CONSOLIDATED BALANCE SHEETS

	June 30, 2019			December 31, 2018
	(unaudited)
ASSETS
Investments:
Rental properties, net	$	197,997,091		$	136,061,586
Identified intangible assets, net		1,127,962			707,825
Total investments		199,125,053			136,769,411

Cash		30,338,228			32,827,390
Restricted cash		2,364,290			883,902
Tenant receivables, net		60,607			51,524
Due from related parties		5,380			13,772
Subscriptions receivable		110,000			1,431,000
Prepaid expenses and other assets		584,916			1,097,179
Deferred offering costs		4,795,010			5,046,364
Total assets	$	237,383,484		$	178,120,542
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Mortgage notes payable, net	$	145,419,265		$	100,044,640
Accounts payable and accrued expenses		1,277,151			1,167,901
Accrued real estate taxes		1,124,091			—
Due to related parties		12,944,582			12,993,287
Tenant prepayments		56,489			116,102
Security deposits		353,959			271,246
Distributions payable		1,315,781			1,037,799
Total liabilities		162,491,318			115,630,975

Stockholders’ equity:
Preferred stock, par value $0.01: 10,000,000 shares authorized, none issued and outstanding		—			—
Convertible stock, par value $0.01: 50,000 shares authorized, issued and outstanding		500			500
Class A common stock, par value $0.01: 25,000,000 shares authorized, 623,238 and 634,493 issued and outstanding, respectively		6,232			6,345
Class T common stock, par value $0.01: 25,000,000 shares authorized, 1,099,414 and 1,111,394 issued and outstanding, respectively		10,994			11,114
Class R common stock, par value $0.01: 750,000,000 shares authorized, 9,294,218 and 7,181,534 issued and outstanding, respectively		92,942			71,815
Class I common stock, par value $0.01: 75,000,000 shares authorized, 614,262 and 329,604 issued and outstanding, respectively		6,143			3,296
Additional paid-in capital		98,271,812			77,896,470
Accumulated other comprehensive loss		(39,764	)		(40,633	)
Accumulated deficit		(23,456,693	)		(15,459,340	)
Total stockholders’ equity		74,892,166			62,489,567
Total liabilities and stockholders’ equity	$	237,383,484		$	178,120,542

September 30,
2017 December 31, 2016
(unaudited)
ASSETS
Investments:
Rental properties, net $ 29,654,938
$ 2,445,835
Identified intangible assets, net 562,568
27,870
Total investments 30,217,506
2,473,705

Cash 10,914,545
3,351,536
Restricted cash 427,116
7,733
Tenant receivables, net 721
788
Due from related parties 4,553
2,352
Subscriptions receivable 676,851
210,000
Prepaid expenses and other assets 147,562
100,485
Deferred offering costs 4,933,424
2,848,199
Total assets $ 47,322,278
$ 8,994,798

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:
Mortgage notes payable, net of unamortized deferred financing costs of $353,061 and $34,166 $ 22,769,848
$ 1,590,834
Accounts payable and accrued expenses 253,350
214,284
Accrued real estate taxes 236,986
—
Due to related parties 7,594,906
3,616,713
Tenant prepayments 19,644
—
Security deposits 64,066
3,300
Distributions payable 91,561
25,174
Total liabilities $ 31,030,361
$ 5,450,305

Stockholders’ equity:

Preferred stock, par value $0.01: 10,000,000 shares authorized, none issued and outstanding —
—
Convertible stock, par value $0.01: 50,000 shares authorized, 50,000 and 50,000 issued and outstanding, respectively 500
500
Class A common stock, par value $0.01: 25,000,000 and 250,000,000 shares authorized, respectively, 618,569 and 384,195 issued and outstanding, respectively 6,186
3,842
Class T common stock, par value $0.01: 25,000,000 and 750,000,000 shares authorized, respectively, 1,073,229 and 114,037 issued and outstanding, respectively 10,732
1,140
Class R common stock, par value $0.01: 750,000,000 and 0 shares authorized, respectively, 617,186 and 0 issued and outstanding, respectively 6,172
—
Class I common stock, par value $0.01: 75,000,000 and 0 shares authorized, respectively, 28,602 and 0 issued and outstanding, respectively 286
—
Additional paid-in capital 19,922,440
�� 4,380,126
Accumulated other comprehensive loss (9,396 ) —
Accumulated deficit (3,645,003 ) (841,115 )
Total stockholders’ equity $ 16,291,917
$ 3,544,493
Total liabilities and stockholders’ equity $ 47,322,278
$ 8,994,798

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

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RESOURCE APARTMENT REIT III, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenues:
Rental income	$	4,091,185		$	1,827,196		$	7,746,967		$	2,690,315
Total revenues		4,091,185			1,827,196			7,746,967			2,690,315

Expenses:
Rental operating - expenses		809,644			346,784			1,491,055			483,280
Rental operating - payroll		412,606			199,196			783,480			278,532
Rental operating - real estate taxes		579,216			182,989			1,076,447			307,192
Subtotal- rental operating		1,801,466			728,969			3,350,982			1,069,004
Property management fees		2,624			2,344			5,235			4,361
Management fees - related parties		630,599			290,565			1,204,637			426,491
General and administrative		602,250			527,348			1,394,922			955,120
Loss on disposal of assets		131,611			3,879			218,473			6,488
Depreciation and amortization expense		2,216,145			1,152,791			4,453,246			1,714,946
Total expenses		5,384,695			2,705,896			10,627,495			4,176,410
Loss before other income (expense)		(1,293,510	)		(878,700	)		(2,880,528	)		(1,486,095	)

Other income (expense):
Interest income		83,164			44,292			152,980			70,214
Interest expense		(1,391,557	)		(554,042	)		(2,659,762	)		(798,724	)
Total other income (expense)		(1,308,393	)		(509,750	)		(2,506,782	)		(728,510	)
Net loss	$	(2,601,903	)	$	(1,388,450	)	$	(5,387,310	)	$	(2,214,605	)

Other comprehensive (loss) income:
Designated derivatives, fair value adjustments		2,046			(21,309	)		869			(17,270	)
Total other comprehensive (loss) income		2,046			(21,309	)		869			(17,270	)
Comprehensive loss	$	(2,599,857	)	$	(1,409,759	)	$	(5,386,441	)	$	(2,231,875	)

~~(unaudited)~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Revenues:
Rental income $ 544,431
$ 25,178
$ 645,585
$ 25,178
Total revenues 544,431
25,178
645,585
25,178

Expenses:
Rental operating 236,562
3,249
277,163
3,249
Acquisition costs 823,411
112,711
906,644
112,711
Property management fees 2,776
1,501
7,538
1,501
Management fees - related parties 82,938
3,110
96,395
3,110
General and administrative 342,956
322,765
883,360
349,223
Loss on disposal of assets 185,114
—
185,114
—
Depreciation and amortization expense 345,352
10,376
394,050
10,376
Total expenses 2,019,109
453,712
2,750,264
480,170
Loss before other income (expense) (1,474,678 ) (428,534 ) (2,104,679 ) (454,992 )

Other income (expense):
Other income —
—
1,500
—
Interest income 3,902
432
9,386
432
Interest expense (132,007 ) (2,989 ) (157,987 ) (2,989 )
Net loss $ (1,602,783 ) $ (431,091 ) $ (2,251,780 ) $ (457,549 )

Other comprehensive loss:
Designated derivatives, fair value adjustments (9,396 ) —
(9,396 ) —
Total other comprehensive loss (9,396 ) —
(9,396 ) —
Comprehensive loss $ (1,612,179 ) $ (431,091 ) $ (2,261,176 ) $ (457,549 )

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

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - (continued)

(unaudited)

	Three Months Ended June 30,							Six Months Ended June 30,
	2019			2018				2019			2018
Class A common stock:
Net loss attributable to Class A common stockholders	$	(138,232	)	$	(154,200	)		$	(306,114	)	$	(272,581	)
Net loss per Class A share, basic and diluted	$	(0.22	)	$	(0.25	)		$	(0.48	)	$	(0.44	)
Weighted average Class A common shares outstanding, basic and diluted		635,764			626,103				635,630			624,518

Class T common stock:
Net loss attributable to Class T common stockholders	$	(269,481	)	$	(291,749	)	0	$	(590,857	)	$	(526,031	)
Net loss per Class T share, basic and diluted	$	(0.24	)	$	(0.27	)		$	(0.53	)	$	(0.48	)
Weighted average Class T common shares outstanding, basic and diluted		1,118,038			1,089,943				1,116,159			1,086,970

Class R common stock:
Net loss attributable to Class R common stockholders	$	(2,088,721	)	$	(921,259	)	0	$	(4,290,343	)	$	(1,386,823	)
Net loss per Class R share, basic and diluted	$	(0.23	)	$	(0.24	)		$	(0.51	)	$	(0.42	)
Weighted average Class R common shares outstanding, basic and diluted		8,968,558			3,848,272				8,455,769			3,280,470

Class I common stock:
Net loss attributable to Class I common stockholders	$	(105,469	)	$	(21,242	)	0	$	(199,996	)	$	(29,170	)
Net loss per Class I share, basic and diluted	$	(0.18	)	$	(0.16	)		$	(0.41	)	$	(0.32	)
Weighted average Class I common shares outstanding, basic and diluted		585,893			133,309				483,610			91,914

~~(unaudited)~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Class A common stock:
Net loss attributable to Class A common stockholders $ (524,863 ) $ (428,286 ) $ (952,550 ) $ (455,028 )
Net loss per Class A share, basic and diluted $ (0.85 ) $ (1.72 ) $ (1.76 ) $ (4.60 )
Weighted average Class A common shares outstanding, basic and diluted 616,733
249,051
540,022
98,905

Class T common stock:
Net loss attributable to Class T common stockholders $ (935,090 ) $ (2,805 ) $ (1,214,317 ) $ (2,521 )
Net loss per Class T share, basic and diluted $ (0.87 ) $ (1.72 ) $ (1.78 ) $ (4.60 )
Weighted average Class T common shares outstanding, basic and diluted 1,068,753
1,631
682,945
548

Class R common stock:
Net loss attributable to Class R common stockholders $ (130,032 ) $ —
$ (77,304 ) $ —
Net loss per Class R share, basic and diluted $ (0.77 ) $ —
$ (1.37 ) $ —
Weighted average Class R common shares outstanding, basic and diluted 167,935
—
56,594
—

Class I common stock:
Net loss attributable to Class I common stockholders $ (12,798 ) $ —
$ (7,609 ) $ —
Net loss per Class I share, basic and diluted $ (0.77 ) $ —
$ (1.37 ) $ —
Weighted average Class I common shares outstanding, basic and diluted 16,527
—
5,570
—

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

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RESOURCE APARTMENT REIT III, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE ~~NINE~~THREE AND SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~2019 AND 2018

(unaudited)

	Common Stock																				Convertible Stock
	Shares										Amount
	A Shares			T Shares			R Shares		I Shares		A Shares			T Shares			R Shares		I Shares		Shares		Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total
Balance, at April 1, 2019		637,293			1,119,361			8,744,329		456,135		6,373			11,194			87,443		4,561		50,000	$	500		92,373,880			(41,810	)		(19,501,790	)	$	72,940,351
Issuance of common stock		-			-			488,614		157,334		-			-			4,886		1,574		—		—		6,218,508			—			—			6,224,968
Offering costs		-			-			-		-		-			-			-		-		—		—		(598,229	)		—			—			(598,229	)
Cash distributions declared		-			-			-		-		-			-			-		-		—		—		—			—			(1,353,000	)		(1,353,000	)
Common stock issued through distribution reinvestment plan		2,859			8,140			61,275		793		28			81			613		8		—		—		665,626			—			—			666,356
Other comprehensive income		-			-			-		-		-			-			-		-		—		—		—			2,046			—			2,046
Net loss		-			-			-		-		-			-			-		-		—		—		—			—			(2,601,903	)		(2,601,903	)
Share redemptions		(16,914	)		(28,087	)		-		-		(169	)		(281	)		-		-		—		—		(387,973	)		—			—			(388,423	)
Balance, at June 30, 2019		623,238			1,099,414			9,294,218		614,262		6,232			10,994			92,942		6,143		50,000	$	500		98,271,812			(39,764	)		(23,456,693	)	$	74,892,166


Balance, at January 1, 2019		634,493			1,111,394			7,181,534		329,604		6,345			11,114			71,815		3,296		50,000	$	500	$	77,896,470		$	(40,633	)	$	(15,459,340	)	$	62,489,567
Issuance of common stock		-			-			1,998,867		283,601		-			-			19,989		2,836		—		—		21,995,434			—			—			22,018,259
Offering costs		-			-			-		-		-			-			-		-		—		—		(2,473,982	)		—			—			(2,473,982	)
Cash distributions declared		-			-			-		-		-			-			-		-		—		—		—			—			(2,610,043	)		(2,610,043	)
Common stock issued through distribution reinvestment plan		5,659			16,107			113,817		1,057		56			161			1,138		11		—		—		1,241,863			—			—			1,243,229
Other comprehensive income		-			-			-		-		-			-			-		-		—		—		—			869			—			869
Net loss		-			-			-		-		-			-			-		-		—		—					—			(5,387,310	)		(5,387,310	)
Share redemptions		(16,914	)		(28,087	)		-		-		(169	)		(281	)		-		-		—		—		(387,973	)		—			—			(388,423	)
Balance, at June 30, 2019		623,238			1,099,414			9,294,218		614,262		6,232			10,994			92,942		6,143		50,000	$	500	$	98,271,812		$	(39,764	)	$	(23,456,693	)	$	74,892,166

