Resource Apartment REIT III, Inc. - FORM 8-K/A

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): August 19, 2016

Resource Apartment REIT III, Inc.

(Exact name of registrant as specified in its charter)

Commission File number 333-207740



Maryland		47-4608249
(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 Apartment REIT III, Inc. (which may be referred to as the “Registrant,” “we,” “our,” or “us”) hereby amends our Current Report on Form 8-K filed on August 24, 2016 to provide the required financial information relating to our acquisition of a multifamily community located in Alexandria, Virginia known as the Alexandria Property, or Payne Place ("Payne Place"), as described in such Current Report.

After reasonable inquiry, we are not aware of any material factors relating to Payne Place 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 Auditors' Report	1
	Statements of Revenues and Certain Operating Expenses for the Six Months Ended June 30, 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 June 30, 2016	5
	Notes to Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2016	6
	Unaudited Pro Forma Consolidated Statement of Comprehensive Loss for the Six Months Ended June 30, 2016	7
	Notes to Unaudited Pro Forma Consolidated Statement of Comprehensive Loss for the Six Months Ended June 30, 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

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 APARTMENT REIT III, INC.

November 1, 2016	By:	/s/ Kevin M. Finkel
		Kevin M. Finkel
		Chief Executive Officer
		(Principal Executive Officer)

Independent Auditors’ Report

To Resource Apartment REIT III, Inc.

Philadelphia, Pennsylvania

We have audited the accompanying Statement of Revenues and Certain Operating Expenses of Payne Place (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 Apartment REIT III, 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/ Baker Tilly Virchow Krause, LLP

Chicago, Illinois

November 1, 2016

Payne Place

Statements of Revenues and Certain Operating Expenses

For the Six Months Ended June 30, 2016 (unaudited) and for the Year Ended December 31, 2015



	Six Months Ended June 30, 2016		Year Ended December 31, 2015
	(unaudited)
Revenues:
Rental income	$	97,333	$	159,956
Other income	—		—
Total Revenues	97,333		159,956


Certain Operating Expenses:
Operating expenses	19,382		63,528
Real estate taxes	12,065		23,654
Insurance	1,418		2,945
Management fees	3,926		7,445
Total Certain Operating Expenses	36,791		97,572
Revenues in excess of Certain Operating Expenses	$	60,542	$	62,384

See accompanying notes to the statements of revenues and certain operating expenses.

Payne Place

Notes to Statements of Revenues and Certain Expenses

For the the Six Months Ended June 30, 2016 (unaudited) and the Year Ended December 31, 2015

NOTE 1. Basis of Presentation

On August 19, 2016, Resource Apartment REIT III, Inc. (the “Company”) purchased Payne Place (the "Property"), a multifamily community located in Alexandria, Virginia from unaffiliated sellers. The apartment complex was purchased for $2.5 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 Payne Place for the six months ended June 30, 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 Payne Place, 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 six months ended June 30, 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 November 1, 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.

Unaudited Pro Forma Consolidated Financial Information

On August 19, 2016, Resource Apartment REIT III, Inc. (the “Company”) purchased Payne Place, a multifamily community, from an unaffiliated seller. The apartment complex was purchased for $2.5 million, excluding closing costs, and was funded from the capital of the Company, as well as a bridge loan from an affiliated entity.

The following unaudited pro forma consolidated balance sheet as of June 30, 2016 and consolidated statements of comprehensive loss for the six months ended June 30, 2016 and the year ended December 31, 2015 are presented as if the Company had acquired Payne Place 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 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.

Resource Apartment REIT III, Inc.

Unaudited Pro Forma Consolidated Balance Sheet

June 30, 2016



	June 30, 2016			Pro Forma Adjustments				June 30, 2016
	(a)							(Pro Forma)
ASSETS
Investments:
Rental property, net	$	—		$	2,450,058		(b)	$	2,450,058
Identified intangible assets, net	—			49,941			(b)	49,941
	—			2,499,999				2,499,999

Cash	200,000			4,265			(b)	204,265
Subscriptions receivable	2,000,000			(2,000,000		)		—
Prepaid expenses and other assets	131,548			2,649			(b)	134,197
Deferred offering costs	1,327,121			—				1,327,121
Total assets	$	3,658,669		$	506,913			$	4,165,582

