Attached files
| file | filename |
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| EX-23.1 - EXHIBIT 23.1 - Resource REIT, Inc. | breckenridgeconsent.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 17, 2016
Resource Real Estate Opportunity REIT II, Inc.
(Exact name of registrant as specified in its charter)
Maryland | 80-0854717 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
1845 Walnut Street, 18th Floor, Philadelphia, PA, 19103 |
(Address of principal executive offices) (Zip code) |
(215) 231-7050 |
(Registrant's telephone number, including area code) |
(former name or former address, if changed since last report |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the following obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the securities Act (17CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Pursuant to the requirements of the Securities Exchange Act of 1934, Resource Real Estate Opportunity REIT II, Inc. (which may be referred to as the “Registrant,” “we,” “our,” or “us”) hereby amends our Current Report on Form 8-K filed on May 18, 2016 to provide the required financial information relating to our acquisition of a multifamily community located in Portland, Oregon known as the Portland Property, or Breckenridge ("Breckenridge"), as described in such Current Report.
After reasonable inquiry, we are not aware of any material factors relating to Breckenridge that would cause the reported revenues and certain operating expenses relating to it not to be necessarily indicative of future operating results.
Item 9.01. Financial Statement and Exhibits.
a. | Financial Statements |
Page | ||
Independent Auditor's Report | 1 | |
Statements of Revenues and Certain Operating Expenses for the Three Months Ended March 31, 2016 (unaudited) and the Year Ended December 31, 2015 | 2 | |
Notes to Statements of Revenues and Certain Operating Expenses | 3 | |
b. | Pro Forma Financial Information | |
Unaudited Pro Forma Consolidated Financial Information | 4 | |
Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2016 | 5 | |
Notes to Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2016 | 6 | |
Unaudited Pro Forma Consolidated Statement of Comprehensive Loss for the Three Months Ended March 31, 2016 | 7 | |
Notes to Unaudited Pro Forma Consolidated Statement of Comprehensive Loss for the Three Months Ended March 31, 2016 | 8 | |
Unaudited Pro Forma Consolidated Statement of Comprehensive Loss for the Year Ended December 31, 2015 | 9 | |
Notes to Unaudited Pro Forma Consolidated Statement of Comprehensive Loss for the Year Ended December 31, 2015 | 10 | |
c. | Not applicable | |
d. | Exhibit | |
Exhibit 23.1 Consent of Independent Auditor | ||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC. | |||
July 29, 2016 | By: | /s/ Alan F. Feldman | |
Alan F. Feldman | |||
Chief Executive Officer | |||
(Principal Executive Officer) | |||
Independent Auditors’ Report
To Resource Real Estate Opportunity REIT II, Inc.
Philadelphia, Pennsylvania
We have audited the accompanying Statement of Revenues and Certain Operating Expenses of Breckenridge Apartment Homes (the “Property”) for the year ended December 31, 2015, and the related notes (the “Historical Summary”).
Management’s Responsibility for the Historical Summary
Management is responsible for the preparation and fair presentation of the Historical Summary in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the Historical Summary that is free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the Historical Summary based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Historical Summary. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the Historical Summary, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Property’s preparation and fair presentation of the Historical Summary in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Property’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the Historical Summary.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the Historical Summary presents fairly, in all material respects, the revenues and certain operating expenses described in Note 1 to the Historical Summary of the Property for the year ended December 31, 2015, in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
We draw attention to Note 1 to the Historical Summary, which describes that the accompanying Historical Summary was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in the Current Report on Form 8-K/A of Resource Real Estate Opportunity REIT II, Inc.) and is not intended to be a complete presentation of the Property’s revenues and expenses. Our opinion is not modified with respect to this matter.
/s/ Deloitte & Touche LLP
Chicago, Illinois
July 29, 2016
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Breckenridge Apartment Homes
Statements of Revenues and Certain Operating Expenses
For the Three Months Ended March 31, 2016 (unaudited) and for the Year Ended December 31, 2015
(in thousands)
Three Months Ended March 31, 2016 | Year Ended December 31, 2015 | |||||||
(unaudited) | ||||||||
Revenues: | ||||||||
Rental income | $ | 1,263 | $ | 4,582 | ||||
Other income | 126 | 592 | ||||||
Total Revenues | 1,389 | 5,174 | ||||||
Certain Operating Expenses: | ||||||||
Operating expenses | 293 | 1,146 | ||||||
Real estate taxes | 103 | 407 | ||||||
Insurance | 18 | 74 | ||||||
Management fees | 46 | 172 | ||||||
Total Certain Operating Expenses | 460 | 1,799 | ||||||
Revenues in excess of Certain Operating Expenses | $ | 929 | $ | 3,375 | ||||
See accompanying notes to the statements of revenues and certain operating expenses.