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

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY – (continued)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(unaudited)

	Common Stock																		Convertible Stock
	Shares									Amount
	A Shares		T Shares			R Shares		I Shares		A Shares		T Shares			R Shares		I Shares		Shares		Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total
Balance, at April 1, 2018		624,078		1,084,484			3,314,097		61,380	$	6,241	$	10,845		$	33,141	$	614		50,000	$	500	$	43,261,424		$	(7,153	)	$	(6,632,165	)	$	36,673,447
Issuance of common stock		—		—			1,084,995		71,705		—		—			10,850		717		—		—		10,963,265			—			—			10,974,832
Offering costs		—		—			—		—		—		—			—		—		—		—		(1,932,959	)		—			—			(1,932,959	)
Cash distributions declared		—		—			—		—		—		—			—		—		—		—		—			—			(757,120	)		(757,120	)
Common stock issued through distribution reinvestment plan		4,160		10,762			32,159		147		41		108			322		1		—		—		432,537			—			—			433,009
Other comprehensive income		—		—			—		—		—		—			—		—		—		—		—			(21,309	)		—			(21,309	)
Net loss		—		—			—		—		—		—			—		—		—		—		—			—			(1,388,450	)		(1,388,450	)
Share redemptions		—		—			—		—		—		—			—		—		—		—		—			—			—			-
Balance, at June 30, 2018		628,238		1,095,246			4,431,251		133,232	$	6,282	$	10,953		$	44,313	$	1,332		50,000	$	500	$	52,724,267		$	(28,462	)	$	(8,777,735	)	$	43,981,450


Balance, at January 1, 2018		621,754		1,081,226			2,058,008		36,118	$	6,218	$	10,812		$	20,580	$	361		50,000	$	500	$	32,323,424		$	(11,192	)	$	(5,218,198	)	$	27,132,505
Issuance of common stock		—		—			2,330,100		96,897		—		—			23,301		969		—		—		23,032,256			—			—			23,056,526
Offering costs		—		—			—		—		—		—			—		—		—		—		(3,217,795	)		—			—			(3,217,795	)
Cash distributions declared		—		—			—		—		—		—			—		—		—		—		—			—			(1,344,932	)		(1,344,932	)
Common stock issued through distribution reinvestment plan		6,484		16,174			43,143		217		64		162			432		2		—		—		604,867			—			—			605,527
Other comprehensive income		—		—			—		—		—		—			—		—		—		—		—			(17,270	)		—			(17,270	)
Net loss		—		—			—		—		—		—			—		—		—		—		—			—			(2,214,605	)		(2,214,605	)
Share redemptions		—		(2,154	)		—		—		—		(21	)		—		—		—		—		(18,485	)		—			—			(18,506	)
Balance, at June 30, 2018		628,238		1,095,246			4,431,251		133,232	$	6,282	$	10,953		$	44,313	$	1,332		50,000	$	500	$	52,724,267		$	(28,462	)	$	(8,777,735	)	$	43,981,450

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

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

~~(unaudited)~~

	Six Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(5,387,310	)	$	(2,214,605	)
Adjustment to reconcile net loss to net cash (used in) provided by operating activities:
Loss on disposal of assets		218,473			6,488
Depreciation and amortization		4,453,246			1,714,946
Amortization of deferred financing costs		117,180			41,222
Realized loss on change in fair value of interest rate cap		2,963			—
Changes in operating assets and liabilities:
Tenant receivables, net		(9,083	)		1,239
Due from related parties		8,392			(3,894	)
Prepaid expenses and other assets		(218,430	)		(15,462	)
Due to related parties		(699,944	)		354,187
Accounts payable and accrued expenses		1,165,318			436,328
Tenant prepayments		(75,187	)		23,064
Security deposits		4,818			14,182
Net cash (used in) provided by operating activities		(419,563	)		357,695

Cash flows from investing activities:
Property acquisition		(17,335,215	)		(12,859,966	)
Capital expenditures		(2,812,055	)		(529,118	)
Net cash used in investing activities		(20,147,270	)		(13,389,084	)

Cash flows from financing activities:
Net proceeds from issuance of common stock		21,767,870			21,454,364
Redemptions of common stock		(388,423	)		(18,506	)
Payments on borrowings		(17,539	)		(17,002	)
Payment of deferred financing costs		(715,016	)		(410,275	)
Distributions paid on common stock		(1,088,832	)		(496,157	)
Net cash provided by financing activities		19,558,060			20,512,424

Net increase (decrease) in cash and restricted cash		(1,008,774	)		7,481,035
Cash and restricted cash at beginning of period		33,711,292			23,944,874
Cash and restricted cash at end of period	$	32,702,518		$	31,425,909

Reconciliation to consolidated balance sheets:
Cash	$	30,338,228		$	30,663,307
Restricted Cash		2,364,290			762,602
Cash and restricted cash at end of period	$	32,702,518		$	31,425,909

Common Stock Convertible Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total
A Shares T Shares R Shares I Shares A Shares T Shares R Shares I Shares Shares Amount
Shares Amount
Balance, at January 1, 2017 384,195
114,037
—
—
$ 3,842
$ 1,140
$ —
$ —
50,000
$ 500
$ 4,380,126
$ —
$ (841,115 ) $ 3,544,493
Issuance of common stock 219,259
936,581
616,508
28,557
2,192
9,366
6,165
286
—
—
17,146,464
—
—
17,164,473
Offering costs —
—
—
—
—
—
—
—
—
—
(1,971,106 ) —
—
(1,971,106 )
Cash distributions declared —
—
—
—
—
—
—
—
—
—
—
—
(300,541 ) (300,541 )
Stock dividends 10,956
14,993
—
—
110
150
—
—
—
—
251,307
—
(251,567 ) —
Common stock issued through distribution reinvestment plan 4,159
7,618
678
45
42
76
7
—
—
—
115,649
—
—
115,774
Other comprehensive loss —
—
—
—
—
—
—
—
—
—
—
(9,396 ) —
(9,396 )
Net loss —
—
—
—
—
—
—
—
—
—
—
—
(2,251,780 ) (2,251,780 )
Balance, at September 30, 2017 618,569
1,073,229
617,186
28,602
$ 6,186
$ 10,732
$ 6,172
$ 286
50,000
$ 500
$ 19,922,440
$ (9,396 ) $ (3,645,003 ) $ 16,291,917

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

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RESOURCE APARTMENT REIT III, INC.

~~CONSOLIDATED STATEMENT OF CASH FLOWS~~

~~(unaudited)~~

Nine Months Ended September 30,
2017 2016
Cash flows from operating activities:
Net loss $ (2,251,780 ) $ (457,549 )
Adjustment to reconcile net loss to net cash (used in) provided by operating activities:
Loss on disposal of assets 185,114
—
Depreciation and amortization 394,050
10,376
Amortization of deferred financing costs 5,390
651
Changes in operating assets and liabilities:
Restricted cash (38,443 ) —
Tenant receivable, net 67
(3,800 )
Due from related parties 4,971
(1,489 )
Prepaid expenses and other assets 285,774
(241,402 )
Due to related parties 982,779
494,154
Accounts payable and accrued expenses 13,040
204,886
Tenant prepayments 16,912
—
Security deposits 7,222
—
Net cash (used in) provided by operating activities (394,904 ) 5,827

Cash flows from investing activities:
Property acquisitions (7,591,828 ) (2,493,672 )
Capital expenditures (22,965 ) (1,979 )
Restricted cash (6,056 ) —
Net cash used in investing activities (7,620,849 ) (2,495,651 )

Cash flows from financing activities:
Net proceeds from issuance of common stock 15,719,233
2,254,961
Proceeds from borrowings —
555,000
Payments on borrowings (22,091 ) (250,000 )
Distributions paid on common stock (118,380 ) —
Net cash provided by financing activities 15,578,762
2,559,961

Net increase in cash 7,563,009
70,137
Cash at beginning of period 3,351,536
200,000
Cash at end of period $ 10,914,545
$ 270,137

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

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~~RESOURCE APARTMENT REIT III, INC.~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2019

(unaudited)

NOTE 1 - NATURE OF BUSINESS AND OPERATIONS

Resource Apartment REIT III, Inc. (the "Company") was organized in Maryland on July 15, 2015. The Company is offering up to $1.1 billion of shares of its common stock, consisting of up to $1.0 billion of shares in its primary offering and up to $100.0 million of shares pursuant to its distribution reinvestment plan (the "DRIP"). The Company expects to offer shares in its primary initial public offering until the registration statement relating to its proposed follow-on offering that was filed on April 24, 2019 is declared effective by the Securities and Exchange Commission.

Through July 2, 2017, the Company offered shares of Class A and Class T common stock ~~at prices of $10.00 per share~~in the primary and ~~$9.47 per share, respectively.~~DRIP offering. As of July 3, 2017, the Company ceased offering shares of Class A and Class T common stock in its primary offering and commenced offering shares of Class R and Class I common stock ~~at prices~~in both the primary and DRIP offering.

On June 27, 2018 and March 21, 2019, the board of ~~$9.52 per share and $9.13 per share, respectively. The initial offering price for shares offered pursuant to~~directors of the ~~DRIP is $9.60 per share for Class A, $9.09 per share for Class T, $9.14 per share for Class R and $8.90 per share for Class I. The~~ Company ~~will determine its~~determined an estimated net asset value ~~("NAV"~~(“NAV”) per share ~~on a date no later than June 30, 2018 (the "NAV Pricing Date"). Commencing~~of the common stock of $9.05 and $9.12, respectively, based on the ~~NAV Pricing Date, if~~estimated market value of the ~~primary offering is ongoing,~~portfolio of investments of the Company ~~will offer~~as of March 31, 2018 and December 31, 2018, respectively. Based on the estimated NAV per share, the board of directors established updated offering prices for shares of Class R and Class I ~~shares~~common stock to be sold in the primary portion of the initial public offering ~~at a price equal~~by adding certain offering costs to the estimated NAV per share. Pursuant to the terms of the DRIP, following the establishment of an estimated NAV per share, shares of common stock are sold at the most recent estimated NAV per share.

The prices per share for ~~Class R and Class I~~each class of shares ~~respectively, plus applicable selling commissions and dealer manager fees, and pursuant to the DRIP at a price equal to 96%~~ of the new primary offering price. If the Company’s primary offering is not ongoing on the NAV Pricing Date, or on the date of any subsequent NAV pricing, it will offer Class A, Class T, Class R and Class I shares pursuant to the DRIP at a price equal to 96% of the most recently determined NAV per share. The Company will update its NAV at least annually following the NAV Pricing Date and further adjust the per share price in the primary offering and DRIP accordingly. The Company qualifiesCompany's common stock through June 30, 2019 were as ~~an emerging growth company.~~ follows:

	Class A		Class T		Class R		Class I
Primary Offering Price
Inception through July 2, 2017	$	10.00	$	9.47	n/a		n/a
July 3, 2017 through July 1, 2018	n/a		n/a		$	9.52	$	9.13
July 2, 2018 through March 24, 2019	n/a		n/a		$	9.68	$	9.28
March 25, 2019 through June 30, 2019	n/a		n/a		$	9.75	$	9.35

Offering Price under the DRIP
Inception through July 2, 2017	$	9.60	$	9.09	n/a		n/a
July 3, 2017 through July 1, 2018	$	9.60	$	9.09	$	9.14	$	8.90
July 2, 2018 through March 24, 2019 ⁽¹⁾	$	9.05	$	9.05	$	9.05	$	9.05
March 25, 2019 through June 30, 2019 ⁽¹⁾	$	9.12	$	9.12	$	9.12	$	9.12

(1)	Shares of common stock pursuant to the DRIP are sold at the Company’s NAV per share.

As of ~~September~~June 30, ~~2017,~~2019, the Company has raised ~~aggregated~~aggregate gross primary offering proceeds of approximately ~~$21.9~~$108.3 million from the sale of 601,207 Class A shares, 1,049,996 Class T shares, ~~616,508~~9,051,083 Class R shares and ~~28,557~~612,560 Class I shares of common stock.

On June 29, 2016, the Company satisfied the $2.0 million minimum offering amount for its initial public offering, excluding shares purchased by residents of Pennsylvania, New York and Washington. As a result, the Company broke escrow and issued shares of common stock in the offering. The Company broke escrow in New York on October 11, 2016 and in Washington on September 18, 2017. Having raised the minimum offerings, the offering proceeds were released by the escrow agent to the Company and available for acquisition of properties and other purposes. Subscription payments received from residents of Pennsylvania will continue to be held in escrow until the Company has received aggregate subscriptions of at least $50.0 million.