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses	$	98,206		$	(51,387	)	(b)	$	46,819
Due to related parties	1,441,921			555,000			(c)	1,996,921
Security deposits	—			3,300			(b)	3,300
Total liabilities	1,540,127			506,913				2,047,040

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)	—			—				—
Class A common stock (par value $.01; 250,000,000 shares authorized, 242,222 shares issued and outstanding)	2,422			—				2,422
Class T common stock (par value $.01; 750,000,000 shares authorized, none issued and outstanding)	—			—				—
Additional paid-in-capital	2,142,578			—				2,142,578
Accumulated deficit	(26,458		)	—				(26,458		)
Total stockholders' equity	2,118,542			—				2,118,542
Total liabilities and stockholders' equity	$	3,658,669		$	506,913			$	4,165,582

See accompanying notes to unaudited pro forma consolidated financial statements

Resource Apartment REIT III, Inc.

Notes to Unaudited Pro Forma Consolidated Balance Sheet

June 30, 2016


a.	Reflects the Company’s historical consolidated balance sheet as of June 30, 2016.


b.	Reflects the increase in assets and liabilities acquired as a result of the acquisition. The Company paid the purchase price of $2.5 million from the capital of the Company.


c.	Reflects a bridge loan obtained from a related party.

Resource Apartment REIT III, Inc.

Unaudited Pro Forma Consolidated Statement of Comprehensive Loss

For the Six Months Ended June 30, 2016



	For the Six Months Ended June 30, 2016			Pro Forma Adjustments			For the Six Months Ended June 30, 2016
	(a)						(Pro Forma)

Revenues:
Rental income	$	—		$	97,333	(b)	$	97,333
	—			97,333			97,333

Expenses:
Rental operating	—			32,865		(b)	32,865
Acquisition costs	—			—		(c)	—
Management fees - related parties	—			15,643		(d)	15,643
General and administrative	26,458			—			26,458
Depreciation and amortization expense	—			48,446		(e)	48,446
Total expenses	26,458			96,954			123,412
Net Loss	(26,458		)	379			(26,079		)

Weighted average shares outstanding	23,773						23,773

Basic and diluted loss per common share	$	(1.11	)				$	(1.10	)

See accompanying notes to unaudited pro forma consolidated financial statements

Resource Apartment REIT III, Inc.

Notes to Unaudited Pro Forma Consolidated Statement of Comprehensive Loss

For the Six Months Ended June 30, 2016


a.	Reflects the Company’s historical consolidated operations for the six months ended June 30, 2016.


b.	Reflects operating activity from January 1, 2016 to June 30, 2016 for the acquisition made during the quarter ended September 30, 2016.


c.	Acquisition expenses are non-recurring and have not been included for the 2016 acquisition.

Reflects the asset management fee associated with the acquisition. The asset is managed by Resource REIT Advisor, LLC, a related party of the Company. The asset management fee is six twelfths of 1% of the asset’s cost for the six months ended June 30, 2016. Also, reflects the property management fee associated with the acquisition. The property is managed by Resource Apartment Manager III, LLC, a related party of the Company. The property management fee is 4.5% of gross receipts for the six months ended June 30, 2016.


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.

Resource Apartment REIT III, Inc.

Unaudited Pro Forma Consolidated Statement of Comprehensive Loss

For the Year Ended December 31, 2015



	For the Year Ended December 31, 2015		Pro Forma Adjustments				For the Year Ended December 31, 2015
	(a)						(Pro Forma)
Revenues:
Rental income	$	—	$	159,956		(b)	$	159,956
	—		159,956				159,956

Expenses:
Rental operating	—		90,127			(b)	90,127
Acquisition costs	—		51,505			(e)	51,505
Management fees - related parties	—		34,103			(c)	34,103
Depreciation and amortization expense	—		86,903			(d)	86,903
Total expenses	—		262,638				262,638
Net Loss	—		(102,682		)		(102,682		)

Weighted average shares outstanding	—						—

Basic and diluted loss per common share	$	—					$	—

See accompanying notes to unaudited pro forma consolidated financial statements

Resource Apartment REIT III, 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.

Reflects the asset management fee associated with the acquisition. The asset is managed by Resource REIT Advisor, 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 Apartment Manager III, 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 Payne Place.

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