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EX-32.2 - EXHIBIT 32.2 - Resource Real Estate Opportunity REIT II, Inc.rreoii-20170630xex322.htm
EX-32.1 - EXHIBIT 32.1 - Resource Real Estate Opportunity REIT II, Inc.rreoii-20170630xex321.htm
EX-31.2 - EXHIBIT 31.2 - Resource Real Estate Opportunity REIT II, Inc.rreoii-20170630xex312.htm
EX-31.1 - EXHIBIT 31.1 - Resource Real Estate Opportunity REIT II, Inc.rreoii-20170630xex311.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 June 30, 2017
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 000-55430
reit2logoa03a01a06.jpg


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)

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 R No  o  
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 R No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
 
Accelerated filer                  o
Non-accelerated filer  o
(Do not check if a smaller reporting company)
Smaller reporting company þ
 
 
Emerging growth company þ
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o No þ
As of August 8, 2017, there were 60,246,872 outstanding shares of common stock of Resource Real Estate Opportunity REIT II, Inc.



RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
INDEX TO QUARTERLY REPORT
ON FORM 10-Q

 
 
PAGE
PART I
FINANCIAL INFORMATION
 
 
 
 
ITEM 1.
Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 2.
 
 
 
ITEM 3.
 
 
 
ITEM 4.
 
 
 
PART II
OTHER INFORMATION
 
 
 
 
ITEM 2.
 
 
 
ITEM 6.
 
 
 






Forward-Looking Statements
Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements.  Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts.  In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expects,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will” and “would” or the negative of these terms or other comparable terminology.  Actual results may differ materially from those contemplated by such forward-looking statements.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.  We undertake no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances after the date of this report, except as may be required under applicable law.




PART I. FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
 
 
June 30,
2017
 
December 31,
2016
 
 
(unaudited)
 
 
ASSETS
 
 
 
 
Investments:
 
 
 
 
Rental properties, net
 
$
804,617

 
$
754,588

Identified intangible assets, net
 
839

 
2,689

 
 
805,456

 
757,277

 
 
 
 
 
Cash
 
101,448

 
104,889

Restricted cash
 
6,562

 
6,620

Tenant receivables, net
 
46

 
68

Due from related parties
 
619

 
604

Prepaid expenses and other assets
 
1,923

 
1,852

Total assets
 
$
916,054

 
$
871,310

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Liabilities:
 
 
 
 
Mortgage notes payable, net
 
$
532,123

 
$
455,361

Accounts payable and accrued expenses
 
12,039

 
11,997

Due to related parties
 
659

 
2,648

Tenant prepayments
 
673

 
546

Security deposits
 
1,274

 
1,097

Distributions payable
 
8,980

 
8,769

Total liabilities
 
555,748

 
480,418

 
 
 
 
 
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 issued and outstanding)
 
1

 
1

Common stock (par value $.01; 1,000,000,000 shares authorized, 60,042,644 and 59,160,177 issued and outstanding at June 30, 2017 and December 31, 2016, respectively)
 
600

 
591

Additional paid-in capital
 
528,291

 
520,746

Accumulated other comprehensive loss
 
(404
)
 
(74
)
Accumulated deficit
 
(168,182
)
 
(130,372
)
Total stockholders’ equity
 
360,306

 
390,892

Total liabilities and stockholders’ equity
 
$
916,054

 
$
871,310

 The accompanying notes are an integral part of these consolidated financial statements.



RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share data)
(unaudited)

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Rental income
$
19,089

 
$
12,489

 
$
36,898

 
$
22,236

Total revenues
19,089

 
12,489

 
36,898

 
22,236

 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
Rental operating
8,128

 
5,983

 
15,390

 
10,901

Acquisition costs
1,357

 
3,768

 
1,417

 
6,844

Management fees
3,206

 
2,041

 
6,213

 
3,931

General and administrative
2,126

 
1,819

 
4,515

 
3,666

Loss on disposal of assets
290

 
822

 
582

 
1,849

Depreciation and amortization expense
10,071

 
7,984

 
19,495

 
14,725

Total expenses
25,178

 
22,417

 
47,612

 
41,916

 Loss before other income (expense)
(6,089
)
 
(9,928
)
 
(10,714
)
 
(19,680
)
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Interest income
29

 
52

 
75

 
109

Interest expense
(4,909
)
 
(2,539
)
 
(9,237
)
 
(4,155
)
Net loss
(10,969
)
 
(12,415
)
 
(19,876
)
 
(23,726
)
 
 
 
 
 
 
 
 
Other comprehensive loss:
 
 
 
 
 
 
 
Designated derivatives, fair value adjustment
(91
)
 
(48
)
 
(330
)
 
(83
)
Comprehensive loss
$
(11,060
)
 
$
(12,463
)
 
$
(20,206
)
 
$
(23,809
)
 
 
 
 
 
 
 
 
Weighted average common shares outstanding
59,831

 
57,709

 
59,596

 
57,027

 
 
 
 
 
 
 
 
Basic and diluted net loss per common share
$
(0.18
)
 
$
(0.22
)
 
$
(0.33
)
 
$
(0.42
)















The accompanying notes are an integral part of these consolidated financial statements.




 
RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2017
(in thousands)
(unaudited)


 
 
Common Stock
 
Convertible Stock
 
Additional
Paid-in Capital
 
Accumulated
Other
Comprehensive
Loss
 
Accumulated
Deficit
 
 
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Total
Balance, at January 1, 2017
 
59,160

 
$
591

 
50

 
$
1

 
$
520,746

 
$
(74
)
 
$
(130,372
)
 
$
390,892

Common stock issued through distribution reinvestment plan
 
1,192

 
12

 

 

 
10,261

 

 

 
10,273

Distributions declared
 

 

 

 

 

 

 
(17,934
)
 
(17,934
)
Common stock redemptions
 
(309
)
 
(3
)
 

 

 
(2,716
)
 

 

 
(2,719
)
Designated derivatives, fair value adjustment
 

 

 

 

 

 
(330
)
 

 
(330
)
Net loss
 

 

 

 

 

 

 
(19,876
)
 
(19,876
)
Balance, at June 30, 2017
 
60,043

 
$
600

 
50

 
$
1

 
$
528,291

 
$
(404
)
 
$
(168,182
)
 
$
360,306
























The accompanying notes are an integral part of this consolidated financial statement.



RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
 
Six Months Ended 
 June 30,
 
 
2017
 
2016
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(19,876
)
 
$
(23,726
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Loss on disposal of assets
 
582

 
1,849

Depreciation and amortization
 
19,495

 
14,725

Amortization of deferred financing costs
 
565

 
290

Amortization of mortgage premiums
 
(58
)
 
(60
)
Change in fair value of interest rate swap
 
2

 
301

Changes in operating assets and liabilities:
 
 
 
 
Restricted cash
 
(642
)
 
(824
)
Tenant receivables, net
 
21

 
(33
)
Due from related parties
 
(15
)
 
(485
)
Prepaid expenses and other assets
 
(250
)
 
2,491

Due to related parties
 
(1,989
)
 
(3,019
)
Accounts payable and accrued expenses
 
67

 
5,718

Tenant prepayments
 
118

 
44

Security deposits
 
88

 
(17
)
Net cash used in operating activities
 
(1,892
)
 
(2,746
)
 
 
 
 
 
Cash flows from investing activities
 
 
 
 
Property acquisitions
 
(55,160
)
 
(239,427
)
Capital expenditures
 
(13,078
)
 
(13,746
)
Restricted cash - capital reserves
 
700

 
(850
)
Net cash used in investing activities
 
(67,538
)
 
(254,023
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Proceeds from issuance of common stock
 

 
49,599

Redemptions of common stock
 
(2,719
)
 

Payment of deferred financing costs
 
(1,147
)
 
(2,752
)
Increase in borrowings
 
79,039

 
194,607

Repayments on borrowings
 
(1,637
)
 
(500
)
Purchase of interest rate caps
 
(97
)
 
(145
)
Distributions paid on common stock
 
(7,450
)
 
(6,892
)
Offering costs
 

 
(6,263
)
Net cash provided by financing activities
 
65,989

 
227,654

 
 
 
 
 
Net decrease in cash
 
(3,441
)
 
(29,115
)
Cash at beginning of period
 
104,889

 
180,826

Cash at end of period
 
$
101,448

 
$
151,711


The accompanying notes are an integral part of these consolidated financial statements.


RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2017
(unaudited)


NOTE 1 - NATURE OF BUSINESS AND OPERATIONS (LOSS)
Resource Real Estate Opportunity REIT II, Inc. (the “Company”) was organized in Maryland on September 28, 2012. During the primary portion of the offering, the Company offered up to 100,000,000 shares of common stock in its primary initial public offering for $10 per share, with volume discounts available to certain categories of investors.The primary portion of the offering closed on February 6, 2016. The Company is currently offering up to 10,000,000 shares pursuant to the Company’s distribution reinvestment plan at a purchase price equal to $8.65 per share ($8.56 per share prior to June 30, 2017 and $9.50 per share prior to June 30, 2016). The Company has adopted a fiscal year ending December 31.
Resource Real Estate Opportunity Advisor II, LLC (the "Advisor”) is a wholly owned subsidiary of Resource Real Estate, Inc. (the "Sponsor") and an indirect wholly owned subsidiary of Resource America, Inc. (“RAI”). The Advisor acts as the Company's external advisor and manages the Company's day-to-day operations and its portfolio of real estate investments and provides asset-management, marketing, investor relations and other administrative services on the Company's behalf, all subject to the supervision of the Company's Board of Directors.

RAI is a wholly owned subsidiary of C-III Capital Partners, LLC ("C-III"), a leading commercial real estate services company engaged in a broad range of activities. C-III controls our Advisor and Resource Real Estate Opportunity Manager II, LLC, the Company's property manager (the "Manager"). C-III also controls all of the shares of common stock held by the Advisor.
As of June 30, 2017, a total of 60,278,274 shares, including the additional shares purchased by the Advisor and shares issued through the distribution reinvestment plan (but excluding shares issued through stock distributions), have been issued in connection with the Company's public offering resulting in gross offering proceeds of $595.9 million. As of June 30, 2017, the Company had issued 4,471,977 shares for $39.5 million pursuant to its distribution reinvestment plan.
The Company’s objective is to take advantage of the Sponsor's dedicated multifamily investing and lending platforms to invest in multifamily assets across the entire spectrum of investments in order to provide stockholders with growing cash flow and increasing asset values. The Company has acquired and may continue to acquire commercial real estate assets, principally underperforming multifamily rental properties which the Company will renovate and stabilize in order to increase rents, and may acquire, to a lesser extent, real estate related debt.
The Company elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes under the provisions of the Internal Revenue Code of 1986, as amended, commencing with its taxable year ended December 31, 2014. As such, to maintain its REIT qualification for U.S. federal income tax purposes, the Company is generally required to distribute at least 90% of its taxable net income (excluding net capital gains) to its stockholders as well as comply with certain other requirements. Accordingly, the Company generally will not be subject to U.S. federal income taxes to the extent that it annually distributes at least 90% of its REIT taxable income to its stockholders. The Company also operates its business in a manner that is intended to permit it to maintain its exemption from registration under the Investment Company Act of 1940, as amended.
The consolidated financial statements and the information and tables contained in the notes thereto, as of June 30, 2017, are unaudited and prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. However, in the opinion of management, these interim financial statements include all of the necessary adjustments to fairly present the results of the interim periods presented. The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016. The results of operations for the three and six months ended June 30, 2017 may not necessarily be indicative of the results of operations for the full year ending December 31, 2017. The consolidated balance sheet as of December 31, 2016 was derived from the audited consolidated financial statements as of December 31, 2016.


RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries as follows:
Subsidiary
 
Apartment Complex
 
Number
of Units
 
Property Location
RRE Opportunity Holdings II, LLC
 
N/A
 
N/A
 
N/A
RRE Opportunity OP II, LP
 
N/A
 
N/A
 
N/A
RRE Bear Creek Holdings, LLC, or Bear Creek
 
Adair off Addison
 
152
 
Dallas, TX
RRE Oak Hill Holdings, LLC, or Oak Hill
 
Overton Trails Apartment Homes
 
360
 
Fort Worth, TX
RRE Buckhead Holdings, LLC, or Buckhead
 
Uptown Buckhead
 
216
 
Atlanta, GA
RRE Farrington Holdings, LLC, or Farrington
 
Crosstown at Chapel Hill
 
411
 
Chapel Hill, NC
RRE Mayfair Chateau Holdings, LLC, or Mayfair Chateau
 
The Brookwood
 
274
 
Homewood, AL
RRE Fairways of Bent Tree Holdings, LLC, or Fairways of Bent Tree
 
Adair off Addison Apartment Homes
 
200
 
Dallas, TX
RRE Montclair Terrace Holdings, LLC, or Montclair Holdings
 
Montclair Terrace
 
188
 
Portland, OR
RRE Grand Reserve Holdings, LLC, or Grand Reserve
 
Grand Reserve
 
319
 
Naperville, IL
RRE Canterwood Holdings, LLC, or Canterwood
 
Verdant Apartment Homes
 
216
 
Boulder, CO
RRE Spalding Crossing Holdings, LLC, or Spalding Crossing
 
1000 Spalding Apartment Homes
 
252
 
Atlanta, GA
RRE Fox Ridge Holdings, LLC, or Fox Ridge
 
Arcadia Apartment Homes
 
300
 
Centennial, CO
RRE Riverlodge Holdings, LLC, or Riverlodge
 
Ravina Apartment Homes
 
498
 
Austin, TX
RRE Breckenridge Holdings, LLC, or Breckenridge
 
Breckenridge
 
357
 
Portland, OR
RRE Santa Rosa Holdings, LLC, or Santa Rosa
 
The Palmer at Las Colinas
 
476
 
Irving, TX
RRE Windbrooke Holdings, LLC, or Windbrooke Crossing
 
Windbrooke Crossing
 
236
 
Buffalo Grove, IL
RRE Woods Holdings, LLC, or The Woods of Burnsville
 
The Woods of Burnsville
 
400
 
Burnsville, MN
RRE Indigo Creek Holdings, LLC
 
Indigo Creek
 
408
 
Glendale, AZ

N/A - Not Applicable
All intercompany accounts and transactions have been eliminated in consolidation.
Segment Reporting
The Company does not evaluate performance on a relationship-specific or transactional basis and does not distinguish its principal business or group its operations on a geographical basis for purposes of measuring performance.  Accordingly, the  Company believes it has a single operating segment for reporting purposes in accordance with GAAP.



RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Real Estate Investments
The Company records acquired real estate at fair value on its acquisition date. The Company considers the period of future benefit of an asset to determine its appropriate useful life. The Company's estimated useful lives of its assets by class are as follows:
Buildings
27.5 years
Building improvements
5.0 to 27.5 years
Furniture, fixtures and equipment
3.0 to 5.0 years
Tenant improvements
Shorter of lease term or expected useful life
Lease intangibles
Remaining term of related lease
As four of the Company's multifamily properties are located in the Dallas-Fort Worth area, two properties are located in Portland, Oregon, two properties are located in the Atlanta area and two properties are located in the Denver area, our portfolio is currently particularly susceptible to adverse economic developments in these real estate markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for multifamily rentals resulting from the local business climate, could negatively affect our liquidity and adversely affect our ability to fund our ongoing operations.
Impairment of Long Lived Assets
When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors.
If impairment exists, due to the inability to recover the carrying value of a property, an impairment loss will be recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income. The Company did not recognize any impairment charges during the three and six months ended June 30, 2017 and 2016.
Allocation of Purchase Price of Acquired Assets
Upon the acquisition of real properties, the Company allocates the purchase price of properties to acquired tangible assets, consisting of land, buildings, fixtures and improvements, identified intangible lease assets, consisting of the value of above-market and below-market leases, as applicable, the value of in-place leases, the value of tenant relationships, and liabilities, based in each case on their fair values.
Fair value estimates are based on information obtained from a number of sources, including information obtained about each property as a result of pre-acquisition due diligence, marketing and leasing activities. In addition, the Company may obtain independent appraisal reports. The information in the appraisal reports, along with the aforementioned information available to the Company's management, is used in allocating the purchase price. The independent appraisers have no involvement in management's allocation decisions other than providing market information.
The Company records above-market and below-market in-place lease values for acquired properties based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The Company amortizes any


RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


capitalized above-market or below-market lease values as an increase or reduction to rental income over the remaining non-cancelable terms of the respective leases.
The Company measures the aggregate value of other intangible assets acquired based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued as if vacant. Management’s estimates of value are expected to be made using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis). Factors to be considered by management in its analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions and costs to execute similar leases.
In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods. Management also estimates costs to execute similar leases including leasing commissions and legal and other related expenses to the extent that such costs have not already been incurred in connection with a new lease origination as part of the transaction.
The total amount of other intangible assets acquired is further allocated to customer relationship intangible values based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with that respective tenant. Characteristics considered by management in allocating these values include the nature and extent of the Company’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals (including those existing under the terms of the lease agreement), among other factors.
The Company amortizes the value of in-place leases to expense over the remaining term of the underlying leases. The value of customer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event does amortization periods for the intangible assets exceed the remaining depreciable life of the building. Should a tenant terminate its lease, the unamortized portion of the in-place lease value and relationship intangibles related to that customer would be charged to expense in that period.
The determination of the fair value of the assets and liabilities acquired requires the use of significant assumptions with regard to current market rental rates, discount rates and other variables. These estimates are subject to change until all information is finalized, which is generally within one year of the acquisition date.
Revenue Recognition
The Company recognizes minimum rent, including rental abatements and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related lease and includes amounts expected to be received in later years in deferred rents. The Company records property operating expense reimbursements due from tenants for common area maintenance, real estate taxes and other recoverable costs in the period the related expenses are incurred.
The specific timing of a sale is measured against various criteria related to the terms of the transaction and any continuing involvement associated with the property. If the criteria for profit recognition under the full-accrual method are not met, the Company defers the gain recognition and accounts for the continued operations of the property by applying the percentage-of-completion, reduced profit, deposit, installment or cost recovery methods, as appropriate, until the appropriate criteria are met.
The future minimum rental payments to be received from noncancelable operating leases are $40.4 million and $659,000 for the 12-month periods ending June 30, 2018 and 2019, respectively, and none thereafter.
Revenue is primarily derived from the rental of residential housing units, however, included within rental income is other income such as pet fees, parking fees, and late fees, as well as property operating expense reimbursements due from tenants for common area maintenance, real estate taxes and other recoverable costs. The Company records the ancillary charges in the period in which they are earned or received and records the reimbursements in the period in which the related expenses are incurred.Total other income included within rental income was $1.7 million and $1.0 million for the three months ended June 30, 2017 and 2016, respectively. Total other income included within rental income was $3.3 million and $1.8 million for the six months ended June 30, 2017 and 2016, respectively.
Tenant Receivables


RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


The Company makes estimates of the collectability of its tenant receivables related to base rents, including straight-line rentals, expense reimbursements and other revenue or income. The Company specifically analyzes accounts receivable and historic bad debts, tenant creditworthiness, current economic trends when evaluating the adequacy of the allowance for doubtful accounts. In addition, with respect to tenants in bankruptcy, the Company makes estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectability of the related receivable. In some cases, the ultimate resolution of these claims can exceed one year. At June 30, 2017 and December 31, 2016, there were allowances for uncollectible accounts of $347 and $5,000, respectively.
Income Taxes
The Company elected to be taxed as a REIT, commencing with its taxable year ended December 31, 2014. Accordingly, the Company will generally not be subject to corporate U.S. federal or state income tax to the extent that it makes qualifying distributions to its stockholders, and provided it satisfies on a continuing basis, through actual investment and operating results, the REIT requirements including certain asset, income, distribution and stock ownership tests. If the Company fails to qualify as a REIT, and does not qualify for certain statutory relief provisions, it will be subject to U.S. federal, state and local income taxes and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year in which it lost its REIT qualification. Accordingly, the Company’s failure to qualify as a REIT could have a material adverse impact on its results of operations and amounts available for distribution to its stockholders.
The dividends paid deduction of a REIT for qualifying dividends to its stockholders is computed using the Company’s taxable income as opposed to net income reported on the financial statements. Taxable income, generally, will differ from net income reported on the financial statements because the determination of taxable income is based on tax provisions and not financial accounting principles.
The Company may elect to treat certain of its subsidiaries as taxable REIT subsidiaries (“TRSs”). In general, the Company’s TRSs may hold assets and engage in activities that the Company cannot hold or engage in directly and generally may engage in any real estate or non-real estate-related business. A TRS is subject to U.S. federal, state and local corporate income taxes.
While a TRS may generate net income, a TRS can declare dividends to the Company which will be included in the Company’s taxable income and necessitate a distribution to its stockholders. Conversely, if the Company retains earnings at a TRS level, no distribution is required and the Company can increase book equity of the consolidated entity. As of June 30, 2017 and December 31, 2016, the Company had no TRSs.
Earnings Per Share
Basic earnings (loss) per share is calculated on the basis of the weighted-average number of common shares outstanding during the year. Basic earnings (loss) per share is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted to common stock. None of the convertible shares (discussed in Note 11) are included in the diluted earnings per share calculations because the necessary conditions for conversion have not been satisfied as of June 30, 2017 (were such date to represent the end of the contingency period). For the three and six months ended June 30, 2017 and 2016, common shares potentially issuable to settle distributions payable are excluded from the calculation of diluted earnings per share calculations, as their inclusion would be anti-dilutive.
Organization and Offering Costs
The Company incurred organizational, accounting, and offering costs in pursuit of its financing. Organization and offering costs (other than selling commissions and dealer-manager fees) of the Company were initially paid by the Advisor on behalf of the Company. Organization costs were expensed as incurred and included all expenses incurred by the Company in connection with the formation of the Company, including, but not limited to, legal fees and other costs to incorporate the Company.
Pursuant to the Amended and Restated Advisory Agreement between the Company and the Advisor dated January 9, 2014, as amended (the “Advisory Agreement”), the Company is obligated to reimburse the Advisor for organization and offering costs it incurred on the Company's behalf, but only to the extent that such reimbursements did not cause organization and offering expenses (other than selling commissions and the dealer manager fees) to exceed 2.5% of the gross offering proceeds raised in the offering, when recorded by the Company. The primary portion of the offering closed on February 6, 2016, at which point total organization and offering costs incurred did not exceed 2.5% of the gross offering proceeds raised in the offering.


RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


During the offering period the Company incurred $11.2 million for the payment of offering costs consisting of accounting, advertising, allocated payroll, due diligence, marketing, legal and similar costs. During the offering period, the Advisor had incurred $7.2 million of these costs on behalf of the Company, all of which had been reimbursed. A portion of these costs was charged to equity upon the sale of each share of common stock sold under the public offering. Similarly, a portion of the proceeds received from the sales of shares in the Company's public offering was paid to the Advisor to reimburse it for the amount incurred on behalf of the Company.
Adoption of New Accounting Standards
Accounting Standards Issued But Not Yet Effective

In May 2014, Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, “Revenue from Contracts with Customers”, which will replace most existing revenue recognition guidance in GAAP. The core principle of ASU No. 2014-09 is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. ASU No. 2014-09 requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. ASU No. 2014-09 will be effective for the Company beginning January 1, 2018, including interim periods in 2018, and allows for both retrospective and prospective methods of adoption. The Company will adopt the ASU effective January 1, 2018 and does not expect the adoption to have a material effect on its consolidated financial statements as the new guidance does not apply to revenue derived from lease contracts; however, the Company is still in the process of evaluating the impact these standards will have on its consolidated financial statements.

In February 2016, FASB issued ASU No. 2016-02, "Leases (Topic 842)", which is intended to improve financial reporting about leasing transactions and requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. ASU No. 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU No. 2016-02 to have a significant impact on its consolidated financial statements.

In June 2016, FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses”, which requires measurement and recognition of expected credit losses for financial assets held. ASU No. 2016-13 will be effective for the Company beginning January 1, 2019. The Company is evaluating this guidance; however, it does not expect the adoption of ASU No. 2016-13 to have a significant impact on its consolidated financial statements.

In August 2016, FASB issued ASU No. 2016-15 "Classification of Certain Cash Receipts and Cash Payments", which addresses eight specific cash flow issues with the objective of reducing existing diversity in practice.  The guidance is effective for the Company as of January 1, 2018. Early application is permitted. The adoption of the new requirements did not have a material impact on the reporting of the Company's consolidated cash flows.       

In January 2017, FASB issued ASU No. 2017-01, "Business Combinations (Topic 850): Clarifying the Definition of Business", which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses.  ASU No. 2017-01 will be effective for the Company beginning January 1, 2018. Early application is permitted. The Company is evaluating this guidance and assessing the impact of this guidance on its consolidated financial statements.
    
In January 2017, FASB issued ASU No. 2017-04, "Intangibles- Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment", which alters the current goodwill impairment testing procedures. ASU No. 2017-04 will be effective for the Company beginning December 15, 2019. Early application is permitted. The Company is evaluating this guidance and assessing the impact of this guidance on its consolidated financial statements.



RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION    
The following table presents supplemental cash flow information (in thousands):
 
Six Months Ended
 
June 30,
 
2017
 
2016
Non-cash operating, financing and investing activities:
 
 
 
Distributions on common stock declared but not yet paid
$
8,980

 
$
8,746

Stock issued pursuant to distribution reinvestment plan
10,273

 
10,141

Rental property and other assets acquired through assumption of mortgage notes payable

 
28,765

 
 
 
 
Cash paid during the period for:
 
 
 
Interest
$
8,262

 
$
2,950

NOTE 4 - RESTRICTED CASH
Restricted cash represents escrow deposits with lenders to be used to pay real estate taxes, insurance, and capital improvements. A summary of the components of restricted cash follows (in thousands):
 
June 30,
2017
 
December 31,
2016
Real estate taxes
$
4,120

 
$
3,252

Insurance
465

 
671

Capital improvements
1,977

 
2,697

 
$
6,562

 
$
6,620


In addition, the Company had unrestricted cash earmarked for capital expenditures of $56.9 million and $71.7 million as of June 30, 2017 and December 31, 2016.
NOTE 5 - RENTAL PROPERTIES, NET
The Company’s investments in rental properties consisted of the following (in thousands):
 
June 30,
2017
 
December 31,
2016
Land
$
115,789

 
$
108,587

Building and improvements (1)
708,137

 
650,385

Furniture, fixtures and equipment (1)
17,844

 
14,982

Construction in progress
6,195

 
7,641


847,965

 
781,595

Less: accumulated depreciation
(43,348
)
 
(27,007
)

$
804,617

 
$
754,588

    
(1) The Company has reclassified $21.3 million at December 31, 2016 from Furniture, fixtures and equipment to Building and improvements. This reclassification had no impact on accumulated depreciation or estimated useful lives.    
Depreciation expense for the three and six months ended June 30, 2017 was $8.6 million and $16.5 million, respectively. Depreciation expense for the three and six months ended June 30, 2016 was $4.9 million and $8.8 million, respectively.


RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


NOTE 6 - ACQUISITIONS
As of June 30, 2017, the Company owned 17 properties. In order to finalize the fair values of the acquired assets and liabilities, the Company obtained third-party appraisals. The Company has up to twelve months from the date of acquisition to finalize the valuation for each property. All valuations for acquisitions in 2016 and prior had been finalized as of December 31, 2016. The initial purchase price allocation for Indigo Creek has not been finalized as of June 30, 2017,
The table below summarizes the Company's wholly-owned acquisition during the three and six months ended June 30, 2017and the respective fair values assigned (in thousands):    
 
 
 
 
 
 
 
 
Fair Value Assigned
Multifamily
Community Name
 
City and State
 
Date of
Acquisition
 
Contractual Purchase
Price (1)
 
Land
 
Building and
Improvements
 
Furniture, Fixture and Equipment
 
Intangible Assets
 
Debt assumed
 
Other
Liabilities
 
Total
Indigo Creek
 
Glendale, Arizona
 
4/4/2017
 
$
55,200

 
$
7,202

 
$
46,348

 
$
508

 
$
1,143

 
$

 
$
(97
)
 
$
55,104


(1) Contractual purchase price excludes closing costs and acquisition expenses and other immaterial settlement date adjustments and pro-rations.
    
The table below summarizes the total revenues, net loss, and acquisition costs and fees of the Company's 2017 acquisition (in thousands):
 
 
 
Three Months Ended
 
Six Months Ended
 
 
 
June 30,
 
June 30,
Multifamily Community
 
2017
 
2017
Indigo Creek
 
 
 
 
 
Total Revenues
 
$
1,095

 
$
1,095

 
Net Loss
 
(683
)
 
(683
)
 
Acquisition Costs
 
137

 
137

 
Acquisition Fee
 
1,142

 
1,142




RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


NOTE 7 - IDENTIFIED INTANGIBLE ASSETS, NET
Identified intangible assets, net, consist of in-place rental leases. The gross value of acquired in-place leases totaled $17.4 million and $16.3 million as of June 30, 2017 and December 31, 2016, net of accumulated amortization of $16.6 million and $13.6 million, respectively. The weighted average remaining life of the rental leases is three months as of June 30, 2017. Amortization expense for the three months ended June 30, 2017 and 2016 was $1.4 million and $3.0 million, respectively. Amortization expense for the six months ended June 30, 2017 and 2016 was $3.0 million and $5.9 million, respectively. As of June 30, 2017, expected amortization for the in-place rental leases for the next 12 months is $839,000 and none thereafter.
NOTE 8 - MORTGAGE NOTES PAYABLE, NET
The following is a summary of the Company's mortgage notes payable (in thousands):
 
