offering and the issuance of notes payable, partially offset by increased distributions paid to our stockholders. Net cash provided by financing activities during the nine months ended September 30, 2015 consisted of the following:
•
$239,427,910 of cash provided by offering proceeds related to our initial public offering, net of (1) payments of commissions on sales of common stock and related dealer manager fees in the amount of $26,025,010 and (2) the reimbursement of other offering costs to affiliates in the amount of $4,228,397;
•
$327,526,877 of proceeds from the issuance of mortgage notes payable, net of deferred financing costs in the amount of $3,543,623;
•
$114,600,000 provided by advances from our revolving credit facility;
•
$202,317 of cash paid for the redemption of common stock; and
•
$5,341,496 of net cash distributions, after giving effect to distributions reinvested by stockholders of $5,842,481.
Contractual Commitments and Contingencies
We use secured debt, and intend to use in the future secured and unsecured debt as a means of providing additional funds for the acquisition of our properties. We believe that the careful use of borrowings will help us achieve our diversification goals and potentially enhance the returns on our investments. After we have invested all of the net offering proceeds from our initial public offering, we expect that our borrowings will be approximately 55% to 60% of the value of our properties (after debt amortization and before deducting depreciation and amortization) and other real estate-related assets. For valuation purposes, the value of a property will equal its cost until such property is valued by an independent third party appraiser or qualified independent valuation expert. In order to facilitate investments in the early stages of our operations, we expect to temporarily borrow in excess of our long-term targeted debt level. Under our charter, we are prohibited from borrowing in excess of 300% of our net assets, which generally approximates to 75% of the aggregate cost of our assets unless such excess is approved by a majority of the independent directors and disclosed to stockholders, along with a justification for such excess, in our next quarterly report. In such event, we will monitor our debt levels and take action to reduce any such excess as practicable. We do not intend to exceed our charter’s leverage limit except in the early stages of our operations when the costs of our investments are most likely to substantially exceed our net offering proceeds. Our aggregate borrowings are reviewed by our board of directors at least quarterly. As of September 30, 2015, our aggregate borrowings were not in excess of 300% of the value of our net assets.
In addition to using our capital resources for investing purposes and meeting our debt obligations, we expect to use our capital resources to make certain payments to our advisor and the dealer manager. During our organization and offering stage, these payments will include payments to the dealer manager for selling commissions and dealer manager fees and payments to the dealer manager and our advisor for reimbursement of certain organization and other offering expenses. However, our advisor has agreed to reimburse us within 60 days of the end of the month in which our initial public offering ends to the extent that selling commissions, dealer manager fees and organization and other offering expenses incurred by us exceed 15% of our gross offering proceeds of our initial public offering. During our acquisition and development stage, we expect to make payments to our advisor in connection with the selection and origination or purchase of real estate and real estate-related investments, the management of our asset portfolio and costs incurred by our advisor in providing services to us.

41

PART I — FINANCIAL INFORMATION (continued)


As of September 30, 2015, we had indebtedness totaling an aggregate principal amount of $667,410,019. The following is a summary of our contractual obligations as of September 30, 2015:
 
 
 
 
Payments due by period
Contractual Obligations
 
Total
 
Less than 1 year
 
1-3 years
 
3-5 years
 
More than 5 years
Interest payments on outstanding debt obligations(1)
 
$
146,367,429

 
$
3,973,065

 
$
31,544,582

 
$
31,358,902

 
$
79,490,880

Principal payments on outstanding debt obligations
 
667,410,019

 
77,165

 
573,997

 
6,123,320

 
660,635,537

Total
 
$
813,777,448

 
$
4,050,230

 
$
32,118,579

 
$
37,482,222

 
$
740,126,417

________________
(1)
Projected interest payments on outstanding debt obligations are based on the outstanding principal amounts and interest rates in effect at September 30, 2015. We incurred interest expense of $4,086,542 and $7,938,509 during the three and nine months ended September 30, 2015, including amortization of deferred financing costs totaling $117,487 and $220,287, net unrealized losses from the change in fair value of interest rate cap agreements of $1,038,080 and $2,206,162 and credit facility commitment fees of $11,968 and $11,968, respectively.
Results of Operations
Overview
The discussion that follows is based on our consolidated results of operations for the three and nine months ended September 30, 2015 and 2014. The ability to compare one period to another is significantly affected by acquisitions completed during those periods. We commenced operations with our first property acquisition on May 22, 2014. As of September 30, 2015, we owned 24 multifamily properties compared to owning four multifamily properties as of September 30, 2014. The increase in our property portfolio is the primary cause of the increases in operating income and expenses, as further discussed below.
Our results of operations for the three and nine months ended September 30, 2015 are not indicative of those expected in future periods. We have not yet invested all of the proceeds from our offering received to date and expect to continue to raise additional capital, increase our borrowings and make future acquisitions, all of which will have a significant impact on our future results of operations. In general, we expect that our revenues and expenses related to our portfolio will increase in future periods as a result of anticipated future acquisitions of real estate and real estate-related investments.
To provide additional insight into our operating results, we are also providing a detailed analysis of same-store versus non-same-store net operating income, or NOI. For more information on NOI and a reconciliation of NOI (a non-GAAP financial measure) to net loss, see “—Net Operating Income.”

42

PART I — FINANCIAL INFORMATION (continued)


Consolidated Results of Operations for the Three Months Ended September 30, 2015 Compared to the Three Months Ended September 30, 2014
The following table summarizes the consolidated results of operations for the three months ended September 30, 2015 and 2014:
 
 
For the Three Months Ended September 30,
 
 
 
 
 
 
2015
 
2014
 
Change $
 
Change %
Total revenues
 
$
20,192,686

 
$
1,740,048

 
$
18,452,638

 
1,060
 %
Operating, maintenance and management
 
(5,607,063
)
 
(441,824
)
 
(5,165,239
)
 
1,169
 %
Real estate taxes and insurance
 
(2,239,371
)
 
(284,297
)
 
(1,955,074
)
 
688
 %
Fees to affiliates
 
(7,751,727
)
 
(953,666
)
 
(6,798,061
)
 
713
 %
Depreciation and amortization
 
(12,493,027
)
 
(1,204,076
)
 
(11,288,951
)
 
938
 %
Interest expense
 
(4,086,542
)
 
(287,399
)
 
(3,799,143
)
 
1,322
 %
General and administrative expenses
 
(610,641
)
 
(486,056
)
 
(124,585
)
 
26
 %
Acquisition costs
 
(1,624,174
)
 
(515,705
)
 
(1,108,469
)
 
215
 %
Net loss
 
$
(14,219,859
)
 
$
(2,432,975
)
 
$
(11,786,884
)
 
484
 %
 
 
 
 
 
 
 
 
 
NOI(1)
 
$
11,575,312

 
$
944,378

 
$
10,630,934

 
1,126
 %
FFO(2)
 
$
(1,726,832
)
 
$
(1,228,899
)
 
$
(497,933
)
 
(41
)%
MFFO(2)
 