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Breckenridge Apartment Homes
Notes to Statements of Revenues and Certain Expenses
For the the Three Months Ended March 31, 2016 (unaudited) and the Year Ended December 31, 2015
NOTE 1. Basis of Presentation
On May 17, 2016, Resource Real Estate Opportunity REIT II, Inc. (the “Company”) purchased Breckenridge Apartment Homes (the "Property"), a multifamily community located in Portland, Oregon from unaffiliated sellers. The apartment complex was purchased for $81.5 million in cash, excluding closing costs.
The statements of revenues and certain operating expenses (the “Statements”) have been prepared for the purpose of complying with the provision of Article 3-14 of Regulation S-X promulgated by the U.S. Securities and Exchange Commission (the “SEC”), which requires certain information with respect to real estate operations to be included with certain filings with the SEC. The statements are not intended to be a complete presentation of the revenues and operating expenses at Breckenridge Apartment Homes for the three months ended March 31, 2016 and the year ended December 31, 2015. The Statements include the historical revenues and certain operating expenses of the Property, and exclude items that may not be comparable to the future operations of Breckenridge Apartment Homes, such as interest expense, depreciation and amortization, and corporate expenses. Amounts included in property management fees include routine compensation paid to a third party managing property operations.
In the opinion of the Company’s management, all adjustments necessary for a fair presentation of the Statements for the three months ended March 31, 2016 and the year ended December 31, 2015 have been included. Such adjustments consisted of normal recurring items. Interim results are not necessarily indicative of results for a year.
NOTE 2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of the statements of revenues and certain operating expenses, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of revenues and certain operating expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenue is derived from the rental of residential housing units with lease agreement terms of generally one year or less. The Property recognizes rent as income on a straight line basis over the term of the related lease. Included within other income is tenant reimbursement income consisting of charges billed to tenants for trash removal, utilities, and other income amounts such as administrative, application and late fees, all of which are recognized in income as earned.
NOTE 3. Subsequent Events
The Property's management evaluated all events and transactions that occurred through July 29, 2016, the date the statements of revenues and certain operating expenses were available to be issued. During this period, the Property did not have any material subsequent events other than as disclosed in Note 1.
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Unaudited Pro Forma Consolidated Financial Information
On May 17, 2016, Resource Real Estate Opportunity REIT II, Inc. (the “Company”) purchased Breckenridge Apartment Homes, a multifamily community, from an unaffiliated seller. The apartment complex was purchased for $81.5 million, excluding closing costs, and was funded from the capital of the Company.
The following unaudited pro forma consolidated balance sheet as of March 31, 2016 and consolidated statements of comprehensive loss for the three months ended March 31, 2016 and the year ended December 31, 2015 are presented as if the Company had acquired Breckenridge Apartment Homes on January 1, 2015. The footnotes to the pro forma financial statements provide details of the pro forma adjustments. The Company believes that all material adjustments necessary to reflect the effects of the acquisition have been made.
This unaudited pro forma consolidated financial information should be read in conjunction with the historical consolidated financial statements and notes thereto as filed in the Company’s annual report on Form 10-K for the year ended December 31, 2015 and the Company’s quarterly reports on Form 10-Q, and are not necessarily indicative of what the actual financial position or comprehensive loss would have been had the Company completed the transaction as of the beginning of the periods presented, nor is it necessarily indicative of future results.