 
Outstanding borrowings
 
Premium, net
 
Deferred Finance Costs, net
 
Carrying Value
 
Outstanding borrowings
 
Premium, net
 
Deferred Finance Costs, net
 
Carrying Value
Collateral
 
June 30, 2017
 
December 31, 2016
Overton Trails Apartment Homes
 
$
30,807

 
$

 
$
(314
)
 
$
30,493

 
$
31,075

 
$

 
$
(344
)
 
$
30,731

Uptown Buckhead
 
20,200

 

 
(266
)
 
19,934

 
20,200

 

 
(284
)
 
19,916

Crosstown at Chapel Hill
 
32,000

 

 
(319
)
 
31,681

 
32,000

 

 
(373
)
 
31,627

The Brookwood - Key Bank
 
18,060

 
454

 
(214
)
 
18,300

 
18,247

 
508

 
(239
)
 
18,516

The Brookwood - Capital One
 
2,679

 
34

 
(37
)
 
2,676

 
2,699

 
39

 
(41
)
 
2,697

Adair off Addison and Adair off Addison Apartment Homes
 
25,314

 

 
(405
)
 
24,909

 
25,500

 

 
(464
)
 
25,036

1000 Spalding Apartment Homes
 
24,600

 

 
(260
)
 
24,340

 
24,600

 

 
(289
)
 
24,311

Ravina Apartment Homes
 
27,965

 

 
(354
)
 
27,611

 
28,292

 

 
(393
)
 
27,899

Verdant Apartment Homes
 
37,300

 

 
(317
)
 
36,983

 
37,300

 

 
(345
)
 
36,955

Arcadia Apartment Homes
 
40,200

 

 
(348
)
 
39,852

 
40,200

 

 
(379
)
 
39,821

Grand Reserve
 
41,957

 

 
(409
)
 
41,548

 
42,395

 

 
(446
)
 
41,949

Montclair Terrace
 
20,872

 

 
(316
)
 
20,556

 
21,083

 

 
(345
)
 
20,738

Breckenridge
 
52,975

 

 
(642
)
 
52,333

 
52,975

 

 
(697
)
 
52,278

The Palmer at Las Colinas
 
45,700

 

 
(609
)
 
45,091

 
45,700

 

 
(643
)
 
45,057

Windbrooke Crossing
 
38,320

 

 
(450
)
 
37,870

 
38,320

 

 
(490
)
 
37,830

Woods of Burnsville
 
38,250

 

 
(581
)
 
37,669

 

 

 

 

Indigo Creek
 
40,789

 

 
(512
)
 
40,277

 

 

 

 

 
 
$
537,988

 
$
488

 
$
(6,353
)
 
$
532,123

 
$
460,586

 
$
547

 
$
(5,772
)
 
$
455,361



RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


 
 
Maturity
Date
 
Margin over LIBOR
 
Annual Interest Rate
 
Average
Monthly Debt
Service
 
Average
Monthly Escrow
 
 
Overton Trails Apartment Homes
 
1/1/2025
 
1.91
%
 
3.13
%
 
118

 
155

 
(1) (3) (6)
Uptown Buckhead
 
7/1/2025
 
2.22
%
 
3.44
%
 
79

 
70

 
(1) (3) (5)
Crosstown at Chapel Hill
 
7/10/2020
 
1.70
%
 
2.92
%
 
99

 

 
(1) (4) (5)
The Brookwood - Key Bank
 
11/1/2021
 
N/A

 
4.73
%
 
104

 
27

 
(2) (7)
The Brookwood - Capital One
 
11/1/2021
 
N/A

 
5.40
%
 
79

 

 
(2) (7)
Adair off Addison and Adair off Addison Apartment Homes
 
1/1/2021
 
1.55
%
 
2.77
%
 
88

 

 
(1) (3)
1000 Spalding Apartment Homes
 
1/1/2022
 
N/A

 
3.88
%
 
111

 
39

 
(2) (5)
Ravina Apartment Homes
 
5/1/2022
 
N/A

 
3.76
%
 
144

 
130

 
(2) (7)
Verdant Apartment Homes
 
5/1/2023
 
N/A

 
3.89
%
 
158

 
26

 
(2) (5)
Arcadia Apartment Homes
 
5/1/2023
 
N/A

 
3.89
%
 
170

 
19

 
(2) (5)
Grand Reserve
 
6/1/2023
 
2.57
%
 
3.79
%
 
184

 
88

 
(1) (3) (6)
Montclair Terrace
 
6/1/2023
 
2.45
%
 
3.67
%
 
93

 
21

 
(1) (3) (7)
Breckenridge
 
7/1/2023
 
2.36
%
 
3.58
%
 
219

 
54

 
(1) (3) (5)
The Palmer at Las Colinas
 
9/1/2026
 
2.11
%
 
3.33
%
 
148

 
98

 
(1) (3) (5)
Windbrooke Crossing
 
1/1/2024
 
2.69
%
 
3.91
%
 
199

 
70

 
(1) (3) (5)
Woods of Burnsville
 
2/1/2024
 
2.13
%
 
3.35
%
 
168

 
67

 
(1) (3) (5)
Indigo Creek
 
4/1/2024
 
1.93
%
 
3.15
%
 
215

 
42

 
(1) (3) (5)

(1)
Variable rate based on one-month LIBOR of 1.2239% (as of June 30, 2017) plus a fixed margin
(2)
Fixed rate
(3)
Variable rate hedged with interest rate cap cash flow hedge
(4)
Fixed rate interest swap associated with the variable rate debt
(5)
Monthly interest-only payment currently required
(6)
Monthly fixed principal plus interest payment required
(7)
Fixed monthly payment of principal and interest payment required
On August 21, 2015, the Company recorded a fair value adjustment, which represented the fair value of the debt assumed over its principal amount in connection with The Brookwood Apartment Homes acquisition. The fair value will be amortized to interest expense over the term of the related mortgages loans using the effective interest method. As of June 30, 2017, the net unamortized fair value of debt assumed adjustment was $488,000 and was included as a component of mortgage loans payable in the accompanying consolidated balance sheets.
At June 30, 2017, the weighted average interest rate of all the Company's outstanding indebtedness was 3.56%.
All mortgage notes are collateralized by mortgage liens on the assets of the respective property as named in the table above. The amount outstanding on the mortgages may be prepaid in full during the entire term with a prepayment penalty on the majority of the mortgages held.
As of both June 30, 2017 and December 31, 2016, the Company had $6.6 million of restricted cash related to escrow deposits held by mortgage lenders for real estate taxes, insurance and capital reserves (see Note 4).
Annual principal payments on the mortgage notes payable, excluding amortization of the mortgage premium, for each of the next five 12-month periods ending June 30, and thereafter, are as follows (in thousands):


RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


2018
$
4,963

2019
8,081

2020
12,150

2021
66,120

2022
77,543

Thereafter
369,131

Total principal payments
$
537,988

The mortgage notes payable are recourse only with respect to the properties that secure the notes, subject to certain limited standard exceptions, as defined in each mortgage note. These exceptions are referred to as “carveouts.” The Company has guaranteed the mortgage notes by executing a guarantee with respect to the properties. In general, carveouts relate to damages suffered by the lender for a borrower’s failure to pay rents, insurance or condemnation proceeds to lender, failure to pay water, sewer and other public assessments or charges, failure to pay environmental compliance costs or to deliver books and records, in each case as required in the loan documents. The exceptions also require the Company to guarantee payment of audit costs, lender’s enforcement of its rights under the loan documents and payment of the loan if the borrower voluntarily files for bankruptcy or seeks reorganization, or if a related party of the borrower does so with respect to the subsidiary. The Company had also guaranteed the completion and payment of costs of completion of no less than $1.8 million for renovations at Uptown Buckhead by June 30, 2017, all of which were completed as of June 30, 2017. For the Crosstown at Chapel Hill Mortgage Loan, beginning with the calendar quarter ending December 31, 2017, the property must maintain a certain level of debt service coverage.
Deferred financing costs incurred to obtain financing are amortized over the term of the related debt. As of June 30, 2017 and December 31, 2016, accumulated amortization of deferred financing costs was $1.4 million and $877,000, respectively. Amortization of deferred financing costs for the next five 12-month periods ending June 30, and thereafter, is as follows (in thousands):
2018
$
1,180

2019
1,164

2020
1,142

2021
964

2022
801

Thereafter
1,102

 
$
6,353




RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


NOTE 9 - ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table presents the changes in accumulated other comprehensive loss (in thousands):
 
Net unrealized loss
on derivatives
January 1, 2016
$
(117
)
Designated derivatives, fair value adjustment
43

Balance, December 31, 2016
(74
)
Designated derivatives, fair value adjustment
(330
)
Balance, June 30, 2017
$
(404
)
NOTE 10 - RELATED PARTY TRANSACTIONS
Relationship with the Advisor
Pursuant to the terms of the Advisory Agreement, the Advisor provides the Company with the services of its management team, including its officers, along with appropriate support personnel. The Advisor is reimbursed for the Company’s allocable share of costs for Advisor personnel, including allocable personnel salaries and benefits. Each of the Company’s officers is an employee of the Sponsor or one of its affiliates. The Company does not have any employees. The Advisor is not obligated to dedicate any specific portion of its time or the time of its personnel to the Company’s business. The Advisor is at all times subject to the supervision and oversight of the Company’s Board of Directors and has only such functions and authority as the Company delegates to it.
During the course of the primary offering, the Advisor provided offering-related services to the Company and advanced funds to the Company for both operating costs and organization and offering costs. These amounts were reimbursed to the Advisor from the proceeds from the offering. During the offering period, which closed in 2016, the Advisor had incurred costs on a cumulative basis on behalf of the Company of approximately $7.2 million, all of which had been reimbursed.
The Advisory Agreement has a one-year term and renews for an unlimited number of successive one-year terms upon the approval of the conflicts committee of the Company's Board of Directors. Under the Advisory Agreement, the Advisor receives fees and is reimbursed for its expenses as set forth below:
Acquisition fees. The Advisor earns an acquisition fee of 2.0% of the cost of investments acquired on behalf of the Company, plus any capital expenditure reserves allocated, or the amount funded by the Company to acquire loans, including acquisition expenses and any debt attributable to such investments.
Asset management fees. The Advisor earns a monthly asset management fee equal to one-twelfth of 1.0% of the cost of each asset, without deduction for depreciation, bad debts or other non-cash reserves. The asset management fee is based only on the portion of the costs or value attributable to the Company’s investment in an asset if the Company does not own all of an asset and does not manage or control the asset.
Disposition fees. The Advisor earns a disposition fee in connection with the sale of a property equal to the lesser of one-half of the aggregate brokerage commission paid, or if none is paid, 2.0% of the contract sales price.
Debt financing fees. The Advisor earns a debt financing fee equal to 0.5% of the amount available under any debt financing obtained for which it provided substantial services.
Expense reimbursements. The Company also pays directly or reimburses the Advisor for all of the expenses paid or incurred by the Advisor or its affiliates on behalf of the Company or in connection with the services provided to the Company in relation to its public offering, including its distribution reinvestment plan offering. This included all organization and offering costs of up to 2.5% of gross offering proceeds. Reimbursements also include expenses the Advisor incurs in connection with providing services to the Company, including the Company’s allocable share of costs for Advisor personnel and overhead, out-of-pocket expenses incurred in connection with the selection and acquisition of properties or other real estate related debt


RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


investments, whether or not the Company ultimately acquires the investment. However, the Company will not reimburse the Advisor or its affiliates for employee costs in connection with services for which the Advisor earns acquisition or disposition fees.
Relationship with RAI and C-III
Our Advisor is an indirect wholly owned subsidiary of RAI. RAI is a wholly owned subsidiary of C-III. As a result, C-III controls the Advisor and all of the shares currently held by the Advisor.
Self-insurance funds held in escrow.The receivables from related parties includes insurance deposits held in escrow by RAI and C-III for self-insurance, which if unused, will be returned to the Company. The Company's properties participate in insurance pools with other properties directly and indirectly managed by RAI and C-III for both property insurance and general liability. The general liability policy in which the Company participated in a self-insured insurance pool ended on April 22, 2017. Thereafter, the Company is responsible for the first $25,000 of any loss that occurs.
RAI and C-III hold the deposits in escrow to fund future insurance claims. The insurance pool for property losses up to $2.5 million and the insurance pool for the general liability covered losses up to the first $50,000 per incident until April 22, 2017. Catastrophic insurance would cover losses in excess of the insurance pool up to $250.0 million. Therefore, unforeseen or catastrophic losses in excess of the Company's insured limits could have a material adverse effect on the Company's financial condition and operating results. During the three and six months ended June 30, 2017, the Company paid $380,000 and $398,000, respectively, into the insurance pools.
Internal audit fees. RAI performs internal audit services for the Company.
The Company utilizes the services of The Planning and Zoning Resource Company, an affiliate of C-III, for zoning reports for acquisitions.
Relationship with Resource Real Estate Opportunity Manager II
The Manager manages real estate properties and real estate-related debt investments and coordinates the leasing of, and manages construction activities related to the Company’s real estate properties pursuant to the terms of the management agreement with the Manager.
Property management fees. The Manager earns a property management fee equal to 4.5% of actual gross cash receipts from the operations of real property investments.
Construction management fees. The Manager earns a construction management fee of 5.0% of actual aggregate costs to construct improvements, or to repair, rehab or reconstruct a property.
Debt servicing fees. The Manager earns a debt servicing fee of 2.75% on payments received from loans held by the Company for investment. No debt servicing fees were earned during the six months ended June 30, 2017 and 2016.
Expense reimbursement. During the ordinary course of business, the Manager or other affiliates of RAI may pay certain shared operating expenses on behalf of the Company.
Relationship with Resource Securities
Resource Securities LLC. (“Resource Securities”), an affiliate of the Advisor, serves as the Company’s dealer-manager and was responsible for marketing the Company’s shares during the primary portion of its public offering. Pursuant to the terms of the dealer-manager agreement with Resource Securities, the Company paid Resource Securities a selling commission of up to 7% of gross primary offering proceeds and a dealer-manager fee of up to 3% of gross primary offering proceeds. Resource Securities reallowed all selling commissions earned and a portion of the dealer-manager fee as a marketing fee to participating broker-dealers. No selling commissions or dealer-manager fees are earned by Resource Securities in connection with sales under the distribution reinvestment plan.
Relationship with Other Related Party
The Company utilizes the services of a printing company, Graphic Images, LLC (“Graphic Images”), the principal owner of which is the father of RAI’s Chief Financial Officer.    


RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


The fees earned/expenses incurred and the amounts payable to such related parties are summarized in the following tables (in thousands):
 
June 30,
2017
 
December 31,
2016
Due from related parties:
 
 
 
RAI - self-insurance funds held
$
619

 
$
604

 
$
619

 
$
604

 
 
 
 
Due to related parties:
 
 
 
Advisor
 
 
 
Acquisition fees
$

 
$
1,022

Operating expense reimbursements
9

 
1,078

 
 
 
 
Manager
 
 
 
Property management fees
295

 
244

Operating expense reimbursements
337

 
304

 
 
 
 
RAI
 
 
 
Internal audit fees
18

 

 
$
659

 
$
2,648


 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
Fees earned / expenses incurred:
 
 
 
 
 
 
 
Advisor
 
 
 
 
 
 
 
Acquisition fees (1)
$
1,142

 
$
3,438

 
$
1,142

 
$
6,450

Asset management fees (2)
$
2,357

 
$
1,638

 
$
4,573

 
$
2,955

Debt financing fees (3)
$
203

 
$
973

 
$
395

 
$
1,117

Organization and offering costs (4)
$

 
$

 
$

 
$
86

Operating expense reimbursements (5)
$
961

 
$
780

 
$
2,050

 
$
1,303

 
 
 
 
 
 
 
 
Manager
 
 
 
 
 
 
 
Property management fees (2)
$
848

 
$
530

 
$
1,639

 
$
930

Construction management fees (7)
$
444

 
$
340

 
$
832

 
$
521

Operating expense reimbursements (5)
$

 
$
32

 
$

 
$
61

Information technology fees (5)
$

 
40

 
$

 
$
72

 
 
 
 
 
 
 
 
Resource Securities
 
 
 
 
 
 
 
Selling commissions and dealer-manager fees (6)
$

 
$

 
$

 
$
4,192

 
 
 
 
 
 
 
 
Other
 
 
 
 
 
 
 
Graphic Images (5)
$
9

 
$
3

 
$
9

 
$
3

The Planning & Zoning Resource Company (1)
$
1

 
$

 
$
1

 
$



RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


(1)     Included in Acquisition costs on the consolidated statements of operations and comprehensive loss per income statement.
(2)     Included in Management fees on the consolidated statements of operations and comprehensive loss per income statement.
(3)    Included in Mortgage notes payable, net on the consolidated balance sheets.
(4)     Included in Deferred offering costs and Stockholders' Equity on the consolidated balance sheets.
(5)     Included in General and administrative on the consolidated statements of operations and comprehensive loss per income statement.
(6)     Included in Stockholders' equity on the consolidated balance sheets.
(7)     Included in Rental properties, net on the consolidated balance sheets.
NOTE 11 - EQUITY
Preferred Stock
The Company’s charter authorizes the Company to issue 10,000,000 shares of its $0.01 par value preferred stock. As of June 30, 2017, no shares of preferred stock were issued or outstanding.
Convertible Stock
As of June 30, 2017, the Company had 50,000 shares of $0.01 par value convertible stock outstanding, which are owned by the Advisor and affiliated persons. The convertible stock will convert into shares of the Company’s common stock upon the occurrence of (a) the Company having paid distributions to common stockholders that in the aggregate equal 100% of the price at which the Company originally sold the shares plus an amount sufficient to produce a 7% cumulative, non-compounded annual return on the shares at that price; or (b) if the Company lists its common stock on a national securities exchange and, on or after the 31st trading day following the listing, the Company’s value based on the average trading price of its common stock since the listing, plus prior distributions, combine to meet the same 7% return threshold.
Each of these two events is a “Triggering Event.”  Upon a Triggering Event, the Company's convertible stock will, unless its advisory agreement has been terminated or not renewed on account of a material breach by its Advisor, generally be converted into a number of shares of common stock equal to 1/50,000 of the quotient of:
(A)
the lesser of
(i)    15% of the amount, if any, by which
(1)
the value of the Company as of the date of the event triggering the conversion plus the total distributions paid to its stockholders through such date on the then-outstanding shares of its common stock exceeds
(2)
the sum of the aggregate issue price of those outstanding shares plus a 7% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, divided by
(B)
the value of the Company divided by the number of outstanding shares of common stock, in each case, as of the date of the event triggering the conversion.      


RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


Common Stock
As of June 30, 2017, the Company had an aggregate of 60,042,644 shares of $0.01 par value common stock outstanding, including the Advisor's additional purchase of 117,778 shares of common stock for $1.1 million, as follows (dollars in thousands):
 
 
Shares Issued
 
Gross Proceeds
Shares issued through initial public offering
 
55,791,297

 
$
556,197

Shares issued through stock distributions
 
246,365

 

Shares issued through distribution reinvestment plan
 
4,471,977

 
39,520

Advisor's initial investment, net of 5,000 share conversion
 
15,000

 
150

Total
 
60,524,639

 
595,867

Shares redeemed and retired
 
(481,995
)
 
(4,171
)
Total shares outstanding
 
60,042,644

 
$
591,696


Redemptions
During the six months ended June 30, 2017, the Company redeemed shares as follows (in thousands, except per share data):
Month
 
Total Number
of Shares
Redeemed
 
Average Price Paid per Share
 
Cumulative Number
of Shares Purchased
as Part of a Publicly
Announced Plan or
Program
(1)
 
Approximate Dollar
Value of Shares
Available That May
Yet Be Redeemed
Under the Program
January 2017
 
 
$—
 
 
(2) 
February 2017
 
 
$—
 
 
(2) 
March 2017
 
121
 
$8.74
 
121
 
(2) 
April 2017
 
 
$—
 
 
(2) 
May 2017
 
 
$—
 
 
(2) 
June 2017
 
188
 
$8.58
 
309
 
(2) 

(1)
All purchases of equity securities by the Company in the six months ended June 30, 2017 were made pursuant to the Company's share redemption program.
(2)
The Company currently limits the dollar value and number of shares that may be repurchased under the program, as discussed below.
All redemption requests tendered were honored during the six months ended June 30, 2017.
The Company will not redeem in excess of 5% of the weighted-average number of shares outstanding during the 12-month period immediately prior to the effective date of redemption.  Generally, the cash available for redemption will be limited to proceeds from the distribution reinvestment plan plus, if the Company had positive operating cash flow from the previous fiscal year, 1% of all operating cash flow from the previous fiscal year.  These limitations apply to all redemptions, including redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility. 

The Company's board of directors, in its sole discretion, may suspend, terminate or amend the Company's share redemption program without stockholder approval upon 30 days' notice if it determines that such suspension, termination or amendment is in the Company's best interest. The Company's board may also reduce the number of shares purchased under the share redemption program if it determines the funds otherwise available to fund the Company's share redemption program are needed for other purposes. These limitations apply to all redemptions, including redemptions sought upon a stockholder's death, qualifying disability or confinement to a long-term care facility.



RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


Distributions
For the six months ended June 30, 2017, the Company paid aggregate distributions of $17.7 million, including $7.4 million of distributions paid in cash and $10.3 million of distributions reinvested in shares of common stock through the Company's distribution reinvestment plan, as follows (in thousands):
Authorization Date
 
Per
Common
Share
 
Record Dates
 
Distribution Date
 
Distributions
reinvested in shares
of Common Stock
 
Net Cash Distributions
 
Total Aggregate
Distributions
December 15, 2016
 
$
0.00164384

 
December 30, 2016 through January 30, 2017
 
January 31, 2017
 
$
1,748

 
$
1,265

 
$
3,013

December 15, 2016
 
0.00164384

 
January 31, 2017 through February 27, 2017
 
February 28, 2017
 
1,587

 
1,144

 
2,731

December 15, 2016
 
0.00164384

 
February 28, 2017 through March 30, 2017
 
March 31, 2017
 
1,755

 
1,276

 
3,031

March 28, 2017
 
0.00164384

 
March 31, 2017 through April 27, 2017
 
April 28, 2017
 
1,593

 
1,156

 
2,749

March 28, 2017
 
0.00164384

 
April 28, 2017 through May 30, 2017
 
May 31, 2017
 
1,877

 
1,366

 
3,243

March 28, 2017
 
0.00164384

 
May 31, 2017 through June 29, 2017
 
June 30, 2017
 
1,713

 
1,243

 
2,956

 
 
 
 
 
 
 
 
$
10,273

 
$
7,450

 
$
17,723


On June 16, 2017, the Board of Directors approved distributions in an amount of $0.00164384 per share of common stock for stockholders of record each day in the period from June 30, 2017 through and including September 28, 2017, payable on July 31, 2017, August 31, 2017 and September 29, 2017.