$
5,850,677

 
$
147,895

 
$
5,702,782

 
3,856
 %
______________
(1)
NOI is a non-GAAP financial measure used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings. However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs, certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of our properties and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs, all of which are significant economic costs. For additional information on how we calculate NOI and a reconciliation of NOI to net loss, see “—Net Operating Income.”
(2)
GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets the Board of Governors of NAREIT established the measurement tool of FFO. Since its introduction, FFO has become a widely used non-GAAP financial measure among REITs. Additionally, we use modified funds from operations, or MFFO, as defined by the Investment Program Association as a supplemental measure to evaluate our operating performance. MFFO is based on FFO but includes certain adjustments we believe are necessary due to changes in accounting and reporting under GAAP since the establishment of FFO. Neither FFO nor MFFO should be considered as alternatives to net loss or other measurements under GAAP as indicators of our operating performance, nor should they be considered as alternatives to cash flow from operating activities or other measurements under GAAP as indicators of liquidity. For additional information on how we calculate FFO and MFFO and a reconciliation of FFO and MFFO to net loss, see “—Funds From Operations and Modified Funds From Operations.”
Net loss
For the three months ended September 30, 2015, we had a net loss of $14,219,859 compared to a net loss of $2,432,975 for the three months ended September 30, 2014. The increase in net loss of $11,786,884 over the comparable prior year period was primarily due to the increase in operating, maintenance and management expenses of $5,165,239, the increase in real estate taxes and insurance of $1,955,074, the increase in fees to affiliates of $6,798,061, the increase in depreciation and amortization expense of $11,288,951, the increase in interest expense of $3,799,143, the increase in general and administrative expenses of $124,585 and the increase in acquisition costs of $1,108,469, partially offset by the increase in total revenues of $18,452,638. The increase in these expenses was due primarily to the increase in our property portfolio from four multifamily properties at September 30, 2014 to 24 multifamily properties at September 30, 2015.

43

PART I — FINANCIAL INFORMATION (continued)


Total revenues
Rental income and tenant reimbursements for the three months ended September 30, 2015 were $20,192,686 compared to $1,740,048 for the three months ended September 30, 2014. The increase of $18,452,638 was primarily due to owning 24 multifamily properties at September 30, 2015 compared to four multifamily properties at September 30, 2014. Additionally, our total units increased by 6,844 from 1,047 at September 30, 2014 to 7,891 at September 30, 2015. Average monthly rents per unit increased from $809 as of September 30, 2014 to $1,000 as of September 30, 2015. We expect rental income and tenant reimbursements to increase in future periods as a result of ordinary monthly rent increases, improved occupancy and our value-enhancement strategy.
Operating, maintenance and management expenses
Operating, maintenance and management expenses for the three months ended September 30, 2015 were $5,607,063 compared to $441,824 for the three months ended September 30, 2014. The increase of $5,165,239 was primarily due to operating 24 multifamily properties as of September 30, 2015 compared to four multifamily properties as of September 30, 2014. We expect that these amounts will increase in future periods as a result of anticipated future acquisitions of real estate but will decrease as a percentage of total revenues.
Real estate taxes and insurance
Real estate taxes and insurance for the three months ended September 30, 2015 were $2,239,371 compared to $284,297 for the three months ended September 30, 2014. The increase of $1,955,074 was due to the acquisition of 20 multifamily properties since September 30, 2014 and the continuing operation of the properties owned as of September 30, 2014. We expect these amounts to increase in future periods as a result of anticipated future acquisitions of real estate and ordinary municipal property tax increases.
Fees to affiliates
Fees to affiliates for the three months ended September 30, 2015 were $7,751,727 compared to $953,666 for the three months ended September 30, 2014. The increase of $6,798,061 was primarily due to acquisition fees and loan coordination fees of $2,561,266 and $2,353,989, respectively, earned by our advisor in connection with the acquisition of six multifamily properties with an aggregate purchase price of $245,230,000 and financing of ten multifamily properties in the aggregate amount of $235,398,919 during the three months ended September 30, 2015, compared to acquisition fees and loan coordination fees of $488,962 and $315,000, respectively, earned by our advisor in connection with the acquisition and financing of two multifamily properties with an aggregate purchase price of $45,000,000 and financing of $31,500,000 during the three months ended September 30, 2014. Additionally, investment management and property management fees increased for the three months ended September 30, 2015 as a result of the growth of our portfolio from four multifamily properties owned as of September 30, 2014 to 24 multifamily properties owned as of September 30, 2015. We expect fees to affiliates to increase in future periods as a result of anticipated future acquisitions of real estate and real estate-related investments.
Depreciation and amortization
Depreciation and amortization for the three months ended September 30, 2015 was $12,493,027 compared to $1,204,076 for the three months ended September 30, 2014. The increase of $11,288,951 was primarily due to the net increase in depreciable and amortizable assets of $753,928,707 since September 30, 2014. We expect these amounts to increase in future periods as a result of anticipated future acquisitions of real estate.
Interest expense
Interest expense for the three months ended September 30, 2015 was $4,086,542 compared to $287,399 for the three months ended September 30, 2014. The increase of $3,799,143 was primarily due to the net increase in the notes payable balance of $606,440,019 since September 30, 2014 due to financing incurred in connection with the acquisition of 20 multifamily properties since September 30, 2014. Included in interest expense is the amortization of deferred financing costs of $117,487 and $9,151, the unrealized loss on derivative instruments of $1,038,080 and $57,127 and credit facility commitment fees of $11,968 and $0 for the three months ended September 30, 2015 and 2014, respectively. Our interest expense in future periods will vary based on our level of future borrowings, which will depend on the amount of proceeds raised in our ongoing initial public offering, the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.

44

PART I — FINANCIAL INFORMATION (continued)


General and administrative expense
General and administrative expenses for the three months ended September 30, 2015 were $610,641 compared to $486,056 for the three months ended September 30, 2014. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees and independent director compensation. The increase of $124,585 was primarily due to the acquisition of 20 multifamily properties since September 30, 2014 and the continuing operation of the properties owned as of September 30, 2014. We expect general and administrative expenses to decrease as a percentage of total revenue.
Acquisition costs
Acquisition costs for the three months ended September 30, 2015 were $1,624,174 compared to $515,705 for the three months ended September 30, 2014. The increase of $1,108,469 was due primarily to the acquisition of six multifamily properties with an aggregate purchase price of $245,230,000 during the three months ended September 30, 2015, compared to the acquisition of two multifamily properties with an aggregate purchase price of $45,000,000 during the three months ended September 30, 2014. Acquisition costs in future periods will vary based on the number of acquisitions we make during the period, which will depend on the amount of proceeds raised in our ongoing initial public offering and the availability of debt financing.
Consolidated Results of Operations for the Nine Months Ended September 30, 2015 Compared to the Nine Months Ended September 30, 2014
The following table summarizes the consolidated results of operations for the nine months ended September 30, 2015 and 2014:
 
 
For the Nine Months Ended September 30,
 
 
 
 
 
 
2015
 
2014
 
Change $
 
Change %
Total revenues
 
$
40,687,253

 
$
1,932,912

 
$
38,754,341

 
2,005
 %
Operating, maintenance and management
 
(11,082,156
)
 
(498,382
)
 
(10,583,774
)
 
2,124
 %
Real estate taxes and insurance
 
(5,270,842
)
 
(304,649
)
 
(4,966,193
)
 
1,630
 %
Fees to affiliates
 
(17,335,703
)
 
(1,713,203
)
 
(15,622,500
)
 
912
 %
Depreciation and amortization
 
(25,562,812
)
 
(1,354,372
)
 
(24,208,440
)
 
1,787
 %
Interest expense
 
(7,938,509
)
 
(405,468
)
 
(7,533,041
)
 
1,858
 %
General and administrative expenses
 
(2,018,031
)
 
(1,075,227
)
 
(942,804
)
 
88
 %
Acquisition costs
 
(4,662,394
)
 
(940,535
)
 
(3,721,859
)
 
396
 %
Net loss
 
$
(33,183,194
)
 
$
(4,358,924
)
 
$
(28,824,270
)
 
661
 %
 
 
 
 
 
 
 
 
 
NOI(1)
 
$
22,792,772

 
$
1,045,523

 
$
21,747,249

 
2,080
 %
FFO(2)
 
$
(7,620,382
)
 
$
(3,004,552
)
 
$
(4,615,830
)
 
(154
)%
MFFO(2)
 
$
10,844,066

 
$
(383,573
)
 
$
11,227,639

 
2,927
 %
______________
(1)
See “—Net Operating Income” below for a reconciliation of NOI to net loss.
(2)
See “—Funds From Operations and Modified Funds From Operations” below for a reconciliation of FFO and MFFO to net loss.