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Resource Real Estate Opportunity REIT II, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
March 31, 2016
(in thousands)
March 31, 2016 | Pro Forma Adjustments | March 31, 2016 | |||||||||
(a) | (Pro Forma) | ||||||||||
ASSETS | |||||||||||
Investments: | |||||||||||
Rental property, net | $ | 501,166 | $ | 80,155 | (b) | $ | 581,321 | ||||
Identified intangible assets, net | 3,752 | 1,345 | (b) | 5,097 | |||||||
504,918 | 81,500 | 586,418 | |||||||||
Cash | 123,575 | (81,467 | ) | (b) | 42,108 | ||||||
Restricted cash | 3,314 | — | 3,314 | ||||||||
Tenant receivables | 29 | — | 29 | ||||||||
Due from related parties | 81 | — | 81 | ||||||||
Subscriptions receivable | — | — | — | ||||||||
Prepaid expenses and other assets | 2,996 | 109 | (b) | 3,105 | |||||||
Deferred offering costs | — | — | — | ||||||||
Deferred financing costs, net | — | — | — | ||||||||
Total assets | $ | 634,913 | $ | 142 | $ | 635,055 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Liabilities: | |||||||||||
Mortgage note payable | $ | 181,299 | $ | — | $ | 181,299 | |||||
Accounts payable and accrued expenses | 6,616 | (39 | ) | (b) | 6,577 | ||||||
Due to related parties | 1,055 | — | 1,055 | ||||||||
Tenant prepayments | 364 | 4 | (b) | 368 | |||||||
Security deposits | 755 | 177 | (b) | 932 | |||||||
Distribution payable | 8,212 | — | 8,212 | ||||||||
Derivative liability | 404 | — | 404 | ||||||||
Total liabilities | 198,705 | 142 | 198,847 | ||||||||
Stockholders' equity: | |||||||||||
Preferred stock (par value $.01; 10,000,000 shares authorized, none issued and outstanding) | — | — | — | ||||||||
Convertible stock (par value $.01; 50,000 shares authorized, 50,000 shares issued and outstanding) | 1 | — | 1 | ||||||||
Common stock (par value $.01; 1,000,000,000 shares authorized, 52,696,985 shares issued and outstanding) | 574 | — | 574 | ||||||||
Additional paid-in-capital | 506,524 | — | 506,524 | ||||||||
Accumulated other comprehensive loss | (152 | ) | — | (152 | ) | ||||||
Accumulated deficit | (70,739 | ) | — | (70,739 | ) | ||||||
Total stockholders' equity | 436,208 | — | 436,208 | ||||||||
Total liabilities and stockholders' equity | $ | 634,913 | $ | 142 | $ | 635,055 | |||||
See accompanying notes to unaudited pro forma consolidated financial statements
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Resource Real Estate Opportunity REIT II, Inc.
Notes to Unaudited Pro Forma Consolidated Balance Sheet
March 31, 2016
a. | Reflects the Company’s historical consolidated balance sheet as of March 31, 2016. |
b. | Reflects the increase in assets and liabilities acquired as a result of the acquisition. The Company paid the purchase price with $81.5 million cash. |
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Resource Real Estate Opportunity REIT II, Inc.
Unaudited Pro Forma Consolidated Statement of Comprehensive Loss
For the Three Months Ended March 31, 2016
(in thousands)
For the Three Months Ended March 31, 2016 | Pro Forma Adjustments | For the Three Months Ended March 31, 2016 | |||||||||
(a) | (Pro Forma) | ||||||||||
Revenues: | |||||||||||
Rental income | $ | 9,747 | $ | 1,389 | (b) | $ | 11,136 | ||||
9,747 | 1,389 | 11,136 | |||||||||
Expenses: | |||||||||||
Rental operating | 4,891 | 414 | (b) | 5,305 | |||||||
Acquisition costs | 3,076 | — | (d) | 3,076 | |||||||
Management fees - related parties | 1,890 | 290 | (c) | 2,180 | |||||||
General and administrative | 1,874 | — | 1,874 | ||||||||
Loss on disposal of assets | 1,027 | — | 1,027 | ||||||||
Depreciation and amortization expense | 6,741 | 634 | (e) | 7,375 | |||||||
Total expenses | 19,499 | 1,338 | 20,837 | ||||||||
Loss before other income (expense) | (9,752 | ) | 51 | (9,701 | ) | ||||||
Other income (expense): | |||||||||||
Interest income | 57 | — | 57 | ||||||||
Interest expense | (1,616 | ) | — | (1,616 | ) | ||||||
Net loss | (11,311 | ) | 51 | (11,260 | ) | ||||||
Other comprehensive loss: | |||||||||||
Designated derivatives, fair value adjustment | (35 | ) | — | (35 | ) | ||||||
Comprehensive loss | $ | (11,346 | ) | 51 | $ | (11,295 | ) | ||||
Weighted average shares outstanding | 56,330 | 56,330 | |||||||||
Basic and diluted loss per common share | $ | (0.20 | ) | $ | (0.20 | ) | |||||
See accompanying notes to unaudited pro forma consolidated financial statements
7
Resource Real Estate Opportunity REIT II, Inc.