Resource REIT Advisor, LLC ~~(formerly known as Resource Apartment Advisor III, LLC)~~ (the "Advisor"), ~~which is~~ an indirect wholly-owned subsidiary of Resource America, Inc. ("RAI"), contributed $200,000 to the Company in exchange for 20,000 shares of Class A common stock on August 10, 2015. On June 29, 2016, RAI purchased 222,222 shares of Class A common stock for $2.0 million in the offering. On August 5, 2016, the Advisor exchanged 5,000 shares of Class A common stock for 50,000 shares of convertible stock. Under limited circumstances, these shares may be converted into shares of the Company's Class A common stock satisfying the Company's obligation to pay the Advisor an incentive fee and diluting ~~the~~its other stockholders’ interest in the Company.

RAI is a wholly-owned subsidiary of C-III Capital Partners, LLC ("C-III"), a leading commercial real estate investment management and services company engaged in a broad range of activities. C-III controls the Advisor, Resource Securities LLC ("Resource Securities"), the Company's dealer manager, and Resource Apartment Manager III, LLC (the "Manager"), the Company's property manager. C-III also controls all of the shares of the Company's common stock held by RAI and the Advisor.

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RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

The Company’s objective is to take advantage of ~~Resource Real Estate, Inc.’s (the "Sponsor")~~the multifamily investing and lending platforms of Resource Real Estate, LLC (the "Sponsor") to invest in apartment communities in order to provide the investor with growing cash flow and increasing asset values. The Company intends to acquire underperforming apartments which it will renovate and stabilize in order to increase rents. To a lesser extent, the Company ~~will~~may also seek to originate and acquire commercial real estate debt secured by apartments having the same characteristics.

The Company believes multiple opportunities exist within the apartment industry today and will continue to present themselves over the next few years to real estate investors who possess the following characteristics: (i) extensive experience in multifamily investing, (ii) strong management platforms specializing in operational and financial performance optimization, (iii) financial sophistication allowing them to benefit from complex opportunities, and (iv) the overall scale and breadth of a national real estate platform in both the equity and debt markets. At September 30, 2017, the Company owned two apartment properties located in Alexandria, Virginia and Jacksonville, Florida.

~~The Company intends to elect and qualify~~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 ~~ending~~

~~(Back to Index)~~

~~RESOURCE APARTMENT REIT III, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~SEPTEMBER 30, 2017~~

~~(unaudited)~~

ended December 31, 2017. 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 net income (excluding net capital gains) to its stockholders as well as comply with certain other requirements. Accordingly, ~~once qualified as a REIT,~~ the Company generally will not be subject to U.S. federal income taxes to the extent that it annually distributes all of its REIT taxable income to its stockholders. The Company also ~~intends to operate~~operates its business in a manner that will 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 are unaudited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"), pertaining to interim financial statements in Form 10-Q. However, in the opinion of management, these interim financial statements include all the necessary adjustments to fairly present the results of the interim periods presented. The consolidated balance sheet as of December 31, ~~2016~~2018 was derived from the audited consolidated financial statements as of and for the year ended, December 31, ~~2016.~~2018. 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.~~2018. The results of operations for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 may not necessarily be indicative of the results of operations for the full year ending December 31, ~~2017.~~

2019.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows:

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with GAAP.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries as follows:


Subsidiary
~~Subsidiary~~	Number of Units		Property Location
Resource Apartment REIT III Holdings, LLC	N/A			N/A
Resource Apartment REIT III OP, LP	N/A			N/A
RRE Payne Place Holdings, LLC	11	11		Alexandria, VA
RRE Bay Club Holdings, LLC	~~220~~	220		Jacksonville, FL
RRE Tramore Village Holdings, LLC	~~231~~	324		Austell, GA
RRE Matthews Reserve Holdings, LLC		212		Matthews, NC
RRE Kensington Holdings, LLC		204		Riverview, FL
RRE Wimbledon Oaks Holdings, LLC		248		Arlington, TX
RRE Summit Holdings, LLC		141		Alexandria, VA
		1,360

N/A - Not Applicable

All intercompany accounts and transactions have been eliminated in consolidation.

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RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

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.

Concentration of Risk

As of June 30, 2019, the Company's real estate investments in Florida, Virginia, Georgia, North Carolina and Texas represented approximately 28%, 20%, 22%, 17%, and 13%, respectively, of the carrying value of its rental property assets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, adverse weather events, changing demographics and other factors, or any decrease in demand for multifamily rentals resulting from the local business climate, could adversely affect the Company's operating results and its ability to make distributions to stockholders.

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.

Adoption of New Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, "Leases" and amended by ASU No. 2018-09, “Codification Improvements" in July 2018, 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. In September 2017, FASB issued ASU No. 2017-13, "Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842)", which provides additional implementation guidance on the previously issued ASU No. 2016-02. On January 1, 2019, the Company adopted ASU No. 2016-02 and the adoption did not have a material effect on its consolidated financial statements and disclosures. The Company’s operating leases, in which it is the lessor, continue to be accounted for on its balance sheet with the underlying leased asset recognized as real estate. The Company has chosen to apply the practical expedient to nonlease component revenue streams and account for them as a combined component with leasing revenue. For leases in which the Company is the lessee, consisting of office equipment leases, the Company recognized a right-of-use (“ROU”) asset and a lease liability equal to the present value of the minimum lease payments in the amount of $9,304 at January 1, 2019. The Company elected the package of practical expedients permitted within the new standard, which among other things, allows the Company to carry forward the historical lease classification. Also allowable under the new standard, is the option to present the operating lease ROU asset and operating lease liabilities as of January 1, 2019 and not restate prior periods, which the Company has elected. No cumulative impact adjustment was necessary to opening retained earnings as of January 1, 2019. For certain equipment leases, such as copiers, the Company applied a portfolio approach to effectively account for the operating lease ROU assets and liabilities.

In July 2018, FASB issued ASU No. 2018-11, “Leases: Targeted Improvements” an additional amendment to ASU No. 2016-02. On January 1, 2019, the Company adopted ASU No. 2018-11 and the adoption did not have a material effect on its consolidated financial statements and disclosures. The Company applied the practical expedient allowed in this new guidance to combine lease and associated nonlease components by class of underlying asset. In addition, the Company utilized the optional method for adopting the new leasing guidance and did not restate comparative periods.

In August 2017, FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities", which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. On January 1, 2019, the Company adopted ASU No. 2017-12 and the adoption did not have a material effect on its consolidated financial statements and disclosures.

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

~~SEPTEMBER~~

JUNE 30, 2019

(unaudited)

In October 2018, FASB issued ASU No. 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes”. ASU No. 2018-16 permits the use of the Overnight Index Swap (“OIS”) Rate based on the Secured Overnight Financing Rate as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to the interest rates on direct Treasury obligations of the U.S. government, the London Interbank Offered Rate (“LIBOR”) and the OIS Rate based on the Federal Funds Effective Rate. On January 1, 2019, the Company adopted ASU No. 2018-16 and the adoption did not have a material effect on its consolidated financial statements and disclosures.

In June 2018, FASB issued ASU No. 2018-07 “Improvements to Nonemployee Share-Based Payment Accounting” to simplify the accounting for share-based payment transactions for acquiring goods and services from nonemployees by including these payments in the scope of the guidance for share-based payments to employees. On January 1, 2019, the Company adopted ASU No. 2018-07 and the adoption did not have a material effect on its consolidated financial statements and disclosures.

In July 2018, FASB issued ASU No. 2018-09, "Codification Improvements". This standard does not prescribe any new accounting guidance, but instead makes minor improvements and clarifications of several different FASB Accounting Standards Codification areas based on comments and suggestions made by various stakeholders. On January 1, 2019, the Company adopted ASU No. 2018-09 and the adoption did not have a material effect on its consolidated financial statements and disclosures.

Accounting Standards Issued But Not Yet Effective

In June 2016, FASB issued ASU No. 2016-03 "Financial Instruments - Credit Losses", which requires measurement and recognition of expected credit losses for financial assets held. ASU No. 2016-03 will be effective for the Company beginning January 1, 2020. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU 2016-03 to have a material effect on its consolidated financial statements and disclosures due to the fact that the Company did not have instruments subject to this guidance at June 30, 2019.

In January 2017,

~~(unaudited)~~

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 January 1, 2020. Early application is permitted. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU No. 2017-04 to have a significant impact on its consolidated financial statements due to the fact that the Company did not have any goodwill subject to this guidance at June 30, 2019.

In August 2018, FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement”. This update removes, modifies and adds certain disclosure requirements in the FASB Accounting Standards Codification ("ASC") 820, “Fair Value Measurement”. ASU No. 2018-13 will be effective for the Company beginning January 1, 2020 and early adoption is permitted. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU No. 2018-13 to have a significant impact on its consolidated financial statements.

Real Estate Investments

The Company records acquired ~~real estate~~rental properties at ~~fair value~~cost on ~~their respective~~the acquisition ~~dates.~~date. The Company considers the period of future benefit of an asset to determine its appropriate useful life and depreciates the asset using the straight line method. The Company anticipates the estimated useful lives of its assets by class as follows:

Buildings		27.5 years

~~Buildings~~	~~27.5 years~~
Building improvements	~~3.0~~	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	~~Weighted average remaining~~	Remaining term of related lease

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RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

Improvements and replacements in excess of $1,000 are capitalized when they have a useful life greater than or equal to one year. The Manager earns a construction management fee of ~~5.0%~~5% of actual aggregate costs to construct improvements, or to repair, rehab or reconstruct a property. These costs are capitalized along with the related asset. Costs of repairs and maintenance are expensed as incurred.

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. The review also considers 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. There were no impairment losses recorded on long lived assets during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016.~~

2018.

Loans Held for Investment

The Company records acquired real estate loans at cost and reviews them for potential impairment at each balance sheet date. A loan receivable is considered impaired when it becomes probable, based on current information, that the Company will be unable to collect all amounts due according to the loan’s contractual terms. The amount of impairment, if any, is measured by comparing the recorded amount of the loan to the present value of the expected cash flows or the fair value of the collateral. If a loan is deemed to be impaired, the Company will record a reserve for loan losses through a charge to income for any shortfall. Failure to recognize impairment would result in the overstatement of the carrying values of the Company’s real estate loans receivable and an overstatement of the Company’s net income.

The Company may acquire real estate loans at a discount due to credit quality. Revenues from these loans are recorded under the effective interest method. Under this method an effective interest rate ("EIR") is applied to the cost basis of the real estate loan receivable. The EIR that is calculated when the real estate loan is acquired remains constant and is the basis for subsequent impairment testing and income recognition. If the amount and timing of future cash collections are not reasonably estimable, the Company accounts for the real estate loan receivable on the cost recovery method. Under the cost recovery method of accounting, no income is recognized until the basis of the real estate loan receivable has been fully recovered.

Interest income from loans receivable will be recognized based on the contractual terms of the debt instrument. Fees related to any buydown of the interest rate will be deferred as prepaid interest income and amortized over the term of the loan as an adjustment to interest income. Closing costs related to the purchase of a loan receivable will be amortized over the term of the loan and accreted as an adjustment against interest income.

There were no loans held for investment on the Company's consolidated balance sheets as of both June 30, 2019 and December 31, 2018.

Allocation of Purchase Price of Acquired Assets

On January 1, 2018, the Company adopted ASU No. 2017-01. Acquisitions that do not meet the definition of a business under this guidance are accounted for as asset acquisitions. In most cases, the Company believes acquisitions of real estate will no longer be considered a business combination as in most cases substantially all of the fair value is concentrated in a single identifiable asset or group of tangible assets that are physically attached to each other (land and building). However, if the Company determines that substantially all of the fair value of the gross assets acquired is not concentrated in either a single identifiable asset or in a group of similar identifiable assets, the Company will then perform an assessment to determine whether the set is a business by using the framework outlined in the ASU. If the Company determines that the acquired asset is not a business, the Company will allocate the cost of the acquisition including transaction costs to the assets acquired or liabilities assumed based on their related fair value.

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2019

(unaudited)

~~Allocation of Purchase Price of Acquired Assets~~

Upon the acquisition of real properties, the Company allocates the purchase price to tangible assets, consisting of land, building, fixtures and improvements, and identified intangible lease assets and liabilities, consisting of the value of above-market and below-market leases, as applicable, other value of in-place leases and value of tenant relationships, based in each case on their fair values.

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 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, which the Company expects will range from one month to one year.

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~~determined by independent appraisers (e.g., discounted cash flow analysis). Factors to be considered ~~by management~~ in ~~its~~the analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions and costs to execute similar leases.

The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. In estimating carrying costs, management ~~also~~ 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 in-place lease values and 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 to be 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 ~~initial~~average remaining term of the ~~respective~~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 will the 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 customer relationship intangibles 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. The use of inappropriate estimates would result in an incorrect assessment of the fair value of these assets and liabilities, which could impact the amount of the Company’s reported net income. ~~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.