The following is a reconciliation of total aggregate distributions paid to total distributions declared for the six months ended June 30, 2017 (in thousands):
Total aggregate distributions
 
$
17,723

Less: distribution payable at December 31, 2016
 
(8,769
)
Add: distribution payable at June 30, 2017
 
8,980

Total distributions declared
 
$
17,934


NOTE 12 - FAIR VALUE MEASURES AND DISCLOSURES
In analyzing the fair value of its investments accounted for on a fair value basis, the Company follows the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  The Company determines fair value based on quoted prices when available or, if quoted prices are not available, through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. The fair value of cash, tenant receivables and accounts payable, approximate their carrying value due to their short nature.  The hierarchy followed defines three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.


RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.
Level 3 - Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.
The determination of where an asset or liability falls in the hierarchy requires significant judgment.  The Company evaluates its hierarchy disclosures each quarter; depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter.  However, the Company expects that changes in classifications between levels will be rare.
The fair value of rental properties is usually estimated based on information obtained from a number of sources, including information obtained about each property as a result of pre-acquisition due diligence, marketing and leasing activities.  The Company allocates the purchase price of properties to acquired tangible assets, consisting of land, buildings, fixtures and improvements, and identified intangible lease assets and liabilities, consisting of the value of above-market and below-market leases, as applicable, the value of in-place leases and the value of tenant relationships, based in each case on their fair values.    

Derivatives (interest rate caps) which are reported at fair value in the consolidated balance sheets are valued by a third party pricing agent using an income approach with models that use, as their primary inputs, readily observable market parameters. This valuation process considers factors including interest rate yield curves, time value, credit and volatility factors (Level 2).

The following table presents information about the Company's assets measured at fair value on a recurring basis and
indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as follows (in thousands):
 
Level 1
 
Level 2
 
Level 3
 
Total
June 30, 2017
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Interest rate caps
$

 
$
110

 
$

 
$
110

Cancelable swap

 
41

 

 
41

 
$

 
$
151

 
$

 
$
151

Liabilities:
 
 
 
 
 
 
 
Cancelable swap
$

 

 
$

 

 
$

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
Level 1
 
Level 2
 
Level 3
 
Total
December 31, 2016
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Interest rate caps
$

 
$
365

 
$

 
$
365

Canceleable swap

 
43

 

 
43

 
$

 
$
408

 
$

 
$
408

Liabilities:
 
 
 
 
 
 
 
Cancelable swap
$

 
$

 
$

 
$

 
$

 
$

 
$

 
$

Interest rate caps and the cancelable swap are included in Prepaid expenses and other assets on the consolidated balance sheets.
    


RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


The outstanding balance and estimated fair value of the Company’s mortgage notes payable are as follows (in thousands):
 
June 30, 2017
 
December 31, 2016
 
Outstanding Balance
 
Estimated Fair
Value
 
Outstanding Balance
 
Estimated Fair
Value
Mortgage notes payable
$
537,988

 
$
514,294

 
$
460,586

 
$
449,977

The carrying amount of the mortgage notes payable presented is the outstanding borrowings excluding premium and deferred finance costs, net. The fair value of the mortgage notes payable was estimated using rates available to the Company for debt with similar terms and remaining maturities (Level 3).
NOTE 13 - DERIVATIVES AND HEDGING ACTIVITIES
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.
As a condition of the Company’s mortgage loans, from time to time the Company may be required to enter into certain derivative transactions as may be required by the lender. These transactions would generally be in line with the Company’s own risk management objectives and also serve to protect the lender.
Interest Rate Caps
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company entered into interest rate caps that were designated as cash flow hedges. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the six months ended June 30, 2017, such derivatives were used to hedge the variable cash flows, indexed to London InterBank Offered Rate ("LIBOR"), associated with existing variable-rate loan agreements. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the six months ended June 30, 2017, the Company did not record any hedge ineffectiveness in earnings.
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next 12 months, the Company estimates that an additional $80,261 will be reclassified as an increase to interest expense.
Cancelable swap
To manage its exposure to interest rate movements, the Company has also entered into a cancelable interest rate swap    that was not designated as a hedging instrument. Interest rate swaps involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements but do not meet the strict hedge accounting requirements.


RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


As of June 30, 2017, the Company had the following outstanding interest rate derivatives (dollars in thousands):
Interest Rate Derivatives
 
Number of Instruments
 
Notional
Amount
 
Maturity Dates
Derivatives designated as hedging instruments:
Interest rate caps
 
10
 
$
358,941

 
January 1, 2018 through September 1, 2020
Derivatives not designated as hedging instruments
Cancelable swap
 
1
 
$
32,000

 
July 28, 2020

Tabular Disclosure of Fair Value of Derivative Instrument on the Balance Sheet
The table below presents the fair value of the Company’s derivative financial instruments on the consolidated balance sheets as of June 30, 2017 and December 31, 2016 (in thousands):
Asset Derivatives
 
Liabilities Derivatives
June 30, 2017
 
December 31, 2016
 
June 30, 2017
 
December 31, 2016
Balance Sheet
 
Fair Value
 
Balance Sheet
 
Fair Value
 
Balance Sheet
 
Fair Value
 
Balance Sheet
 
Fair Value
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
Interest rate caps
 
$
110

 
Interest rate caps
 
$
365

 
NA
 
$

 
NA
 
$

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
Cancelable swap
 
$
41

 
Cancelable swap
 
43

 
NA
 

 
NA
 

Interest rate caps and the cancelable swap are included in Prepaid expenses and other assets on the consolidated balance sheets.
The table below presents the effect of the Company's derivative financial instruments on the consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2017 and 2016 (in thousands):
 
 
 
 
Amount of Gain (Loss) Recognized in Income for the Three Months Ended
 
Amount of Gain (Loss) Recognized in Income for the Six Months Ended
Derivatives Designated as Hedging Instruments
 
Location of Gain (Loss) Recognized in Income
 
June 30, 2017
 
June 30, 2016
 
June 30, 2017
 
June 30, 2016
Interest rate caps
 
Interest expense
 
$
(13
)
 
2

 
$
(21
)
 
3

 
 
 
 
Amount of Gain (Loss) Recognized in Income for the Three Months Ended
 
Amount of Gain (Loss) Recognized in Income for the Six Months Ended
Derivatives Not Designated as Hedging Instruments
 
Location of Gain (Loss) Recognized in Income
 
June 30, 2017
 
June 30, 2016
 
June 30, 2017
 
June 30, 2016
Cancelable swap
 
Interest expense
 
$
(91
)
 
(141
)
 
$
(159
)
 
(535
)


RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
JUNE 30, 2017
(unaudited)


Derivatives in Cash Flow Hedging Relationships
 
Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) for the Three Months Ended
 
Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
 
Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) for the Three Months Ended
 
June 30, 2017