45

PART I — FINANCIAL INFORMATION (continued)


Net loss
For the nine months ended September 30, 2015, we had a net loss of $33,183,194 compared to $4,358,924 for the nine months ended September 30, 2014. The increase in net loss of $28,824,270 over the comparable prior year period was primarily due to the increase in operating, maintenance and management expenses of $10,583,774, the increase in real estate taxes and insurance of $4,966,193, the increase in fees to affiliates of $15,622,500, the increase in depreciation and amortization expense of $24,208,440, the increase in interest expense of $7,533,041, the increase in general and administrative expenses of $942,804 and the increase in acquisition costs of $3,721,859, partially offset by the increase in total revenues of $38,754,341. The increase in these expenses was due primarily to the increase in our property portfolio from four multifamily properties at September 30, 2014 to 24 multifamily properties at September 30, 2015.
Total revenues
Rental income and tenant reimbursements were $40,687,253 for the nine months ended September 30, 2015 compared to $1,932,912 for the nine months ended September 30, 2014. The increase of $38,754,341 was primarily due to owning 24 multifamily properties at September 30, 2015 compared to four multifamily properties at September 30, 2014. Additionally, our total units increased by 6,844 from 1,047 at September 30, 2014 to 7,891 at September 30, 2015. Average monthly rents per unit increased from $809 as of September 30, 2014 to $1,000 as of September 30, 2015. We expect rental income and tenant reimbursements to increase in future periods as a result of ordinary monthly rent increases, improved occupancy and our value-enhancement strategy.
Operating, maintenance and management expenses
Operating, maintenance and management expenses were $11,082,156 for the nine months ended September 30, 2015 compared to $498,382 for the nine months ended September 30, 2014. The increase of $10,583,774 was primarily due to operating 24 multifamily properties as of September 30, 2015 compared to four multifamily properties as of September 30, 2014. We expect that these amounts will increase in future periods as a result of anticipated future acquisitions of real estate but will decrease as a percentage of total revenues.
Real estate taxes and insurance
Real estate taxes and insurance expenses were $5,270,842 for the nine months ended September 30, 2015 compared to $304,649 for the nine months ended September 30, 2014. The increase of $4,966,193 was due to the acquisition of 20 multifamily properties since September 30, 2014 and the continuing operation of the properties owned as of September 30, 2014. We expect these amounts to increase in future periods as a result of anticipated future acquisitions of real estate and ordinary municipal property tax increases.
Fees to affiliates
Fees to affiliates were $17,335,703 for the nine months ended September 30, 2015 compared to $1,713,203 for the nine months ended September 30, 2014. The increase of $15,622,500 was primarily due to acquisition fees and loan coordination fees of $6,891,098 and $4,704,794, respectively, earned by our advisor in connection with the acquisition and financing of 17 multifamily properties with an aggregate purchase price of $657,945,000 and financing of $470,479,419 during the nine months ended September 30, 2015, compared to acquisition fees and loan coordination fees of $930,405 and $609,700, respectively, earned by our advisor in connection with the acquisition and financing of four multifamily properties with an aggregate purchase price of $87,064,250 and financing of $60,970,000 during the nine months ended September 30, 2014. Additionally, investment management and property management fees increased for the nine months ended September 30, 2015 as a result of the growth of our portfolio from four multifamily properties owned as of September 30, 2014 to 24 multifamily properties owned as of September 30, 2015. We expect fees to affiliates to increase in future periods as a result of anticipated future acquisitions of real estate and real estate-related investments.
Depreciation and amortization
Depreciation and amortization expenses were $25,562,812 for the nine months ended September 30, 2015 compared to $1,354,372 for the nine months ended September 30, 2014. The increase of $24,208,440 was primarily due to the net increase in depreciable and amortizable assets of $753,928,707 since September 30, 2014. We expect these amounts to increase in future periods as a result of anticipated future acquisitions of real estate.

46

PART I — FINANCIAL INFORMATION (continued)


Interest expense
Interest expense for the nine months ended September 30, 2015 was $7,938,509 compared to $405,468 for the nine months ended September 30, 2014. The increase of $7,533,041 was primarily due to the net increase in the notes payable balance of $606,440,019 since September 30, 2014 due to financing incurred in connection with the acquisition of 20 multifamily properties since September 30, 2014. Included in interest expense is the amortization of deferred financing costs of $220,287 and $11,520, the unrealized loss on derivative instruments of $2,206,162 and $140,339 and credit facility commitment fees of $11,968 and $0 for the nine months ended September 30, 2015 and 2014. Our interest expense in future periods will vary based on our level of future borrowings, which will depend on the amount of proceeds raised in our ongoing initial public offering, the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.
General and administrative expenses
General and administrative expenses for the nine months ended September 30, 2015 were $2,018,031 compared to $1,075,227 for the nine months ended September 30, 2014. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees and independent director compensation. The increase of $942,804 was primarily due to the acquisition of 20 multifamily properties since September 30, 2014 and the continuing operation of the properties owned as of September 30, 2014. We expect general and administrative expenses to decrease as a percentage of total revenue.
Acquisition costs
Acquisition costs for the nine months ended September 30, 2015 were $4,662,394 compared to $940,535 for the nine months ended September 30, 2014. The increase of $3,721,859 was due primarily to the acquisition of 17 multifamily properties with an aggregate purchase price of $657,945,000 during the nine months ended September 30, 2015, compared to the acquisition of four multifamily properties with an aggregate purchase price of $87,064,250 during the nine months ended September 30, 2014. Acquisition costs in future periods will vary based on the number of acquisitions we make during the period, which will depend on the amount of proceeds raised in our ongoing initial public offering and the amount of debt financing available.
Property Operations for the Three Months Ended September 30, 2015 Compared to the Three Months Ended September 30, 2014
For purposes of evaluating comparative operating performance, we categorize our properties as “same-store” or “non-same-store.” A “same-store” property is a property that was owned at July 1, 2014. A “non-same-store” property is a property that was acquired, placed into service or disposed of after July 1, 2014. As of September 30, 2015, two properties were categorized as same-store properties.
The following table presents the same-store and non-same-store results from operations for the three months ended September 30, 2015 and 2014:
 
 
For the Three Months Ended September 30,
 
 
 
 
 
 
2015
 
2014
 
Change $
 
Change %
Same-store properties:
 
 
 
 
 
 
 
 
Revenues
 
$
1,316,139

 
$
1,204,450

 
$
111,689

 
9
 %
Operating expenses
 
473,605

 
546,911

 
(73,306
)
 
(13
)%
Net operating income
 
842,534

 
657,539

 
184,995

 
28
 %
 
 
 
 
 
 
 
 
 
Non-same-store properties:
 
 
 
 
 
 
 
 
Net operating income
 
10,732,778

 
286,839

 
10,445,939

 
 
 
 
 
 
 
 
 
 
 
Total net operating income(1)
 
$
11,575,312

 
$
944,378

 
$
10,630,934

 
 
________________
(1)
See “—Net Operating Income” below for a reconciliation of NOI to net loss.

47

PART I — FINANCIAL INFORMATION (continued)


Net Operating Income
Same-store net operating income for the three months ended September 30, 2015 was $842,534 compared to $657,539 for the three months ended September 30, 2014. The 28% increase in same-store net operating income was primarily due to a 9% increase in same-store rental revenues and a 13% decrease in same-store operating expenses.
Revenues
Same-store revenues for the three months ended September 30, 2015 were $1,316,139 compared to $1,204,450 for the three months ended September 30, 2014. The 9% increase in same-store revenues was primarily due to average rent increases at the same-store properties from $817 as of September 30, 2014 to $861 as of September 30, 2015, as a result of ordinary monthly rent increases and the completion of value-enhancement projects, partially offset by the decrease in same store occupancy from 95.4% as of September 30, 2014 to 94.4% as of September 30, 2015.
Operating Expenses
Same-store operating expenses for the three months ended September 30, 2015 were $473,605 compared to $546,911 for the three months ended September 30, 2014. The decrease in same-store operating expenses was primarily attributable to the decrease in property taxes and insurance.