~~(Back to Index)~~

~~RESOURCE APARTMENT REIT III, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~SEPTEMBER 30, 2017~~

~~(unaudited)~~

lease. The future minimum rental payments to be received from noncancelable operating leases for residential rental properties are approximately ~~$1.8~~$7.7 million and ~~$27,158~~$140,285 for the 12 month periods ending ~~September~~June 30, ~~2018~~2020 and ~~2019,~~2021, respectively, and none thereafter.

Revenue is primarily derived from the rental of residential housing units ~~however, included within rental~~for which the Company receives minimum rents pursuant to underlying tenant lease agreements. The Company also receives utility reimbursements, other ancillary tenant fees for administration of leases, late payments and amenities, which are charged to residents and recognized monthly as earned. The Company elected the practical expedient to not separate lease and non-lease components and has presented property revenues combined based upon the lease being determined the predominant component. The Company also has revenues sharing arrangements of cable income ~~is other income such~~from contracts with cable providers at the Company's properties.

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RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

Tenant Receivables

The Company evaluates its portfolio of operating leases for collectability at both the onset of the underlying leases and on an ongoing basis. Tenant receivables include amounts for which collectability was assessed as ~~pet fees, parking fees, and late fees, as well as property operating~~probable in accordance with the guidance in ASC 842-30. For tenant receivables, which include base rents, straight-line rentals, expense reimbursements ~~due from tenants for common area maintenance, real estate taxes~~ and other ~~recoverable costs. The~~revenue or income, 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 $35,162 and $0 for the three months ended September 30, 2017 and 2016, respectively. Total other income included within rental income was $42,957 and $0 for the nine months ended September 30, 2017 and 2016, respectively.

~~Tenant Receivables~~

~~Tenant receivables are stated in the consolidated financial statements as amounts due from tenants net of an~~also estimates a general allowance for uncollectible ~~receivables. Payment terms vary and receivables outstanding longer than the payment terms are considered past due.~~accounts under ASC 450-20. The ~~Company determines its~~ allowance ~~by considering a number of factors, including the length of time receivables are past due, security deposits held,~~is based on the Company’s ~~previous loss history, the tenants’~~historical collection experience, tenant creditworthiness, and current ~~ability to pay their obligations to the Company, the condition of the general economy and the industry as a whole.~~economic trends. The Company writes off tenant receivables when they ~~become~~are determined uncollectible. At ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, there were no allowances for uncollectible ~~receivables.~~

receivables of $711 and $5,593, respectively.

Income Taxes

The Company ~~intends to elect and qualify~~elected to be taxed as a REIT commencing with its taxable year ~~ending~~ended December 31, 2017. ~~Accordingly, once qualified as~~As a REIT, 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, differs 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 a taxable REIT ~~subsidiaries~~subsidiary ("~~TRSs"~~TRS"). In general, a TRS 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. At ~~September~~June 30, ~~2017,~~2019 and December 31, 2018, the Company did not ~~have~~treat any of its subsidiaries as a TRS.

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.

Earnings Per Share

Basic earnings per share are computed by dividing net income (loss) attributable to common stockholders for each period by the weighted-average common shares outstanding during the period for each share class. Diluted net income (loss) 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 50,000 shares of convertible stock (discussed in Note 10) are included in the diluted earnings per share calculations because the necessary conditions for conversion have not been satisfied as of June 30, 2019 (were such date to represent the end of the contingency period). For the purposes of calculating earnings per share, all common shares and per share information in the financial statements have been retroactively adjusted for the effect of any stock dividends and stock splits.

~~(Back~~ For the three and six months ended June 30, 2019 and 2018, common shares potentially issuable to ~~Index)~~

~~(Back to Index)~~

~~RESOURCE APARTMENT REIT III, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~SEPTEMBER 30, 2017~~

~~(unaudited)~~

settle distributions payable are excluded from the calculation of diluted earnings per share calculations, as their inclusion would be anti-dilutive.

In accordance with ~~the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") No.~~ASC 260-10-45, "Earnings Per Share", the Company uses the two-class method to calculate earnings per share. Basic earnings per share is calculated based on dividends declared and the rights of common shares and participating securities in any undistributed earnings, which represents net income remaining after deduction of dividends declared during the period. The undistributed earnings are allocated to all outstanding common shares based on their relative percentage of each class of shares to the total number of outstanding shares. The Company did not have any participating securities outstanding other than Class A common stock, Class T common stock, Class R common stock and Class I common stock during the periods presented (see Note 10).

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

Organization and Offering Costs

Organization and offering costs (other than selling commissions, ~~and~~ dealer manager fees, and distribution and shareholder servicing fees) of the Company are initially being paid by the Advisor on behalf of the Company.

Pursuant to the advisory agreement between the Company and the Advisor, the Company is obligated to reimburse the Advisor for organization and other offering costs paid by the Advisor on behalf of the Company, up to an amount equal to 4.0% of gross offering proceeds as of the termination of the initial public offering if the Company raises less than ~~$500~~$500.0 million in the primary portion of the initial public offering and 2.5% of gross offering proceeds as of the termination of the initial public offering if the Company raises ~~$500~~$500.0 million or more in the primary portion of the initial public offering.

~~Through September~~

On April 13, 2018, the board of directors approved an amendment to the advisory agreement that provides that the Company is not responsible for the reimbursement of any unreimbursed organization and offering expenses or operational expenses incurred by the Advisor on the Company’s behalf through March 31, 2018 until after the termination of the primary portion of the Company’s ongoing initial public offering. Additionally, the amendment provides that such unreimbursed organization and offering expenses or operational expenses incurred or paid by the Advisor on the Company’s behalf through March 31, 2018 will be reimbursed ratably starting after the termination of the primary portion of the Company’s ongoing initial public offering through April 30, ~~2017,~~2021 for organization and offering expenses and through April 30, 2020 for operating expenses.

As of June 30, 2019, the Company has ~~charged $501,303 to equity~~incurred approximately $9.1 million for ~~the payment of~~public offering costs consisting of accounting, advertising, allocated payroll, due diligence, marketing, legal ~~printing~~ and similar costs. ~~At September~~As of June 30, ~~2017,~~2019, the Advisor has advanced approximately ~~$5.4~~$8.1 million of these costs on behalf of the Company. The Company has paid approximately $249,000 of these costs directly and reimbursed approximately $747,000 to the Advisor.

As of June 30, 2019, the Company has charged approximately $4.3 million of offering costs to equity, which ~~approximately $4.9 million has been deferred at September 30, 2017. A~~represents the portion of deferred offering costs ~~will be charged~~allocated to ~~equity upon the sale of~~ each share of common stock sold ~~under~~in the public offering. ~~Such deferred~~Deferred offering costs ~~will only become a liability~~of approximately $4.8 million represent the portion of the ~~Advisor~~total offering costs incurred that have not yet been charged to equity. Upon completion of the ~~extent that~~public offering, any deferred offering costs in excess of the limit on organization and offering costs incurred by us exceed 4% of the gross proceeds of the initial public offering. However, if the Company raises the maximum offering amount in the primary offering, organization and offering expenses (excluding selling commissions, the dealer manager fee and the distribution and stockholder servicing fee) are estimateddiscussed above, will not be paid to ~~be approximately 1.0% of the gross proceeds of the initial public offering. When recorded by the Company, organization~~our Advisor.

Organization costs, ~~are expensed as incurred,~~ which include all expenses incurred by the Company in connection with its formation, including but not limited to legal fees and other costs to ~~incorporate.~~incorporate, are expensed as incurred. There can be no assurance that the Company's plans to raise capital will be successful. Prior to the Company breaking escrow, the Advisor incurred $104,266 of formation and other operating expenses on the Company's behalf, which will not be reimbursed to the Advisor.

Outstanding Class T shares issued in the Company's primary offering are subject to ~~a 1%~~an annual distribution and shareholder servicing fee in the amount of 1% of the estimated NAV of the share (1% of purchase price prior to June 29, 2018) for five years from the date on which such ~~shares were~~share is issued. The Company will cease paying the distribution and shareholder servicing fee on each Class T share prior to the fifth anniversary of its issuance on the earliest of the following, should any of these events occur: (i) the date at which, in the aggregate, underwriting compensation from all sources equals 10% of the gross proceeds from the Company's primary offering (i.e., excluding proceeds from sales pursuant to the DRIP); (ii) the date on which the Company lists its common stock on a national securities exchange; and (iii) the date of a merger or other extraordinary transaction in which the Company is a party and in which the common stock is exchanged for cash or other securities. The Company cannot predict if or when any of these events will occur.

Outstanding Class R shares issued in the Company's primary offering are also subject to ~~a 1%~~an annual distribution and shareholder servicing ~~fee.~~fee in the amount of 1% of the estimated NAV of the share (1% of purchase price prior to June 29, 2018). The Company will cease paying the distribution and shareholder servicing fee with respect to Class R shares held in any particular account, and those Class R shares will convert into a number of Class I shares determined by multiplying each Class R share to be converted by the applicable "Conversion Rate," on the earlier of (i) the date after the termination of the primary offering at which, in the aggregate, underwriting compensation from all sources equals 10% of the gross proceeds from its primary offering; (ii) a listing of the Class I shares on a national securities exchange; (iii) a merger or consolidation of the company with or into another entity, or the sale or other disposition of all or substantially all of its assets; and (iv) the end of the month in which the total underwriting compensation (which consists of selling commissions, dealer manager fees and distribution and shareholder servicing fees) paid with respect to such Class R shares purchased in a primary offering is not less

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

than 8.5% (or a lower limit, provided that, in the case of a lower limit, the agreement between the Resource Securities and the broker-dealer in effect at the time Class R shares were first issued to such account sets forth the lower limit and Resource Securities advises the Company's transfer agent of the lower limit in writing) of the gross offering price of those Class R shares purchased in such primary offering (excluding shares purchased through its distribution reinvestment plan).

~~(Back to Index)~~

~~RESOURCE APARTMENT REIT III, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~SEPTEMBER 30, 2017~~

~~(unaudited)~~

The Company records distribution and shareholder servicing fees as a reduction to additional paid-in capital and the related liability in an amount equal to the maximum fees payable in relation to the Class T and Class R shares on the date the shares are issued. The liability will be relieved over time, as the fees are paid to the Dealer Manager, or as the fees are adjusted if(if the fees are no longer payable pursuant to the conditions described above.) For issued Class T shares, the Company has accrued an estimate of ~~the~~ total distribution and shareholder servicing ~~fee~~fees of ~~$497,173~~$465,638 for the full five year period at ~~September~~June 30, ~~2017~~2019 based on a total of 5% of the gross proceeds from all Class T shares sold, of which the Company paid ~~$40,491~~$207,141 cumulatively through ~~September~~June 30, ~~2017.~~2019. For issued Class R shares, the Company has accrued an estimate of ~~the~~ total distribution and shareholder servicing ~~fee~~fees of ~~$176,075~~$2.4 million at ~~September~~June 30, ~~2017~~2019 based on a total of 3% of the gross proceeds from all Class R shares sold, of which the Company paid ~~$713~~$753,435 cumulatively through ~~September~~June 30, ~~2017.~~2019. The ~~remaining payable~~total accrual of ~~$632,044~~approximately $1.9 million is included in due to related parties on the Company's consolidated balance ~~sheets.~~

~~Reclassifications~~

Certain amounts in the prior year financial statements have been reclassified to conform to the current-year presentation. The impact of the reclassifications made to prior year amounts are not material and did not affect net loss.

~~Adoption of New Accounting Standards~~

In November 2016, FASB issued Accounting Standards Update ("ASU") No. 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash," which provides guidance on the classification of restricted cash in the statement of cash flows. On July 1, 2017, the Company adopted ASU No. 2016-18 and the adoption of ASU No. 2016-18 did not have a material effect on its consolidated financial statements and disclosures.

~~Accounting Standards Issued But Not Yet Effective~~

In May 2014, 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. In accordance with the Company’s plan for the adoption of ASU 2014-09, the Company has identified revenue streams and is performing an in-depth review to identify the related performance obligations and to evaluate the impact on the Company’s consolidated financial statements and internal accounting processes and controls. As the majority of the Company’s revenue is derived from lease contracts, the Company does not expect that the adoption of ASU 2014-09 or related amendments and modifications issued by the FASB will have a material impact on its consolidated financial statements.

In February 2016, FASB issued ASU No. 2016-02, "Leases", 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. In September 2017, the FASB issued ASU 2017-13, "Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842)", which provides additional implementation guidance on the previously issued ASU No. 2016-02 Leases (Topic 842). 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, the Company expects that its operating leases where it is the lessor will be accounted for on its balance sheet similar to its current accounting with the underlying leased asset recognized as real estate. The Company expects that executory costs and certain other non-lease components will need to be accounted for separately from the lease component of the lease with the lease component continuing to be recognized on a straight-line basis over the lease term and the executory costs and certain other non-lease components being accounted for under the new revenue recognition guidance in ASU 2014-09. For leases in which the Company is the lessee, primarily consisting of office equipment leases, the Company expects to recognize a right-of-use asset and a lease liability equal to the present value of the minimum lease payments with rental payments being applied to the lease liability and to interest expense and the right-of-use asset being amortized to expense on a straight-line basis over the term of the lease.