Notes to Unaudited Pro Forma Consolidated Statement of Comprehensive Loss
For the Three Months Ended March 31, 2016
a. | Reflects the Company’s historical consolidated operations for the three months ended March 31, 2016. |
b. | Reflects operating activity from January 1, 2016 to March 31, 2016 for the acquisition made during the quarter ended June 30, 2016. |
c. | Reflects the asset management fee associated with the acquisition. The asset is managed by Resource Real Estate Opportunity Advisor II, LLC, a related party of the Company. The asset management fee is three twelfths of 1% of the asset’s cost for the three months ended March 31, 2016. Also, reflects the property management fee associated with the acquisition. The property is managed by Resource Real Estate Opportunity Manager II, LLC, a related party of the Company. The property management fee is 4.5% of gross receipts for the three months ended March 31, 2016. |
d. | Acquisition expenses are non-recurring and have not been included for the 2016 acquisition. |
e. | Reflects the additional depreciation for the building and improvements incurred as a result of the acquisition. Building depreciation is expensed over the property’s estimated useful life of 27.5 years and improvements are depreciated over their estimated useful lives ranging from three to 15 years. |
8
Resource Real Estate Opportunity REIT II, Inc.
Unaudited Pro Forma Consolidated Statement of Comprehensive Loss
For the Year Ended December 31, 2015
(in thousands)
For the Year Ended December 31, 2015 | Pro Forma Adjustments | For the Year Ended December 31, 2015 | |||||||||
(a) | (Pro Forma) | ||||||||||
Revenues: | |||||||||||
Rental income | $ | 14,661 | $ | 5,174 | (b) | $ | 19,835 | ||||
14,661 | 5,174 | 19,835 | |||||||||
Expenses: | |||||||||||
Rental operating | 8,235 | 1,627 | (b) | 9,862 | |||||||
Acquisition costs | 9,136 | 1,798 | (e) | 10,934 | |||||||
Management fees - related parties | 2,435 | 1,143 | (c) | 3,578 | |||||||
General and administrative | 3,689 | — | 3,689 | ||||||||
Loss on disposal of assets | 1,680 | — | 1,680 | ||||||||
Depreciation and amortization expense | 9,270 | 3,879 | (d) | 13,149 | |||||||
Total expenses | 34,445 | 8,447 | 42,892 | ||||||||
Loss before other income (expense) | (19,784 | ) | (3,273 | ) | (23,057 | ) | |||||
Other income (expense): | |||||||||||
Interest income | 129 | — | 129 | ||||||||
Interest expense | (2,516 | ) | — | (2,516 | ) | ||||||
Net loss | (22,171 | ) | (3,273 | ) | (25,444 | ) | |||||
Other comprehensive loss: | |||||||||||
Designated derivatives, fair value adjustment | (82 | ) | — | (82 | ) | ||||||
Comprehensive loss | $ | (22,253 | ) | $ | (3,273 | ) | $ | (25,526 | ) | ||
Weighted average shares outstanding | 24,230 | 24,230 | |||||||||
Basic and diluted loss per common share | $ | (0.92 | ) | $ | (1.05 | ) | |||||
See accompanying notes to unaudited pro forma consolidated financial statements
9
Resource Real Estate Opportunity REIT II, Inc.
Notes to Unaudited Pro Forma Consolidated Statement of Comprehensive Loss
For the Year Ended December 31, 2015
a. | Reflects the Company’s historical consolidated operations for the year ended December 31, 2015. |
b. | Reflects operating activity from January 1, 2015 to December 31, 2015 for the acquisition made during the quarter ended June 30, 2016. |
c. | Reflects the asset management fee associated with the acquisition. The asset is managed by Resource Real Estate Opportunity Advisor II, LLC, a related party of the Company. The asset management fee is 1% of the asset’s cost for the year ended December 31, 2015. Also, reflects the property management fee associated with the acquisition. The property is managed by Resource Real Estate Opportunity Manager II, LLC, a related party of the Company. The property management fee is 4.5% of gross receipts for the year ended December 31, 2015. |
d. | Reflects the additional depreciation for the building and improvements incurred as a result of the acquisition. Building depreciation is expensed over the property’s estimated useful life of 27.5 years and improvements are depreciated over their estimated useful lives ranging from three to 15 years. |
e. | Acquisition fees incurred in connection with the purchase of Breckenridge Apartment Homes. |
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