48

PART I — FINANCIAL INFORMATION (continued)


Net Operating Income
Net Operating Income, or NOI, is a non-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties, to determine trends in earnings and to compute the fair value of our properties as it is not affected by (1) the cost of funds, (2) acquisition costs, (3) non-operating fees to affiliates, (4) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP or (5) general and administrative expenses and other gains and losses that are specific to us. The cost of funds is eliminated from net income (loss) because it is specific to our particular financing capabilities and constraints. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future. Acquisition costs and non-operating fees to affiliates are eliminated because they do not reflect continuing operating costs of the property owner.
Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our multifamily properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale which will usually change from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed purchases or sales. We believe that eliminating these costs from net income is useful because the resulting measure captures the actual revenue generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs.
However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs, certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income which further limits its usefulness.
NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income (loss) as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income (loss) computed in accordance with GAAP and discussions elsewhere in “—Results of Operations” regarding the components of net income (loss) that are eliminated in the calculation of NOI. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.
The following is a reconciliation of our NOI to net loss for the three and nine months ended September 30, 2015 and 2014 computed in accordance with GAAP:
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Net loss
 
$
(14,219,859
)
 
$
(2,432,975
)
 
$
(33,183,194
)
 
$
(4,358,924
)
Fees to affiliates(1)
 
6,980,787

 
884,117

 
15,794,220

 
1,628,845

Depreciation and amortization
 
12,493,027

 
1,204,076

 
25,562,812

 
1,354,372

Interest expense
 
4,086,542

 
287,399

 
7,938,509

 
405,468

General and administrative expenses
 
610,641

 
486,056

 
2,018,031

 
1,075,227

Acquisition costs
 
1,624,174

 
515,705

 
4,662,394

 
940,535

Net operating income
 
$
11,575,312

 
$
944,378

 
$
22,792,772

 
$
1,045,523

____________________

49

PART I — FINANCIAL INFORMATION (continued)



(1)
Fees to affiliates for the three and nine months ended September 30, 2015 excludes property management fees of $582,945 and $1,182,106 and other fees of $187,995 and $359,377, respectively, that are included in NOI. Fees to affiliates for the three and nine months ended September 30, 2014 excludes property management fees of $50,915 and $58,037 and other fees of $18,634 and $26,321, respectively, that are included in NOI.
Funds from Operations and Modified Funds from Operations
Due to certain unique operating characteristics of real estate companies, as discussed below, NAREIT, an industry trade group, has promulgated a measure known as funds from operations, or FFO, which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income (loss) as determined under GAAP.
We define FFO, a non-GAAP financial measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, or the White Paper. The White Paper defines FFO as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of property and non-cash impairment charges of real estate related investments, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In particular, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges. Our FFO calculation complies with NAREIT’s policy described above.
The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. However, FFO, and MFFO as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.
Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While other start-up entities may also experience significant acquisition activity during their initial years, we believe that public, non-listed REITs, like us, are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after acquisition activity

50

PART I — FINANCIAL INFORMATION (continued)


ceases. Our board of directors will determine to pursue a liquidity event when it believes that the then-current market conditions are favorable. However, our board of directors does not anticipate evaluating a liquidity event (i.e., listing of our common stock on a national exchange, a merger or sale of our company or another similar transaction) until five years after the completion of our offering stage. Thus, as a limited life REIT, we will not continuously purchase assets and will have a limited life.
Due to the above factors and other unique features of publicly registered, non-listed REITs, the Investment Program Association, or IPA, an industry trade group, has standardized a measure known as MFFO, which the IPA has recommended as a supplemental measure for publicly registered non-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a public, non-listed REIT having the characteristics described above. MFFO is not equivalent to our net income or loss as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate with a limited life and targeted exit strategy, as currently intended. We believe that, because MFFO excludes costs that we consider more reflective of investing activities and other non-operating items included in FFO and also excludes acquisition fees and expenses that affect our operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring our properties and once our portfolio is in place. By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our offering has been completed and our properties have been acquired. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry. Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our offering and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our offering has been completed and properties have been acquired, as it excludes acquisition costs that have a negative effect on our operating performance during the periods in which properties are acquired.
We define MFFO, a non-GAAP financial measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized. While we rely on our advisor for managing interest rate, hedge and foreign exchange risk, we do not retain an outside consultant to review all our hedging agreements. Inasmuch as interest rate hedges are not a fundamental part of our operations, we believe it is appropriate to exclude such non-recurring gains and losses in calculating MFFO, as such gains and losses are not reflective of on-going operations.
Our MFFO calculation complies with the IPA’s Practice Guideline described above. In calculating MFFO, we exclude acquisition related expenses, amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Under GAAP, acquisition fees and expenses are characterized as operating expenses in determining operating net income. These expenses are paid in cash by us. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. In the event that proceeds from our initial public offering are not available to fund our reimbursement of acquisition fees and expenses incurred by our advisor, such fees and expenses will need to be reimbursed to our advisor from other sources, including debt, operational earnings or cash flow, net proceeds from the sale of properties, or from ancillary cash flows. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to our stockholders. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of derivatives and gains

51

PART I — FINANCIAL INFORMATION (continued)


and losses from dispositions of assets as non-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective of on-going operations and are therefore typically adjusted for when assessing operating performance.
Our management uses MFFO and the adjustments used to calculate MFFO in order to evaluate our performance against other public, non-listed REITs which have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate MFFO allow us to present our performance in a manner that reflects certain characteristics that are unique to public, non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures is useful to investors. By excluding expensed acquisition costs, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.
Presentation of this information is intended to provide useful information to investors as they compare the operating performance to that of other public, non-listed REITs, although it should be noted that not all public, non-listed REITs calculate FFO and MFFO the same way, so comparisons with other public, non-listed REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. MFFO has limitations as a performance measure in an offering such as ours where the price of a share of common stock is a stated value and there is no regular net asset value determination during the early stage of the offering and for a period thereafter. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. MFFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining MFFO.
Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across the non-listed REIT industry and in response to such standardization we may have to adjust our calculation and characterization of FFO or MFFO accordingly.
Our calculation of FFO and MFFO is presented in the following table for the three and nine months ended September 30, 2015 and 2014:
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Reconciliation of net loss to MFFO:
 
 
 
 
 
 
 
 
Net loss
 
$
(14,219,859
)
 
$
(2,432,975
)
 
$
(33,183,194
)
 
$
(4,358,924
)
  Depreciation of real estate assets
 
6,786,834

 
485,661

 
13,534,142

 
540,747

  Amortization of lease-related costs
 
5,706,193

 
718,415

 
12,028,670

 
813,625

FFO
 
(1,726,832
)
 
(1,228,899
)
 
(7,620,382
)
 
(3,004,552
)
  Acquisition fees and expenses(1)(2)
 