Inat June 2016, FASB issued ASU No. 2016-03 "Financial Instruments - Credit Losses", which requires measurement and recognition of expected credit losses for financial assets held. The standard update is effective for the Company beginning January 1,30, 2019. ~~The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU No. 2016-03 to have a significant impact on its consolidated financial statements.~~

~~(Back to Index)~~

~~RESOURCE APARTMENT REIT III, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~SEPTEMBER 30, 2017~~

~~(unaudited)~~

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 is not expected to have a material impact on the Company's consolidated statement of 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 is effective for the Company beginning January 1, 2018 but early adoption is allowed. The Company is currently evaluating the impact the adoption of ASU No. 2017-01 may have 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.

In August 2017, FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities", which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. The update to the standard is effective for the Company on January 1, 2019, with early adoption permitted in any interim period. The Company is continuing to evaluate this guidance and assessing the impact of this guidance on its consolidated financial statements.

NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION

The following table presents the Company's supplemental cash flow information:

	Six Months Ended June 30,
	2019		2018
Non-cash operating, financing and investing activities:
Offering costs payable to related parties	$	629,376	$	1,428,461
Offering costs payable to third parties		—		(32,311	)
Distribution and shareholder servicing fee payable to related parties		94,518		475,502
Cash distributions on common stock declared but not yet paid		1,315,781		697,125
Stock issued from distribution reinvestment plan		1,243,229		605,527
Subscriptions receivable		110,000		619,500
Escrow deposits funded directly by mortgage notes payable		797,855		243,637

Non-cash activity related to acquisitions:
Mortgage notes payable used to acquire real properties		45,192,145		32,381,363

Cash paid during the period for:
Interest	$	2,481,341	$	644,876

Nine Months Ended September 30,
2017 2016
Non-cash operating, financing and investing activities:
Offering costs payable $ 2,474,799
$ 2,324,925
Cash distributions on common stock declared but not yet paid 91,561
—
Stock issued from distribution reinvestment plan 115,774
—
Stock dividend issued 251,567
—
Subscriptions receivable 676,851
—
Exchange of common stock for convertible stock —
500
Deferred financing costs and escrow deposits funded directly by mortgage notes payable 454,918
—

Non-cash activity related to acquisitions:
Mortgage notes payable used to acquire real property 21,520,000
—

Cash paid during the year for:
Interest $ 92,819
$ —

~~(Back to Index)~~

~~RESOURCE APARTMENT REIT III, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~SEPTEMBER 30, 2017~~

~~(unaudited)~~

NOTE 4 - RESTRICTED CASH

Restricted cash represents escrow deposits with lenders to be used to pay real estate taxes, insurance, and capital improvements. The following table presents a summary of the components of the Company's restricted cash:

	June 30, 2019		December 31, 2018
Real estate taxes	$	1,363,630	$	19,988
Insurance		191,133		150,263
Capital improvements		809,527		713,651
Total	$	2,364,290	$	883,902

September 30, 2017 December 31, 2016
Real Estate Taxes $ 226,529
$ 7,733
Insurance 67,031
—
Capital Improvements 133,556
—
Total $ 427,116
$ 7,733

In addition, the Company ~~had~~designated unrestricted cash ~~earmarked~~ for capital expenditures of approximately ~~$1.96~~$11.6 million and ~~$84,702~~$9.2 million at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively.

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

NOTE 5 - ~~ACQUISITIONS~~

~~At September 30, 2017, the Company owned interests in two properties. The Company estimated the fair values of certain~~

~~of the acquired assets and liabilities based on preliminary valuations at the date of purchase. The Company has up to~~ACQUISITION

On February 12, months from the date of acquisition to finalize the valuation for each property. The valuation for Payne Place was finalized at December 31, 2016. The initial purchase price allocation for Bay Club (as defined below) has not been finalized at September 30, 2017.

~~On July 31, 2017,~~2019, the Company, through its wholly-owned subsidiary, purchased a multifamily community located in ~~Jacksonville, Florida~~Arlington, Texas ("~~Bay Club"~~Wimbledon Oaks"). ~~Bay Club,~~Wimbledon Oaks, constructed in ~~1990,~~1986, contains ~~220~~248 units plus amenities, including a swimming pool, clubhouse, and a fitness center. Wimbledon Oaks encompasses 189,960 rentable square feet. At June 30, 2019, Wimbledon Oaks was 90% leased.

On June 24, 2019, the Company, through its wholly-owned subsidiary, purchased a multifamily community located in Alexandria, Virginia ("Summit"). Summit, constructed in 1976, contains 141 units and amenities, including ~~private garages for each unit,~~ a swimming pool, clubhouse, ~~pool,~~and a fitness ~~center and business~~ center. ~~Bay Club~~Summit encompasses ~~223,568~~164,140 rentable square feet. At ~~September~~June 30, ~~2017, Bay Club~~2019, Summit was ~~96%~~94% leased.

The following table presents the ~~Company's wholly-owned acquisition during the three and nine months ended September 30, 2017 and the respective fair values assigned:~~

Fair Value Assigned
Multifamily Community Name City and State Date of Acquisition
Contractual Purchase Price⁽¹⁾
Land Building and Improvements Furniture, Fixtures and Equipment Intangible Assets Other Liabilities
Bay Club Jacksonville, Florida 7/31/2017 $ 28,300,000
$ 3,321,081
$ 23,879,553
$ 376,064
$ 723,302
$ (232,980 )

~~(1) Contractual~~allocated contract purchase price, ~~excludes closing costs,~~ acquisition ~~expenses, and other immaterial settlement date adjustments and pro-rations.~~

~~The following table presents the total revenues, net loss,~~fee, and acquisition costs of ~~Bay Club,~~ the ~~Company's wholly-owned acquisition~~Company’s acquisitions during the ~~three and nine~~six months ended ~~September~~June 30, ~~2017:~~2019:

	Contract Purchase Price		Acquisition Fee ⁽¹⁾		Acquisition Costs ⁽²⁾		Total Real Estate, Cost
Wimbledon Oaks
Land	$	3,779,617	$	83,471	$	30,014	$	3,893,102
Building and Improvements		20,970,743		463,127		166,529		21,600,399
Furniture, fixtures and equipment		377,962		8,347		3,001		389,310
Intangible Assets		721,678		15,938		5,731		743,347
	$	25,850,000	$	570,883	$	205,275	$	26,626,158

Summit
Land	$	8,288,088	$	181,740	$	96,178	$	8,566,006
Building and Improvements		26,981,318		591,641		313,101		27,886,060
Furniture, fixtures and equipment		346,356		7,595		4,019		357,970
Intangible Assets		759,238		16,648		8,810		784,696
	$	36,375,000	$	797,624	$	422,108	$	37,594,732

(1)	Represents acquisition fee of 2% of the cost of investments, paid to the Advisor.

(2)	Represents transaction costs paid both at closing and post-closing, excluding Acquisition Fees.

Three months ended September 30, 2017 Nine Months Ended September 30, 2017
Total Revenues $ 489,521
$ 489,521
Net Loss (707,429 ) (707,429 )
Acquisition Costs 211,080
294,313
Acquisition Fee 612,331
612,331

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~~RESOURCE APARTMENT REIT III, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~SEPTEMBER 30, 2017~~

~~(unaudited)~~

NOTE 6 - RENTAL PROPERTIES, NET

The following table presents the Company's investment in rental properties:

	June 30, 2019			December 31, 2018
Land	$	31,220,230		$	18,761,123
Building and improvements		169,880,590			118,625,834
Furniture, fixtures, and equipment		3,551,290			2,202,006
Construction in progress		437,898			265,233
		205,090,008			139,854,196
Less: accumulated depreciation		(7,092,917	)		(3,792,610	)
Total rental property, net	$	197,997,091		$	136,061,586

September 30, 2017 December 31, 2016
Land $ 4,740,979
$ 1,419,898
Building and improvements 24,901,228
1,018,051
Furniture, fixtures, and equipment 227,243
21,317
Construction in progress 4,365
—
29,873,815
2,459,266
Less: accumulated depreciation (218,877 ) (13,431 )
Total rental property, net $ 29,654,938
$ 2,445,835

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

Depreciation expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 was ~~$184,618~~$1.7 million and ~~$205,446,~~$3.3 million, respectively. Depreciation expense for ~~both~~ the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2018 was ~~$3,288.~~

$715,940 and $998,662, respectively.

Loss on disposal of assets: During the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, the Company ~~had~~recorded losses ~~of $185,114~~ on the disposal of assets of $131,611and $218,473, respectively, due to the replacement of appliances at its rental properties in conjunction with unit upgrades. During the three and six months ended June 30, 2018, the Company recorded losses on the disposal of assets of $3,879 and $6,488, respectively, due to the replacement of appliances at its rental properties in conjunction with unit upgrades.

NOTE 7 - IDENTIFIED INTANGIBLE ASSETS, NET

Identified intangible assets, net, consist of in-place rental leases. The net carrying value of the acquired in-place leases at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 was ~~$562,568~~$1.1 million and ~~$27,870,~~$707,825, respectively, net of the accumulated amortization of ~~$210,675~~approximately $3.5 million and ~~$22,071,~~$2.4 million, respectively. At ~~September~~June 30, ~~2017,~~2019, the weighted average remaining life of the rental leases was seven months.

Amortization for the three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 was ~~$160,734~~$468,839 and ~~$7,088,~~$436,851 , respectively. Amortization for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 was ~~$188,604~~$1.1 million and ~~$7,088,~~$716,284, respectively. At ~~September~~June 30, ~~2017,~~2019, expected amortization for the in-place rental leases for the next 12 months is ~~$562,568~~$1.1 million and none thereafter.

NOTE 8 - MORTGAGE NOTES PAYABLE, NET

The following table presents a summary of the Company's mortgage notes payable, net, at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016:~~2018:

	June 30, 2019							December 31, 2018
Collateral	Outstanding Borrowings		Deferred Financing Costs, net			Carrying Value		Outstanding borrowings		Deferred Financing Costs, net			Carrying Value
Payne Place		1,542,697	$	(29,283	)	$	1,513,414	$	1,560,236	$	(30,220	)	$	1,530,016
Bay Club		21,520,000		(232,127	)		21,287,873		21,520,000		(255,957	)		21,264,043
Tramore Village		32,625,000		(334,217	)		32,290,783		32,625,000		(363,784	)		32,261,216
Matthews Reserve		23,850,000		(291,348	)		23,558,652		23,850,000		(315,236	)		23,534,764
The Park at Kensington		21,760,000		(282,523	)		21,477,477		21,760,000		(305,399	)		21,454,601
Wimbledon Oaks		18,410,000		(254,804	)		18,155,196		—		—			—
Summit		27,580,000		(444,129	)		27,135,871		—		—			—

Total	$	147,287,697	$	(1,868,432	)	$	145,419,265	$	101,315,236	$	(1,270,596	)	$	100,044,640

September 30, 2017 December 31, 2016
Collateral Outstanding Borrowings Deferred Financing Costs, net Carrying Value Outstanding borrowings Deferred Financing Costs, net Carrying Value
Payne Place $ 1,602,909
$ (32,860 ) $ 1,570,049
$ 1,625,000
$ (34,166 ) $ 1,590,834
Bay Club 21,520,000
(320,201 ) 21,199,799
—
—
—
Total $ 23,122,909
$ (353,061 ) $ 22,769,848
$ 1,625,000
$ (34,166 ) $ 1,590,834

The following table presents additional information about the Company's mortgage notes payable, net:

Collateral	Maturity Date	Annual Interest Rate				Average Monthly Debt Service		Average Monthly Escrow
Payne Place	1/1/2047		3.11	%	⁽¹⁾⁽⁵⁾	$	6,948	$	2,531
Bay Club	8/1/2024		4.27	%	⁽²⁾⁽⁶⁾		103,482		52,024
Tramore Village	4/1/2025		4.20	%	⁽³⁾⁽⁶⁾		118,929		55,872
Matthews Reserve	9/1/2025		4.47	%	⁽⁴⁾⁽⁶⁾		90,322		20,127
The Park at Kensington	10/1/2025		4.36	%	⁽⁴⁾⁽⁶⁾		80,379		37,346
Wimbledon Oaks	3/1/2026		4.33	%	⁽⁴⁾⁽⁶⁾		67,537		63,822
Summit	8/1/2026		3.84	%	⁽⁴⁾⁽⁶⁾		89,593		42,698

Collateral Maturity Date Annual Interest Rate Average Monthly Debt Service Average Monthly Escrow
Payne Place 1/1/2047 3.11%
₍₁₎₍₄₎
$ 6,948
$ 1,933
Bay Club 8/1/2024 3.10%
₍₂₎₍₃₎
56,479
40,667

(1)	Fixed rate until January 1, 2020, when the fixed rate of the note changes to variable rate based on six-month LIBOR plus 2.25%, with an all-in interest rate floor of 2.50% and ceiling of 9.50%.

(2)

Variable rate based on one-month LIBOR of 2.40% (at June 30, 2019) plus 1.87%, with a maximum interest rate of 5.75%; see Note 13.

~~(1) Fixed rate.~~

(3)	Variable rate based on one-month LIBOR of 2.40% (at June 30, 2019) plus 1.80%, with a maximum interest rate of 6.25%; see Note 13.

~~(2) Variable rate based on one-month LIBOR plus 1.87%, with a maximum interest rate of 5.75%.~~

(4)	Fixed rate.

~~(3) Monthly interest-only payment currently required.~~

(5)	Through December 18, 2018, RAI co-guaranteed this loan with the Company. See Note 9 for more details.

~~(4) RAI co-guarantees this loan with the Company. See Note 9 for more details.~~

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

~~SEPTEMBER~~

JUNE 30, ~~2017~~2019

(unaudited)

(6)	Monthly interest-only payment currently required.

~~(unaudited)~~

All mortgage notes are collateralized by a first mortgage lien on the assets of the respective property named in the table above. The amount outstanding on the mortgages may be prepaid in full during the entire term with a prepayment penalty for a period of the term.

On ~~July 31, 2017,~~February 12, 2019, the Company, through a wholly owned subsidiary, entered into a ~~seven years, $21.5 million~~seven-year secured mortgage loan with ~~CBRE~~M&T Realty Capital ~~Markets, Inc.,~~Corporation, an unaffiliated lender, for borrowings of approximately $18.4 million secured by ~~Bay Club~~Wimbledon Oaks (the ~~"Bay Club~~“Wimbledon Oaks Mortgage ~~Loan"~~Loan”). The ~~Bay Club~~Wimbledon Oaks Mortgage Loan matures on ~~August~~March 1, ~~2024. The Bay Club Mortgage Loan~~2026 and bears interest at a fixed rate of ~~LIBOR plus 1.87%, with a maximum interest rate of 5.75%~~4.33%. Monthly payments are interest only for the first 2436 months.

Beginning on ~~September~~April 1, ~~2019,~~2022, the Company will pay both principal and interest on the Wimbledon Oaks Mortgage Loan based on 30 year amortization. Any remaining principal balance and all accrued and unpaid interest and fees will be due at maturity. ~~The Company may prepay the Bay Club Mortgage Loan~~

Prepayment in full atis permitted on any ~~time (1) after July 31, 2019 and until April 30, 2024 upon~~scheduled payment ofdate, provided a prepayment premium ~~equal to~~is paid. The prepayment premium will be based on the greater of (i) the yield maintenance prepayment formula and (ii) 1% of the amount of the principal being repaid, for any prepayment made prior to March 1, 2024. The prepayment premium will be 1% of the amount ~~prepaid; and (2)~~of principal being repaid for any prepayment made from (and including) March 1, 2024 through October 31, 2025. No prepayment premium is required after ~~April 30, 2024 with no prepayment premium.~~November 1, 2025. The non-recourse carveouts under the loan documents for the ~~Bay Club~~Wimbledon Oaks Mortgage Loan are guaranteed by the Company.

On June 24, 2019, the Company, through a wholly owned subsidiary, entered into a seven-year secured mortgage loan with CBRE Capital Markets, Inc., an unaffiliated lender, for borrowings of approximately $27.6 million secured by Summit (the “Summit Mortgage Loan”). The Summit Mortgage Loan matures on July 1, 2026 and bears interest at a fixed rate of 3.84%. Monthly payments are interest only for the first 36 months. Beginning on August 1, 2022, the Company will pay both principal and interest on the Summit Mortgage Loan based on 30 year amortization. Any remaining principal balance and all accrued and unpaid interest and fees will be due at maturity.

The following table presents the Company's annual principal payments on outstanding borrowings for each of the next five 12-month periods ending ~~September~~June 30, and thereafter:

2020	$	325,789
2021		489,675
2022		1,552,973
2023		2,516,980
2024		2,654,195
Thereafter		139,748,085
	$	147,287,697

2018 $ 34,006
2019 70,044
2020 474,335
2021 491,320
2022 506,982
Thereafter 21,546,222
$ 23,122,909

Deferred financing costs incurred to obtain financing are amortized over the term of the related debt. During the three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, amortization of deferred financing costs of ~~$4,572~~$57,990 and ~~$651,~~$27,323, respectively, was included in interest expense. During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, amortization of deferred financing costs of ~~$5,390~~$117,180 and ~~$651,~~$41,222, respectively, was included in interest expense. Accumulated amortization at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 was ~~$5,390~~$266,350 and ~~$2,775,~~$149,170, respectively.

The following table presents the Company's estimated amortization of the existing deferred financing costs for the next five 12-month periods ending ~~September~~June 30, and thereafter:

2020	$	307,996
2021		306,110
2022		303,838
2023		299,116
2024		294,157
Thereafter		357,215
	$	1,868,432

2018 $ 49,998
2019 49,956
2020 49,517
2021 48,346
2022 47,271
Thereafter 107,973
$ 353,061

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

NOTE 9 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Relationship with the Advisor

The Company is externally managed and advised by the Advisor. Pursuant to the terms of the ~~Advisory Agreement,~~advisory agreement, the Advisor provides the Company with its management team, including its officers, along with appropriate support personnel. The Advisor will be 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 ~~expect to~~ have any employees. The Advisor is not obligated to dedicate any specific portion of its time or its employees' time to the Company’s business. The Advisor and any employees of the Sponsor or its affiliates acting on behalf of the Advisor, are at all times subject to the supervision and oversight of the Company’s board of directors and have only such functions and authority as the Company delegates to it. Effective April 28, ~~2017,~~2019, the Company renewed the advisory agreement with the Advisor through April 27, ~~2018. The terms of the agreement are identical to those of the advisory agreement in effect through April 27, 2017.~~

2020.

During the course of the offering, the Advisor will provide offering-related services to the Company and will advance funds to the Company for both operating costs and organization and offering costs. These amounts will be reimbursed to the

~~(Back to Index)~~

~~RESOURCE APARTMENT REIT III, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~SEPTEMBER 30, 2017~~

~~(unaudited)~~

Advisor from the proceeds from the offering, subject to the aforementioned limits on organization and offering expense reimbursements, although there can be no assurance that the Company’s plans to raise capital will be successful. At ~~September~~June 30, ~~2017,~~2019, the Advisor has advanced organization and offering costs on a cumulative basis on behalf of the Company of approximately ~~$5.4~~$8.9 million.

The ~~Advisory Agreement~~advisory agreement has a ~~one-year~~one -year term and may be renewed for an unlimited number of successive ~~one-year~~one -year terms upon the approval of the Conflicts Committee of the Company's board of directors. Under the ~~Advisory Agreement,~~advisory agreement, the Advisor will receive fees and will be 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 or originate loans, including acquisition expenses and any debt attributable to such investments.

Asset management fees. The Advisor earns a monthly asset management fee equal to 0.083% (one-twelfth of 1.0%) of (i) the appraised asset values for all assets owned on the date of the most recently determined NAV of the Company plus, (ii) until the date of the next determination of NAV of the Company, the cost of each asset at the end of each month, without deduction for depreciation, bad debts or other non-cash ~~reserves.~~reserves, for all assets acquired after the most recently determined NAV of the Company, if any. 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 will earn 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 will pay directly or reimburse 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 includes all organization and offering costs of up to 4.0% of gross offering proceeds if the Company raises less than ~~$500~~$500.0 million in the primary offering and 2.5% of gross offering proceeds if the Company raises more than ~~$500~~$500.0 million in the primary offering. 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 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. Prior to the Company breaking escrow, the Advisor incurred $104,266 of formation and other operating expenses the Company's behalf, which will not be reimbursed to the Advisor.

On ~~August 18, 2016,~~April 13, 2018, the board of directors approved an amendment to the advisory agreement that provides that the Company is not responsible for the reimbursement of any unreimbursed organization and offering expenses or operational

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

expenses incurred by the Advisor ~~provided a $555,000 bridge loan (the "Bridge Loan") to~~on the ~~Company. The Company used~~Company’s behalf through March 31, 2018 until after the ~~proceeds~~termination of the Bridge Loan to partially finance the acquisition of Payne Place. The Bridge Loan incurred interest at an annual rate of LIBOR plus 3.00%. On November 1, 2016, the Company repaid the outstanding balanceprimary portion of the ~~Bridge Loan~~Company’s ongoing initial public offering. Additionally, the amendment provides that such unreimbursed organization and ~~accrued interest before its scheduled maturity date~~offering expenses or operational expenses incurred or paid by the Advisor on the Company’s behalf through March 31, 2018 will be reimbursed ratably starting after the termination of ~~February 18, 2017. Interest expense associated with Bridge Loan~~the primary portion of the Company’s ongoing initial public offering through April 30, 2021 for ~~the year ended December 31, 2016 was $2,921.~~

organization and offering expenses and through April 30, 2020 for operating expenses.

Relationship with Resource Apartment Manager III, LLC

The Manager manages real estate properties and real estate-related debt investments and coordinates the leasing of, and manages construction activities related to, some of 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 that it manages and an oversight fee on any real property investments that are managed by third parties. Property management fees are deducted directly from the property's operating account by the property manager. Any property management fees paid to unaffiliated third party property managers in excess of 4.5% of actual gross receipts will be reimbursed to the Company by the Advisor. At ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the Advisor owed the Company ~~$3,086~~$585 and ~~$1,041,~~$291, respectively, for property management fees in excess of the 4.5% cap paid to the unaffiliated third party property manager.

Construction management fees. The Manager earns a construction management fee equal to 5.0% of actual aggregate costs to construct improvements to a property.

Debt servicing fees. The Manager will earn a debt servicing fee equal to 2.75% of gross receipts from real estate-related debt investments.

~~(Back to Index)~~

~~RESOURCE APARTMENT REIT III, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~SEPTEMBER 30, 2017~~

~~(unaudited)~~

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. The Company is obligated to reimburse the Manager or other affiliates for such shared operating expenses.

Relationship with Resource Securities

Resource Securities, an affiliate of the Advisor, serves as the Company’s dealer manager and is responsible for marketing the Company’s shares during the public offering.

Dealer manager fee and selling commissions. Pursuant to the terms of the amended and restated dealer manager agreement with Resource Securities, the Company generally pays Resource Securities a selling commission of up to 3.0% of gross offering proceeds from the sale of Class R shares and a dealer manager fee of up to 3.5% of gross offering proceeds from the sale of Class R shares (but the aggregate of such fees shall not exceed 5.5% of gross offering proceeds). The Company generally pays Resource Securities a dealer manager fee of up to 1.5% of gross offering proceeds from the sale of the Class I shares. Prior to July 3, 2017, the Company paid Resource Securities of selling commissions up to 7.0% of gross primary offering proceeds from the sale of Class A shares and up to 2.0% of gross primary offering proceeds from the sale of Class T shares and a dealer manager fee of up to 3.0% of gross primary offering proceeds from the sale of either Class A or Class T shares. Resource Securities allows 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. Additionally, the Company may reimburse Resource Securities for bona fide due diligence expenses. ~~No selling commissions or dealer manager fees were paid in connection with the sales of Class A shares~~

(Back to ~~the Advisor or RAI.~~

Index)

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

Distribution and shareholder servicing fee. Resource Securities is paid an annual fee of 1.0% of the NAV per share (1% of purchase price ~~(or, once reported, the NAV) per share~~prior to June 29, 2018) of Class T common stock sold in the primary offering for five years from the date on which each share is issued up to a total of 5.0%. Resource Securities is also paid an annual fee of 1.0% of the NAV per share (1% of purchase price ~~(or, once reported, the NAV) per share~~prior to June 29, 2018) of Class R common stock sold in the primary offering. The Company will cease paying the distribution and shareholder servicing fee with respect to Class R shares held in any particular account, and those Class R shares will convert into a number of Class I shares determined by multiplying each Class R share to be converted by the applicable "Conversion Rate," on the earlier of (i) the date after the termination of the primary offering at which, in the aggregate, underwriting compensation from all sources equals 10.0% of the gross proceeds from the primary offering; (ii) a listing of the Class I shares on a national securities exchange; (iii) a merger or consolidation of the Company with or into another entity, or the sale or other disposition of all or substantially all of our assets; and (iv) the end of the month in which the total underwriting compensation (which consists of selling commissions, dealer manager fees and distribution and shareholder servicing fees) paid with respect to such Class R shares purchased in a primary offering is not less than 8.5% (or a lower limit, provided that, in the case of a lower limit, the agreement between Resource Securities and the broker-dealer in effect at the time Class R shares were first issued to such account sets forth the lower limit and Resource Securities advises the Company’s transfer agent of the lower limit in writing) of the gross offering price of those Class R shares purchased in such primary offering (excluding shares purchased through the distribution reinvestment plan).