6,539,429

 
1,319,667

 
16,258,286

 
2,480,640

  Unrealized loss on derivative instruments
 
1,038,080

 
57,127

 
2,206,162

 
140,339

MFFO
 
$
5,850,677

 
$
147,895

 
$
10,844,066

 
$
(383,573
)
________________
(1)
By excluding expensed acquisition costs, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our advisor or third parties. Acquisition fees and expenses under GAAP are considered operating expenses and as expenses included in the

52

PART I — FINANCIAL INFORMATION (continued)


determination of net income (loss) and income (loss) from continuing operations, both of which are performance measures under GAAP. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property. In the event that proceeds from our initial public offering are not available to fund our reimbursement of acquisition fees and expenses incurred by our advisor, such fees and expenses will need to be reimbursed to the advisor from other sources, including debt, operational earnings or cash flow, net proceeds from the sale of properties, or from ancillary cash flows. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to its stockholders.
(2)
Acquisition fees and expenses for the three and nine months ended September 30, 2015 includes acquisition fees of $2,561,266 and $6,891,098 and loan coordination fees of $2,353,989 and $4,704,794 that are recorded in fees to affiliates in the accompanying consolidated statements of operations. Acquisition fees and expenses for the three and nine months ended September 30, 2015 also includes acquisition expenses of $1,624,174 and $4,662,394 that are recorded in acquisition costs in the accompanying consolidated statements of operations. Acquisition fees and expenses for the three and nine months ended September 30, 2014 includes acquisition fees of $488,962 and $930,405 and loan coordination fees of $315,000 and $609,700 that are recorded in fees to affiliates in the accompanying consolidated statements of operations. Acquisition fees and expenses for the three and nine months ended September 30, 2014 also includes acquisition expenses of $515,705 and $940,535 that are recorded in acquisition costs in the accompanying consolidated statements of operations.
FFO and MFFO may be used to fund all or a portion of certain capitalizable items that are excluded from FFO and MFFO, such as tenant improvements, building improvements and deferred leasing costs.
Off-Balance Sheet Arrangements
As of September 30, 2015, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Related-Party Transactions and Agreements
We have entered into agreements with our advisor and its affiliates, whereby we pay certain fees to, or reimburse certain expenses of, our advisor or its affiliates for acquisition and advisory fees and expenses, financing coordination fees, organization and offering costs, sales commissions, dealer manager fees, asset and property management fees and expenses, leasing fees and reimbursement of certain operating costs. Refer to Note 7 of our unaudited condensed consolidated financial statements included in this quarterly report for a discussion of the various related-party transactions, agreements and fees.
Item 3. Qualitative and Quantitative Disclosure About Market Risk
We may be exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund the acquisition, expansion and refinancing of our real estate investment portfolio and operations. We may be also exposed to the effects of changes in interest rates as a result of the acquisition and origination of mortgage, mezzanine, bridge and other loans. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. In addition, we may utilize a variety of financial instruments, including interest rate caps, collars, floors and swap agreements, in order to limit the effects of changes in interest rates on our operations. When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for payments to holders of our common stock and that the losses may exceed the amount we invested in the instruments.
We borrow funds at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. At September 30, 2015, the fair value of our fixed rate debt was $24,808,919 and the carrying value of our fixed rate debt was $24,808,919. The fair value estimate of our fixed rate debt was estimated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining

53

PART I — FINANCIAL INFORMATION (continued)


maturity if the loans were originated at September 30, 2015. As we expect to hold our fixed rate instruments to maturity and the amounts due under such instruments would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instruments, would have a significant impact on our operations.
Movements in interest rates on our variable rate debt will change our future earnings and cash flows, but not significantly affect the fair value of those instruments. However, changes in required risk premiums will result in changes in the fair value of floating rate instruments. At September 30, 2015, the fair value of our variable rate debt was $616,726,274 and the carrying value of our variable rate debt was $642,601,100. Based on interest rates as of September 30, 2015, if interest rates are 100 basis points higher during the 12 months ending September 30, 2016, interest expense on our variable rate debt would increase by $6,373,259 and if interest rates are 100 basis points lower during the 12 months ending September 30, 2016, interest expense on our variable rate debt would decrease by $1,230,039.
At September 30, 2015, the weighted-average interest rate of our fixed rate debt and variable rate debt was 4.34% and 2.25%, respectively. The weighted-average interest rate represents the actual interest rate in effect at September 30, 2015 (consisting of the contractual interest rate), using interest rate indices as of September 30, 2015, where applicable.
We will also be exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and, therefore, do not have credit risk. We will seek to minimize the credit risk in derivative instruments by entering into transactions with high-quality counterparties. As of September 30, 2015, we did not have counterparty risk on our interest rate cap agreements as the underlying variable rates for each of our interest rate caps as of September 30, 2015 were not in excess of the capped rates. See also Note 10 to our unaudited condensed consolidated financial statements included in this quarterly report.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this quarterly report, management, including our chief executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(f) or 15d-15(f) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Based upon, and as of the date of, the evaluation, our chief executive officer and principal financial officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this quarterly report to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

54

PART II — OTHER INFORMATION

PART II
Item 1. Legal Proceedings
From time to time we are party to legal proceedings that arise in the ordinary course of our business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by government agencies.
Item 1A. Risk Factors
There have been no material changes to the risk factors contained in Part I, Item 1A set forth in our Annual Report on Form 10-K filed with the SEC on March 16, 2015.
Item 2. Unregistered Sales of Equity Securities and use of Proceeds
During the three months ended September 30, 2015, we did not sell any equity securities that were not registered under the Securities Act of 1933, or the Securities Act.
Our Registration Statement on Form S-11 (File No. 333-191049), registering a public offering of up to $1,100,000,000 in shares of our common stock, was declared effective under the Securities Act and we commenced our initial public offering on December 30, 2013. We are offering up to 66,666,667 shares of our common stock to the public in our primary offering at $15.00 per share and up to 7,017,544 shares of our common stock pursuant to our distribution reinvestment plan at $14.25 per share. As of September 30, 2015, we had sold 27,557,178 shares of our common stock in our public offering for gross offering proceeds of $411,236,534, including 458,675 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $6,536,120.
From inception through September 30, 2015, we had recognized selling commissions, dealer manager fees and organization and other offering costs in our public offering in the amounts set forth below. The dealer manager for our public offering reallowed all of the selling commissions and a portion of the dealer manager fees to participating broker-dealers.
Type of Expense Amount
 
Amount
 
Estimated/Actual
 
Percentage of Offering Proceeds
Selling commissions and dealer manager fees
 
$
38,814,637

 
Actual
 
9.59
%
Other organization and offering costs
 
10,680,344

 
Actual
 
2.64
%
Total expenses
 
$
49,494,981

 
Actual
 
12.23
%
Total public offering proceeds (excluding DRP proceeds)
 
$
404,700,414

 
Actual
 
100.00
%
Percentage of public offering proceeds used to pay for organization and offering costs
 
12.23
%
 
Actual
 
12.23
%
From the commencement of our initial public offering through September 30, 2015, the net offering proceeds to us, after deducting the total expenses incurred as described above, were $361,741,553, including net offering proceeds from our distribution reinvestment plan of $6,536,120. For the period from inception through September 30, 2015, the ratio of the cost of raising equity capital to the gross amount of equity capital raised was approximately 12.23%.
We intend to use substantially all of the net proceeds from our public offering to invest in and manage a diverse portfolio of multifamily properties located in targeted markets throughout the United States. In addition to our focus on multifamily properties, we may also make selective strategic acquisitions of other types of commercial properties. We may also acquire or originate mortgage, mezzanine, bridge and other real estate loans and equity securities of other real estate companies. As of September 30, 2015, we had invested in 24 multifamily properties for a total purchase price of $932,509,250. These property acquisitions were funded from proceeds of our public offering and $613,130,019 in secured financings.