The differences between the Class A, Class T, Class R and Class I shares relate to the fees and selling commissions payable with respect to each class and the differing distribution amounts and expense allocations due to differing ongoing fees and expenses. The per share amount of distributions on Class T and Class R shares will likely be lower than the distributions on the Class A and Class I shares for so long as the distribution and shareholder servicing fee applies because this fee is a class-specific expense. The following table summarizes the differences in fees and selling commissions between the classes of common stock:

Class A Share Class T Share Class R Share Class I Share
Initial Offering Price $10.00 $9.47 $9.52 $9.13
Selling Commissions Paid by Company (per shares) 7.0% 2.0% 3.0%
⁽¹⁾
None
Dealer Manager Fee (per share) 3.0% 3.0% 3.5%
⁽¹⁾
1.5%
Annual Distributions and Shareholder Servicing Fee None 1.0%
⁽²⁾
1.0%
⁽³⁾
None
Initial Offering Price Under the DRIP $9.60 $9.09 $9.14 $8.90


⁽¹⁾	~~The aggregate amount paid to Resource Securities for selling commissions and dealer manager fees shall not exceed 5.5% of gross offering proceeds.~~

~~(Back to Index)~~

~~RESOURCE APARTMENT REIT III, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~SEPTEMBER 30, 2017~~

~~(unaudited)~~

⁽²⁾

Each outstanding Class T share issued in the primary offering is subject to an annual distribution and shareholder servicing fee for five years from the date on which such share is issued. The Company will cease paying the distribution and shareholder servicing fee on each Class T share prior to the fifth anniversary of its issuance on the earliest of the following, should any of these events occur: (i) the date at which, in the aggregate, underwriting compensation from all sources equals 10% of the gross proceeds from the Company's primary offering (i.e., excluding proceeds from sales pursuant to the DRIP); (ii) the date on which the Company lists its common stock on a national securities exchange; and (iii) the date of a merger or other extraordinary transaction in which the Company is a party and in which the common stock is exchanged for cash or other securities. The Company cannot predict if or when any of these events will occur.

⁽³⁾

The Company will cease paying the distribution and shareholder servicing fee with respect to Class R shares held in any particular account, and those Class R shares will convert into a number of Class I shares determined by multiplying each Class R share to be converted by the applicable "Conversion Rate," on the earlier of (i) the date after the termination of the primary offering at which, in the aggregate, underwriting compensation from all sources equals 10.0% of the gross proceeds from the primary offering; (ii) a listing of the Class I shares on a national securities exchange; (iii) a merger or consolidation of the Company with or into another entity, or the sale or other disposition of all or substantially all of our assets; and (iv) the end of the month in which the total underwriting compensation (which consists of selling commissions, dealer manager fees and distribution and shareholder servicing fees) paid with respect to such Class R shares purchased in a primary offering is not less than 8.5% (or a lower limit, provided that, in the case of a lower limit, the agreement between Resource Securities and the broker-dealer in effect at the time Class R shares were first issued to such account sets forth the lower limit and Resource Securities advises the Company’s transfer agent of the lower limit in writing) of the gross offering price of those Class R shares purchased in such primary offering (excluding shares purchased through the distribution reinvestment plan). The Company cannot predict if or when any of these events will occur.

Relationship with RAI and C-III

Property loss pool.The Company's properties ~~participate~~participated in a property loss self-insurance pool with other properties directly and indirectly managed by RAI and C-III, which iswas backed by a catastrophic insurance ~~policy.~~policy, until February 28, 2019. Substantially all of the receivables from related parties represent insurance deposits held in escrow by RAI and C-III related to the self-insurance pool which ~~if unused,~~ will be returned to the Company. The pool ~~covers~~covered losses up to $2.5 million, in aggregate, after a $25,000 deductible per incident. Claims beyond the insurance pool limits ~~will be~~were covered by the catastrophic insurance policy, which covered claims up to $250.0 million, after either a $25,000 or a $100,000 deductible per incident, depending on location and/or type of loss.

Beginning of March 1, 2019, the Company now participates (with other properties directly and indirectly managed by RAI and C-III) only in the catastrophic insurance policy, which covers claims up to ~~$250~~$250.0 million, after either a $25,000 or a $100,000 deductible per ~~incident.~~incident, depending on location and/or type of loss. Therefore, unforeseen or catastrophic losses in excess of the Company's insured ~~limited~~limits could have a material adverse effect on the Company's financial condition and operating results. ~~During the three and nine months ended September 30, 2017, the Company paid $7,172 and $7,591 into the property loss insurance pool.~~

General liability loss pool. The Company's properties also participated in a general liability pool with other properties directly and indirectly managed by RAI and C-III until April 22, 2017. The pool covers claims up to $50,000 per incident through April 22, 2017. Effective April 23, 2017, the loss pool was eliminated and the Company ~~now~~ participates (with other properties directly and indirectly managed by RAI and C-III) in a general liability policy. The insured limit for the general liability policy is ~~$76~~$76.0 million in total claims, after a $25,000 deductible per incident.

Internal audit fees.RAI performs internal audit services for the Company. ~~The 2017 annual fee for the services provided is $12,500.~~

Other transactions. Through December 18, 2018, RAI ~~co-guarantees~~co-guaranteed the mortgage on Payne Place with the Company until such time as the Company ~~achieves~~achieved the following: (a) ~~owns~~owned a minimum of five apartment complexes; (b) ~~has~~had a minimum net worth of ~~$50~~$50.0 million; (c) ~~has~~had liquidity of no less than $5$5.0 million; and (d) ~~has~~had an aggregate portfolio leverage of no more than 65% (see Note 8 for further details). As of December 18, 2018, RAI has been released from the guaranty.

The Company paid The Planning & Zoning Resource Company, ~~an affiliate~~a subsidiary of C-III, ~~$1,079~~$2,716 for a zoning ~~report~~reports in connection with its acquisition of ~~Bay Club.~~

Wimbledon Oaks and Summit during the six months ended June 30, 2019 .

The Company participates in a liability insurance program for directors and officers coverage with other C-III managed entities and subsidiaries for coverage up to $100.0 million.

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2019

(unaudited)

The following table presents the Company's amounts receivable from and amounts payable to such related parties:

	June 30, 2019		December 31, 2018
Due from related parties:
Advisor	$	585	$	291
RAI and affiliate - insurance funds held in escrow		4,386		12,799
Resource Securities		409		682
	$	5,380	$	13,772

Due to related parties:
Advisor:
Asset management fees	$	—	$	5,238
Organization and offering costs		8,132,222		8,249,864
Operating expense reimbursements (including prepaid expenses)		2,782,214		2,700,703
		10,914,436		10,955,805

Manager:
Property management fees		52,848		50,912
Operating expense reimbursements		44,259		62,717
		97,107		113,629

RAI:
Internal audit fee		13,000		11,750
Operating expense reimbursements		629		14,843
		13,629		26,593

Resource Securities:
Selling commissions and dealer-manager fees		6,050		78,705
Distribution and shareholder servicing fee		1,913,360		1,818,555
		1,919,410		1,897,260

	$	12,944,582	$	12,993,287

September 30, 2017 December 31, 2016
Due from related parties:
Advisor $ 3,086
$ 1,041
RAI and affiliate - insurance funds held in escrow 1,467
1,311
$ 4,553
$ 2,352
Due to related parties:
Advisor:
Acquisition related reimbursements $ 6,533
$ 14,050
Asset management fees —
2
Organization and offering costs 5,382,494
2,848,317
Operating expense reimbursements (including prepaid expenses) 1,517,776
682,661
$ 6,906,803
$ 3,545,030
Manager:
Property management fees $ 10,946
$ —
Operating expense reimbursements 8,514
—
$ 19,460
$ —
RAI:
Internal audit fee $ 750
$ 8,250
Operating expense reimbursements 1,372
—
$ 2,122
$ 8,250
Resource Securities:
Selling commissions and dealer-manager fees $ 34,477
$ 10,363
Distribution and shareholder servicing fee 632,044
53,015
$ 666,521
$ 63,378

Other: $ —
$ 55

$ 7,594,906
$ 3,616,713

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2019

(unaudited)

The following table presents the Company's fees earned by and expenses incurred from such related parties:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Fees earned / expenses incurred:
Advisor:
Acquisition fees and acquisition related reimbursements ⁽¹⁾	$	846,397	$	-	$	1,456,067	$	1,018,719
Asset management fees⁽²⁾		459,211		212,613		874,161		310,821
Debt financing fees⁽³⁾		137,900		-		229,950		163,125
Organization and offering costs ⁽⁴⁾		305,335		747,018		629,380		1,428,461
Operating expense reimbursement ⁽⁵⁾		360,699		148,772		766,144		401,260

Manager:
Property management fees⁽²⁾	$	171,388	$	77,952	$	330,476	$	115,670
Construction management fees⁽¹⁾		72,902		12,318		114,469		28,166
Operating expense reimbursements ⁽⁶⁾		7,454		23,209		37,925		26,397

RAI:
Internal audit fee⁽⁵⁾	$	13,000	$	11,750	$	24,750	$	15,250

Resource Securities:
Selling commissions and dealer-manager fees⁽⁷⁾	$	277,917	$	568,559	$	1,098,082	$	1,222,695
Distribution and shareholder servicing fee⁽⁷⁾		71,313		305,130		495,170		659,906

Other:
The Planning & Zoning Resource Company ⁽¹⁾	$	1,565	$	-	$	2,716	$	1,980

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Fees earned / expenses incurred:
Advisor:
Acquisition fees and acquisition related reimbursements ⁽¹⁾
$ 641,193
$ 51,505
$ 641,193
$ 51,505
Asset management fees ⁽²⁾
60,396
3,110
73,853
3,110
Debt financing fees ⁽³⁾
107,600
2,775
107,600
2,775
Interest expense ⁽⁴⁾
—
2,337
—
2,337
Organization and offering costs ⁽⁵⁾
676,441
999,096
2,534,177
2,286,011
Operating expense reimbursement⁽⁶⁾
173,729
210,351
487,934
210,351

Manager:
Property management fees ⁽²⁾
$ 22,542
$ —
$ 22,542
$ —
Construction management fees ⁽⁷⁾
336
—
336
—

RAI:
Internal audit fees ⁽⁶⁾
$ 3,500
$ —
$ 9,750
$ —

Resource Securities:
Selling commissions and dealer-manager fees⁽⁸⁾
$ 325,954
$ 32,700
$ 961,987
$ 32,700
Distribution and shareholder servicing fee ⁽⁸⁾
176,075
5,200
619,546
5,200

Other:
The Planning & Zoning Resource Company ⁽¹⁾
$ 1,079
$ 1,495
$ 1,079
$ 1,495

(1)	Capitalized and included in Rental properties, net on the consolidated balance sheets.

(2)

Included in Management fees - related parties on the consolidated statements of operations and comprehensive loss.

~~(1)~~ ~~Included in Acquisition costs on the consolidated statements of operations and comprehensive loss.~~

~~(2) Included in Management fees - related parties on the consolidated statements of operations and comprehensive loss.~~

~~(3) Included in Mortgage notes payable on the consolidated balance sheets.~~

~~(4) Included in Interest expense on the consolidated statements of operations and comprehensive loss.~~

(3)	Included in Mortgage notes payable on the consolidated balance sheets.

~~(5)~~

(4)

Organizational expenses were expensed when incurred and offering costs are included in Deferred offering costs ~~and~~until they are charged to Stockholders' equity on the consolidated balance ~~sheets.~~sheets as proceeds are raised in the offering.

(5)
~~(6)~~	Included in General and administrative on the consolidated statements of operations and comprehensive loss and excludes third party costs that are advanced by the Advisor.

(6)
~~(7)~~	Included in Rental ~~properties, net~~operating expenses on the consolidated statements of operations and comprehensive loss.

(7)	Included in Stockholders' equity on the consolidated balance sheets.