55

PART II — OTHER INFORMATION (continued)

During the three months ended September 30, 2015, we fulfilled redemption requests and redeemed shares of our common stock pursuant to our share repurchase plan as follows:
 
 
Total Number of Shares Requested to be Redeemed(1)
 
Total Number of Shares Redeemed
 
Average Price Paid per Share(2)
 
Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
July 2015
 
—

 
6,601

 
$
14.98

 
(3) 
August 2015
 
—

 
—

 
—

 
(3) 
September 2015
 
5,267

 
—

 
—

 
(3) 
 
 
5,267

 
6,601

 
 
 
 
____________________
(1)
We generally redeem shares on the last business day of the month following the end of each fiscal quarter in which requests were received.
(2)
Pursuant to the plan, as amended, we currently redeem shares at prices determined as follows:
•
92.5% of the price paid to acquire the shares from us for stockholders who have held their shares for at least one year;
•
95.0% of the price paid to acquire the shares from us for stockholders who have held their shares for at least two years;
•
97.5% of the price paid to acquire the shares from us for stockholders who have held their shares for at least three years; and
•
100% of the price paid to acquire the shares from us for stockholders who have held their shares for at least four years.
Notwithstanding the above, the redemption price for redemptions sought upon a stockholder’s death, “qualifying disability” or “determination of incompetence” will initially be the amount paid to acquire the shares from us. Furthermore, once we establish an estimated value per share of common stock, the redemption price per share for all stockholders will be based on our most recently established estimated value per share, as determined by our board of directors.
(3)
The number of shares that may be redeemed pursuant to the share repurchase plan during any calendar year is limited to: (1) 5% of the weighted-average number of shares outstanding during the prior calendar year and (2) those that can be funded from the net proceeds we received from the sale of shares under the distribution reinvestment plan during the prior calendar year, plus such additional funds as may be reserved for that purpose by our board of directors.
Item 3. Defaults Upon Senior Securities
None.
Item 4.  Mine Safety Disclosures
Not applicable.
Item 5.  Other Information
None.

56

PART II — OTHER INFORMATION (continued)

Item 6.   Exhibits
EXHIBIT LIST
Exhibit
 
Description
3.1

 
Articles of Amendment and Restatement of Steadfast Apartment REIT, Inc. (incorporated by reference to Exhibit 3.1 to Amendment No. 3 to the Registrant’s Registration Statement on Form S-11, filed December 16, 2013, Commission File No. 333-191049)
3.2

 
Bylaws of Steadfast Apartment REIT, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form S-11, filed September 6, 2013, Commission File No. 333-191049)
4.1

 
Form of Subscription Agreement (incorporated by reference to Appendix B to the prospectus, dated April 15, 2015, of the Registrant)
4.2

 
Form of Distribution Reinvestment Plan (incorporated by reference to Appendix C to the prospectus, dated April 15, 2015, of the Registrant)
4.3

 
Form of Redemption Request Form (incorporated by reference to Appendix D to the prospectus, dated April 15, 2015, of the Registrant)
4.4

 
Form of Application for Transfer (incorporated by reference to Appendix E to the prospectus, dated April 15, 2015, of the Registrant)
10.1

 
Purchase and Sale Agreement, dated as of March 19, 2015, by and between Steadfast Asset Holdings, Inc. and GPP Countryside LLC and Fidelity National Title Insurance Company, in its capacity as the escrow holder (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed July 1, 2015)
10.2

 
First Amendment to Purchase and Sale Agreement, effective as of April 20, 2015 by and between Steadfast Asset Holdings, Inc. and GPP Countryside LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed July 1, 2015)
10.3

 
Second Amendment to Purchase and Sale Agreement, effective as of April 30, 2015 by and between Steadfast Asset Holdings, Inc. and GPP Countryside LLC (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed July 1, 2015)
10.4

 
Third Amendment to Purchase and Sale Agreement, effective as of May 1, 2015 by and between Steadfast Asset Holdings, Inc. and GPP Countryside LLC (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 8-K filed July 1, 2015)
10.5

 
Fourth Amendment to Purchase and Sale Agreement, effective as of May 8, 2015 by and between Steadfast Asset Holdings, Inc. and GPP Countryside LLC (incorporated by reference to Exhibit 10.5 to the Registrant’s Form 8-K filed July 1, 2015)
10.6

 
Fifth Amendment to Purchase and Sale Agreement, effective as of May 15, 2015 by and between Steadfast Asset Holdings, Inc. and GPP Countryside LLC (incorporated by reference to Exhibit 10.6 to the Registrant’s Form 8-K filed July 1, 2015)
10.7

 
Assignment and Assumption of Purchase Agreement and Insurance Agreement, dated as of June 11, 2015, by and between Steadfast Asset Holdings, Inc. and STAR Bella Terra, LLC (incorporated by reference to Exhibit 10.7 to the Registrant’s Form 8-K filed July 1, 2015)
10.8

 
Property Management Agreement, made and entered into as of June 11, 2015, by and between Steadfast Management Company, Inc. and STAR Bella Terra, LLC (incorporated by reference to Exhibit 10.8 to the Registrant’s Form 8-K filed July 1, 2015)
10.9

 
Construction Management Services Agreement entered into as of June 11, 2015, by and between STAR Bella Terra, LLC and Pacific Coast Land & Construction, Inc. (incorporated by reference to Exhibit 10.9 to the Registrant’s Form 8-K filed July 1, 2015)
10.10

 
Multifamily Note, effective as of June 11, 2015, by STAR Bella Terra, LLC in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.10 to the Registrant’s Form 8-K filed July 1, 2015)
10.11

 
Multifamily Loan and Security Agreement, dated as of June 11, 2015, by and between STAR Bella Terra, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.11 to the Registrant’s Form 8-K filed July 1, 2015)
10.12

 
Multifamily Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of June 11, 2015, by STAR Bella Terra, LLC for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.12 to the Registrant’s Form 8-K filed July 1, 2015)
10.13

 
Guaranty of Non-Recourse Obligations, dated as of June 11, 2015, by Steadfast Apartment REIT, Inc. to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.13 to the Registrant’s Form 8-K filed July 1, 2015)

57

PART II — OTHER INFORMATION (continued)

10.14

 
Environmental Indemnity Agreement, dated as of June 11, 2015, by STAR Bella Terra, LLC to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.14 to the Registrant’s Form 8-K filed July 1, 2015)
10.15

 
Assignment of Management Agreement, dated as of June 11, 2015, by and among STAR Bella Terra, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.15 to the Registrant’s Form 8-K filed July 1, 2015)
10.16

 
Purchase and Sale Agreement, dated as of March 19, 2015, by and between Steadfast Asset Holdings, Inc. and GPP Stonebrook LLC and Fidelity National Title Insurance Company, in its capacity as the escrow holder (incorporated by reference to Exhibit 10.16 to the Registrant’s Form 8-K filed July 1, 2015)
10.17

 
First Amendment to Purchase and Sale Agreement, effective as of April 20, 2015, by and between Steadfast Asset Holdings, Inc. and GPP Stonebrook LLC (incorporated by reference to Exhibit 10.17 to the Registrant’s Form 8-K filed July 1, 2015)
10.18

 
Second Amendment to Purchase and Sale Agreement, effective as of April 30, 2015, by and between Steadfast Asset Holdings, Inc. and GPP Stonebrook LLC (incorporated by reference to Exhibit 10.18 to the Registrant’s Form 8-K filed July 1, 2015)
10.19

 
Third Amendment to Purchase and Sale Agreement, effective as of May 1, 2015, by and between Steadfast Asset Holdings, Inc. and GPP Stonebrook LLC (incorporated by reference to Exhibit 10.19 to the Registrant’s Form 8-K filed July 1, 2015)
10.20

 
Fourth Amendment to Purchase and Sale Agreement, effective as of May 8, 2015, by and between Steadfast Asset Holdings, Inc. and GPP Stonebrook LLC (incorporated by reference to Exhibit 10.20 to the Registrant’s Form 8-K filed July 1, 2015)
10.21

 
Fifth Amendment to Purchase and Sale Agreement, effective as of May 15, 2015, by and between Steadfast Asset Holdings, Inc. and GPP Stonebrook LLC (incorporated by reference to Exhibit 10.21 to the Registrant’s Form 8-K filed July 1, 2015)
10.22

 
Assignment and Assumption of Purchase Agreement and Insurance Agreement, dated as of June 25, 2015, by and between Steadfast Asset Holdings, Inc. and STAR Hearthstone, LLC (incorporated by reference to Exhibit 10.22 to the Registrant’s Form 8-K filed July 1, 2015)
10.23

 
Property Management Agreement, made and entered into as of June 25, 2015, by and between Steadfast Management Company, Inc. and STAR Hearthstone, LLC (incorporated by reference to Exhibit 10.23 to the Registrant’s Form 8-K filed July 1, 2015)
10.24

 
Construction Management Services Agreement entered into as of June 25, 2015, by and between STAR Hearthstone, LLC and Pacific Coast Land & Construction, Inc. (incorporated by reference to Exhibit 10.24 to the Registrant’s Form 8-K filed July 1, 2015)
10.25

 
Multifamily Note, effective as of June 25, 2015, by STAR Hearthstone, LLC in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.25 to the Registrant’s Form 8-K filed July 1, 2015)
10.26

 
Multifamily Loan and Security Agreement, dated as of June 25, 2015, by and between STAR Hearthstone, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.26 to the Registrant’s Form 8-K filed July 1, 2015)
10.27

 
Multifamily Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of June 25, 2015, by STAR Hearthstone LLC for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.27 to the Registrant’s Form 8-K filed July 1, 2015)
10.28

 
Guaranty of Non-Recourse Obligations, dated as of June 25, 2015, by Steadfast Apartment REIT, Inc. to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.28 to the Registrant’s Form 8-K filed July 1, 2015)
10.29

 
Environmental Indemnity Agreement, dated as of June 25, 2015, by STAR Hearthstone, LLC to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.29 to the Registrant’s Form 8-K filed July 1, 2015)
10.30

 
Assignment of Management Agreement, dated as of June 25, 2015, by and among STAR Hearthstone, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.30 to the Registrant’s Form 8-K filed July 1, 2015)
10.31

 
Contract of Sale, dated as of May 12, 2015 by and between Steadfast Asset Holdings, Inc. and Butler Fee LLC and First American Title Insurance Company, as title company (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed July 7, 2015)
10.32

 
First Amendment to Contract of Sale, dated as of May 26, 2015 by and between Steadfast Asset Holdings, Inc. and Butler Fee LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed July 7, 2015)

58

PART II — OTHER INFORMATION (continued)

10.33

 
Assignment and Assumption of Contract for Sale, dated as of June 30, 2015, by and between Steadfast Asset Holdings, Inc. and STAR Brookfield, LLC (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed July 7, 2015)
10.34

 
Property Management Agreement, made and entered into as of June 30, 2015, by and between Steadfast Management Company, Inc. and STAR Brookfield, LLC (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 8-K filed July 7, 2015)
10.35

 
Construction Management Services Agreement entered into as of June 30, 2015, by and between STAR Brookfield, LLC and Pacific Coast Land & Construction, Inc. (incorporated by reference to Exhibit 10.5 to the Registrant’s Form 8-K filed July 7, 2015)
10.36

 
Multifamily Note, effective as of June 30, 2015, by STAR Brookfield, LLC in favor of Berkadia Commercial Mortgage LLC (incorporated by reference to Exhibit 10.6 to the Registrant’s Form 8-K filed July 7, 2015)
10.37

 
Multifamily Loan and Security Agreement, dated as of June 30, 2015, by and between STAR Brookfield, LLC and Berkadia Commercial Mortgage LLC (incorporated by reference to Exhibit 10.7 to the Registrant’s Form 8-K filed July 7, 2015)
10.38

 
Multifamily Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of June 30, 2015, by STAR Brookfield, LLC for the benefit of Berkadia Commercial Mortgage LLC (incorporated by reference to Exhibit 10.8 to the Registrant’s Form 8-K filed July 7, 2015)
10.39

 
Guaranty of Non-Recourse Obligations, dated as of June 30, 2015 by Steadfast Apartment REIT, Inc. for the benefit of Berkadia Commercial Mortgage LLC (incorporated by reference to Exhibit 10.9 to the Registrant’s Form 8-K filed July 7, 2015)
10.40

 
Assignment of Management Agreement, dated as of June 30, 2015, by and among STAR Brookfield, LLC, Berkadia Commercial Mortgage LLC and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.10 to the Registrant’s Form 8-K filed July 7, 2015)
10.41

 
Purchase and Sale Agreement, dated as of June 29, 2015, by and between Steadfast Asset Holdings, Inc. and AP WP North Richland Hills REIT LLC and First American Title Insurance Company, in its capacity as the title company (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed September 1, 2015)
10.42

 
First Amendment to Purchase and Sale Agreement, effective as of July 31, 2015 by and between Steadfast Asset Holdings, Inc. and AP WP North Richland Hills REIT LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed September 1, 2015)
10.43

 
Assignment and Assumption of Purchase Agreement, dated as of August 26, 2015, by and between Steadfast Asset Holdings, Inc. and STAR Delano, LLC (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed September 1, 2015)
10.44

 
Property Management Agreement, made and entered into as of August 26, 2015, by and between Steadfast Management Company, Inc. and STAR Delano, LLC (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 8-K filed September 1, 2015)
10.45

 
Construction Management Services Agreement entered into as of August 26, 2015, by and between STAR Delano, LLC and Pacific Coast Land & Construction, Inc. (incorporated by reference to Exhibit 10.5 to the Registrant’s Form 8-K filed September 1, 2015)
10.46

 
Purchase and Sale Agreement, dated as of June 29, 2015, by and between Steadfast Asset Holdings, Inc. and AP WP Green REIT LLC and First American Title Insurance Company, in its capacity as the title company (incorporated by reference to Exhibit 10.6 to the Registrant’s Form 8-K filed September 1, 2015)
10.47

 
First Amendment to Purchase and Sale Agreement, effective as of July 31, 2015 by and between Steadfast Asset Holdings, Inc. and AP WP Green REIT LLC (incorporated by reference to Exhibit 10.7 to the Registrant’s Form 8-K filed September 1, 2015)
10.48

 
Assignment and Assumption of Purchase Agreement, dated as of August 26, 2015, by and between Steadfast Asset Holdings, Inc. and STAR Meadows, LLC (incorporated by reference to Exhibit 10.8 to the Registrant’s Form 8-K filed September 1, 2015)
10.49

 
Property Management Agreement, made and entered into as of August 26, 2015, by and between Steadfast Management Company, Inc. and STAR Meadows, LLC (incorporated by reference to Exhibit 10.9 to the Registrant’s Form 8-K filed September 1, 2015)
10.50

 
Construction Management Services Agreement entered into as of August 26, 2015, by and between STAR Meadows, LLC and Pacific Coast Land & Construction, Inc. (incorporated by reference to Exhibit 10.10 to the Registrant’s Form 8-K filed September 1, 2015)

59

PART II — OTHER INFORMATION (continued)

10.51

 
Multifamily Revolving Credit Note, effective as of August 26, 2015, by STAR Delano, LLC and STAR Meadows, LLC, in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.11 to the Registrant’s Form 8-K filed September 1, 2015)
10.52

 
Credit Agreement, dated as of August 26, 2015, by and between STAR Delano, LLC and STAR Meadows, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.12 to the Registrant’s Form 8-K filed September 1, 2015)
10.53

 
Multifamily Loan and Security Agreement, dated as of August 26, 2015, by and between STAR Delano, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.13 to the Registrant’s Form 8-K filed September 1, 2015)
10.54

 
Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of August 26, 2015, by STAR Delano, LLC for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.14 to the Registrant’s Form 8-K filed September 1, 2015)
10.55

 
Assignment of Management Agreement and Subordination of Management Fees, dated as of August 26, 2015, by and among STAR Delano, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.15 to the Registrant’s Form 8-K filed September 1, 2015)
10.56

 
Multifamily Loan and Security Agreement, dated as of August 26, 2015, by and between STAR Meadows, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.16 to the Registrant’s Form 8-K filed September 1, 2015)
10.57

 
Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of August 26, 2015, by STAR Meadows, LLC for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.17 to the Registrant’s Form 8-K filed September 1, 2015)
10.58

 
Assignment of Management Agreement and Subordination of Management Fees, dated as of August 26, 2015, by and among STAR Meadows, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.18 to the Registrant’s Form 8-K filed September 1, 2015)
10.59

 
Guaranty, effective as of August 26, 2015, by Steadfast Apartment REIT, Inc. for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.19 to the Registrant’s Form 8-K filed September 1, 2015)
10.60

 
Purchase and Sale Agreement, dated as of June 29, 2015, by and between Steadfast Asset Holdings, Inc. and AP WP Vineyard REIT LLC and First American Title Insurance Company, in its capacity as the title company (incorporated by reference to Exhibit 10.20 to the Registrant’s Form 8-K filed September 1, 2015)
10.61

 
First Amendment to Purchase and Sale Agreement, effective as of July 31, 2015 by and between Steadfast Asset Holdings, Inc. and AP WP Vineyard REIT LLC (incorporated by reference to Exhibit 10.21 to the Registrant’s Form 8-K filed September 1, 2015)
10.62

 
Second Amendment to Purchase and Sale Agreement, effective as of August 6, 2015 by and between Steadfast Asset Holdings, Inc. and AP WP Vineyard REIT LLC (incorporated by reference to Exhibit 10.22 to the Registrant’s Form 8-K filed September 1, 2015)
10.63

 
Assignment and Assumption of Purchase Agreement, dated as of August 26, 2015, by and between Steadfast Asset Holdings, Inc. and STAR Kensington, LLC (incorporated by reference to Exhibit 10.23 to the Registrant’s Form 8-K filed September 1, 2015)
10.64

 
Property Management Agreement, made and entered into as of August 26, 2015, by and between Steadfast Management Company, Inc. and STAR Kensington, LLC (incorporated by reference to Exhibit 10.24 to the Registrant’s Form 8-K filed September 1, 2015)
10.65

 
Construction Management Services Agreement entered into as of August 26, 2015, by and between STAR Kensington, LLC and Pacific Coast Land & Construction, Inc. (incorporated by reference to Exhibit 10.25 to the Registrant’s Form 8-K filed September 1, 2015)
10.66

 
Multifamily Note, effective as of August 26, 2015, by STAR Kensington, LLC in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.26 to the Registrant’s Form 8-K filed September 1, 2015)
10.67

 
Multifamily Loan and Security Agreement, dated as of August 26, 2015, by and between STAR Kensington, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.27 to the Registrant’s Form 8-K filed September 1, 2015)
10.68

 
Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of August 26, 2015, by STAR Kensington, LLC for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.28 to the Registrant’s Form 8-K filed September 1, 2015)

60

PART II — OTHER INFORMATION (continued)

10.69

 
Guaranty, dated as of August 26, 2015, by Steadfast Apartment REIT, Inc. for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.29 to the Registrant’s Form 8-K filed September 1, 2015)
10.70

 
Assignment of Management Agreement and Subordination of Management Fees, dated as of August 26, 2015, by and among STAR Kensington, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.30 to the Registrant’s Form 8-K filed September 1, 2015)
10.71

 
Purchase and Sale Agreement, dated as of June 29, 2015 by and between Steadfast Asset Holdings, Inc., AP WP Seramont REIT LLC and First American Title Insurance Company, in its capacity as the title company (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed September 29, 2015)
10.72

 
First Amendment to Purchase and Sale Agreement, effective as of July 31, 2015 by and between Steadfast Asset Holdings, Inc. and AP WP Seramont REIT LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed September 29, 2015)
10.73

 
Second Amendment to Purchase and Sale Agreement, effective as of September 4, 2015 by and between Steadfast Asset Holdings, Inc. and AP WP Seramont REIT LLC (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed September 29, 2015)
10.74

 
Assignment and Assumption of Purchase Agreement, dated as of September 23, 2015, by and between Steadfast Asset Holdings, Inc. and STAR Monticello, LLC (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 8-K filed September 29, 2015)
10.75

 
Property Management Agreement, made and entered into as of September 23, 2015, by and between Steadfast Management Company, Inc. and STAR Monticello, LLC (incorporated by reference to Exhibit 10.5 to the Registrant’s Form 8-K filed September 29, 2015)
10.76

 
Construction Management Services Agreement entered into as of September 23, 2015, by and between STAR Monticello, LLC and Pacific Coast Land & Construction, Inc. (incorporated by reference to Exhibit 10.6 to the Registrant’s Form 8-K filed September 29, 2015)
10.77

 
Second Allonge and Amendment to Multifamily Revolving Credit Note, effective as of September 23, 2015 by STAR Delano, LLC, STAR Meadows, LLC, STAR Cumberland, LLC and STAR Monticello, LLC, in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.7 to the Registrant’s Form 8-K filed September 29, 2015)
10.78

 
Second Joinder to Credit Agreement and Other Loan Documents, made as of September 23, 2015, by and among STAR Delano, LLC, STAR Meadows, LLC, STAR Cumberland, LLC, STAR Monticello, LLC, PNC Bank, National Association and Steadfast Apartment REIT, Inc., in its capacity as Guarantor (incorporated by reference to Exhibit 10.8 to the Registrant’s Form 8-K filed September 29, 2015)
10.79

 
Multifamily Loan and Security Agreement, dated as of September 23, 2015, by and between STAR Monticello, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.9 to the Registrant’s Form 8-K filed September 29, 2015)
10.80

 
Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, effective as of September 23, 2015, by STAR Monticello, LLC for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.10 to the Registrant’s Form 8-K filed September 29, 2015)
10.81

 
Guaranty, effective as of August 26, 2015, by Steadfast Apartment REIT, Inc. for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.19 to the Registrant’s Form 8-K filed September 1, 2015)
10.82

 
Assignment of Management Agreement and Subordination of Management Fees, effective as of September 23, 2015, by and among STAR Monticello, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.12 to the Registrant’s Form 8-K filed September 29, 2015)
31.1

 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2

 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1

 
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
32.2

 
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002


61

SIGNATURES 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
Steadfast Apartment REIT, Inc.
 
 
 
 
 
 
Date:
November 12, 2015
By:
/s/ Rodney F. Emery
 
 
 
Rodney F. Emery
 
 
 
Chief Executive Officer and Chairman of the Board
 
 
 
 
Date:
November 12, 2015
By:
/s/ Kevin J. Keating
 
 
 
Kevin J. Keating
 
 
 
Treasurer
 
 
 
(Principal Financial and Accounting Officer)



62

Steadfast Apartment REIT, Inc. Reports