~~(8) Included in Stockholders' equity on the consolidated balance sheets.~~

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2019

(unaudited)

NOTE 10 - EARNINGS PER SHARE

The following table presents a reconciliation of the Company's basic and diluted ~~earnings~~earnings/(loss) per share for the periods presented:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net loss	$	(2,601,903	)	$	(1,388,450	)	$	(5,387,310	)	$	(2,214,605	)
Less: Class A common stock cash distributions declared		84,122			81,956			169,363			165,068
Less: Class T common stock cash distributions declared		121,545			119,360			244,076			235,694
Less: Class R common stock cash distributions declared		1,047,968			530,248			2,034,919			908,929
Less: Class I common stock cash distributions declared		99,443			25,556			161,764			35,241
Undistributed net loss attributable to common stockholders	$	(3,954,981	)	$	(2,145,570	)	$	(7,997,432	)	$	(3,559,537	)

Class A common stock:
Undistributed net loss attributable to Class A common stockholders	$	(222,354	)	$	(236,156	)	$	(475,477	)	$	(437,649	)
Class A common stock cash distributions declared		84,122			81,956			169,363			165,068
Net loss attributable to Class A common stockholders	$	(138,232	)	$	(154,200	)	$	(306,114	)	$	(272,581	)
Net loss per Class A common share, basic and diluted	$	(0.22	)	$	(0.25	)	$	(0.48	)	$	(0.44	)
Weighted-average number of Class A common shares outstanding, basic and diluted (1)		635,764			626,103			635,630			624,518

Class T common stock:
Undistributed net loss attributable to Class T common stockholders	$	(391,026	)	$	(411,109	)	$	(834,933	)	$	(761,725	)
Class T common stock cash distributions declared		121,545			119,360			244,076			235,694
Net loss attributable to Class T common stockholders	$	(269,481	)	$	(291,749	)	$	(590,857	)	$	(526,031	)
Net loss per Class T common share, basic and diluted	$	(0.24	)	$	(0.27	)	$	(0.53	)	$	(0.48	)
Weighted-average number of Class T common shares outstanding, basic and diluted		1,118,038			1,089,943			1,116,159			1,086,970

Class R common stock:
Undistributed net loss attributable to Class R common stockholders	$	(3,136,689	)	$	(1,451,507	)	$	(6,325,262	)	$	(2,295,752	)
Class R common stock cash distributions declared		1,047,968			530,248			2,034,919			908,929
Net loss attributable to Class R common stockholders	$	(2,088,721	)	$	(921,259	)	$	(4,290,343	)	$	(1,386,823	)
Net loss per Class R common share, basic and diluted	$	(0.23	)	$	(0.24	)	$	(0.51	)	$	(0.42	)
Weighted-average number of Class R common shares outstanding, basic and diluted		8,968,558			3,848,272			8,455,769			3,280,470

Class I common stock:
Undistributed net loss attributable to Class I common stockholders	$	(204,912	)	$	(46,798	)	$	(361,760	)	$	(64,411	)
Class I common stock cash distributions declared		99,443			25,556			161,764			35,241
Net loss attributable to Class I common stockholders	$	(105,469	)	$	(21,242	)	$	(199,996	)	$	(29,170	)
Net loss per Class I common share, basic and diluted	$	(0.18	)	$	(0.16	)	$	(0.41	)	$	(0.32	)
Weighted-average number of Class I common shares outstanding, basic and diluted		585,893			133,309			483,610			91,914

(1)Weighted-average number of shares excludes the convertible stock as they are not participating securities.

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Net loss $ (1,602,783 ) $ (431,091 ) $ (2,251,780 ) $ (457,549 )
Less: Class A common stock cash distributions declared 81,555
—
119,955
—
Less: Class T common stock cash distributions declared 115,789
—
142,039
—
Less: Class R common stock cash distributions declared 35,094
—
35,094
—
Less: Class I common stock cash distributions declared 3,453
—
3,453
—
Undistributed net loss attributable to common stockholders $ (1,838,674 ) $ (431,091 ) $ (2,552,321 ) $ (457,549 )

Class A common stock:
Undistributed net loss attributable to Class A common stockholders $ (606,418 ) $ (428,286 ) $ (1,072,505 ) $ (455,028 )
Class A common stock cash distributions declared 81,555
—
119,955
—
Net loss attributable to Class A common stockholders $ (524,863 ) $ (428,286 ) $ (952,550 ) $ (455,028 )
Net loss per Class A common share, basic and diluted $ (0.85 ) $ (1.72 ) $ (1.76 ) $ (4.60 )
Weighted-average number of Class A common shares outstanding, basic and diluted 616,733
249,051
540,022
98,905

Class T common stock:
Undistributed net loss attributable to Class T common stockholders $ (1,050,879 ) $ (2,805 ) $ (1,356,356 ) $ (2,521 )
Class T common stock cash distributions declared 115,789
—
142,039
—
Net loss attributable to Class T common stockholders $ (935,090 ) $ (2,805 ) $ (1,214,317 ) $ (2,521 )
Net loss per Class T common share, basic and diluted $ (0.87 ) $ (1.72 ) $ (1.78 ) $ (4.60 )
Weighted-average number of Class T common shares outstanding, basic and diluted 1,068,753
1,631
682,945
548

Class R common stock:
Undistributed net loss attributable to Class R common stockholders $ (165,126 ) $ —
$ (112,398 ) $ —
Class R common stock cash distributions declared 35,094
—
35,094
—
Net loss attributable to Class R common stockholders $ (130,032 ) $ —
$ (77,304 ) —
$ —
Net loss per Class R common share, basic and diluted $ (0.77 ) $ —
$ (1.37 ) $ —
Weighted-average number of Class R common shares outstanding, basic and diluted 167,935
—
56,594
—

Class I common stock:
Undistributed net loss attributable to Class I common stockholders $ (16,251 ) $ —
$ (11,062 ) $ —
Class I common stock cash distributions declared 3,453
—
3,453
—
Net loss attributable to Class I common stockholders $ (12,798 ) $ —
$ (7,609 ) $ —
Net loss per Class I common share, basic and diluted $ (0.77 ) $ —
$ (1.37 ) $ —
Weighted-average number of Class I common shares outstanding, basic and diluted 16,527
—
5,570
—

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2019

(unaudited)

Diluted earnings per share take 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 50,000 shares of convertible stock (see Note 11) are included in the diluted earnings per share calculations because the necessary conditions for conversion have not been satisfied as of September 30, 2017 (were such date to represent the end of the contingency period). Due to reported losses for the three and nine ended September 30, 2017, common shares potentially issuable to settle accrued distributions are excluded from the calculation of diluted earnings per share calculations, as their inclusion would be anti-dilutive.

NOTE 11 - EQUITY

Preferred Stock

The Company’s charter authorizes the Company to issue 10 million shares of its $0.01 par value preferred stock. At ~~September~~June 30, ~~2017,~~2019, no shares of preferred stock were issued or outstanding.

Convertible Stock

The Company’s charter authorizes the Company to issue 50,000 shares of its $0.01 par value convertible stock. On August 5, 2016, the Company's board of directors approved the issuance of 50,000 convertible shares in exchange of 5,000 shares of Class A common stock. At ~~September~~June 30, ~~2017,~~2019, the Company had 50,000 shares of $0.01 par value convertible stock outstanding, which are owned by the Advisor. The convertible stock will convert into shares of the Company’s Class A 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 6% 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 or the Company consummates a merger pursuant to which consideration received by the stockholders is securities of another issuer that are listed on a national securities exchange.

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)	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 6% 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)~~

(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.

No triggering events have occurred as of ~~the as of the date of the event triggering the conversion.~~

June 30, 2019.

Common Stock

The Company’s charter authorizes the issuance of 1one billion shares of common stock with a par value of $0.01 per share, of which, the Company ~~initially~~has allocated ~~250 million shares of its $0.01 par value common stock as Class A common stock and~~ 750 million shares ~~of its $0.01 par value common stock as Class T common stock.~~

~~On June 28, 2017, the Company amended its charter to authorize 750 million shares of its $0.01 par value common stock~~ as Class R common stock, 75 million shares ~~of its $0.01 par value common stock~~ as Class I common stock, 25 million shares ~~of its $0.01 par value common stock~~ as Class A common stock and 25 million shares ~~of its $0.01 par value common stock~~ as Class T common stock. 125 million shares of the Company's $0.01 par value common stock remain undesignated. As of July 3, 2017, the Company ceased offering shares of Class A and Class T common stock and commenced the offering of Class R and Class I common stock in its primary offering.

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

~~SEPTEMBER~~

JUNE 30, ~~2017~~

2019

(unaudited)

~~At September~~

Since inception through June 30, ~~2017, there were 618,569~~2019, shares of the Company's $0.01 par value Class A, ~~common stock, 1,073,229 shares of~~ Class T, ~~common stock, 617,186 shares of~~ Class R, ~~common stock~~ and ~~28,602 shares of~~ Class I common stock have been issued ~~and outstanding~~ as follows:

	Class A					Class T					Class R					Class I
	Shares Issued			Gross Proceeds		Shares Issued			Gross Proceeds		Shares Issued			Gross Proceeds		Shares Issued		Gross Proceeds
Shared issued through primary offering ⁽¹⁾		586,207		$	5,601,476		1,049,996		$	9,943,465		9,051,083		$	86,943,065		612,560	$	5,649,613
Shares issued through stock dividends		12,860			—		15,495			—		—			—		—		—
Shares issued through distribution reinvestment plan		26,085			244,121		64,618			586,806		244,080			2,219,124		1,702		15,418
Shares issued in conjunction with the Advisor's initial investment, net of 5,000 share conversion		15,000			200,000		—			—		—			—		—		—
Total		640,152		$	6,045,597		1,130,109		$	10,530,271		9,295,163		$	89,162,189		614,262	$	5,665,031
Shares redeemed and retired		(16,914	)				(30,695	)				(945	)				—
Total shares issued and outstanding at June 30, 2019		623,238					1,099,414					9,294,218					614,262

Class A Class T Class R Class I
Shares Issued Gross Proceeds Shares Issued Gross Proceeds Shares Issued Gross Proceeds Shares Issued Gross Proceeds
Shared issued through primary offering ⁽¹⁾
586,207
$ 5,601,476
1,049,996
$ 9,943,465
616,508
$ 5,869,158
28,557
$ 260,000
Shares issued through stock dividends 12,860
—
15,495
—
—
—
—
—
Shares issued through distribution reinvestment plan 4,502
43,216
7,738
70,333
678
6,198
45
407
Shares issued in conjunction with the Advisor's initial investment, net of 5,000 share conversion 15,000
200,000
—
—
—
—
—
—
Total at September 30, 2017 618,569
$ 5,844,692
1,073,229
$ 10,013,798
617,186
$ 5,875,356
28,602
$ 260,407

(1)Includes 222,222 of Class A shares issued to ~~the Advisor~~

~~Distributions~~

~~Cash Distributions~~

RAI.

Redemptions

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, the Company redeemed shares of its outstanding Class A and Class T common stock. During the six months ended June 30, 2019, there were no redemptions of Class R or Class I common stock. Redemptions for the six months ended June 30, 2019 were as follows:

	Class A				Class T
Period	Total Number of Shares Redeemed		Average Price Paid per Share		Total Number of Shares Redeemed		Average Price Paid per Share
January 2019		—		—		—		—
February 2019		—		—		—		—
March 2019		—		—		—		—
April 2019		—		—		—		—
May 2019		—		—		—		—
June 2019		16,914	$	8.66		28,087	$	8.61

		16,914				28,087

The Company will not redeem in excess of 5% of the weighted-average number of shares of common stock outstanding during the 12-month period immediately prior to the effective date of redemption. The Company's board of directors will determine at least quarterly whether it has sufficient excess cash to repurchase shares. Generally, the cash available for redemptions will be limited to proceeds from the Company's distribution reinvestment plan plus, if the Company has positive operating cash flow from the previous fiscal year, 1% of all operating cash flow from the previous year.

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

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.

Distributions

Cash Distributions

During the three months ended June 30, 2019, the Company’s board of directors declared a cash distribution on the outstanding shares of all classes of its common stock based on daily record dates for the period from ~~March 31, 2017~~June 28, 2019 through ~~October 30, 2017,~~September 27, 2019, which were or will be paid on ~~April 28, 2017, May 31, 2017, June 30, 2017,~~ July 31, ~~2017,~~2019, August ~~31, 2017,~~30, 2019, and September ~~29, 2017 and October 31, 2017.~~ 30, 2019.

The ~~distributions declared for the periods from March 31, 2017 through July 30, 2017 were~~distribution was or will be calculated based on the stockholders of record each day during ~~these periods~~the period at a rate of (i) ~~$0.000547945~~$0.001469178 per share per day, less (ii) the applicable daily distribution and shareholder servicing fees accrued for and allocable to any class of common ~~stock.~~

~~The distributions declared for~~stock divided by the ~~periods from July 31, 2017 through October 30, 2017 were calculated based on stockholders~~number of ~~record each day during these periods at a rate of (i) $0.001434521 per share per day less (ii) the applicable daily distribution and shareholder servicing fees accrued for and allocable to any class~~shares of common ~~stock.~~

stock of such class outstanding as of the close of business on the record date..

Distributions are generally paid to stockholders on the last business day of the month for which the distribution has accrued. Distributions reinvested pursuant to the distribution reinvestment plan are reinvested in shares of the same class as the shares on which distributions are made.

The following ~~tables present~~table presents information regarding the Company's distributions declared and paid to stockholders during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017:~~2019:

	Three Months Ended June 30, 2019										Six Months Ended June 30, 2019
	Class A		Class T		Class R		Class I		Total		Class A		Class T		Class R		Class I		Total
Distributions declared	$	84,122	$	121,467	$	1,047,968	$	99,443	$	1,353,000	$	169,363	$	243,997	$	2,034,919	$	161,764	$	2,610,043

Distributions reinvested in shares of common stock paid	$	26,066	$	74,229	$	558,826	$	7,235	$	666,356	$	51,470	$	146,516	$	1,035,611	$	9,631	$	1,243,229
Cash distributions paid		59,019		48,096		418,723		70,168		596,007		115,178		92,942		764,725		115,985		1,088,830
Total distributions paid	$	85,085	$	122,325	$	977,549	$	77,403	$	1,262,363	$	166,648	$	239,459	$	1,800,336	$	125,616	$	2,332,059

Three Months Ended September 30, 2017
Class A Class T Class R Class I Total
Distributions declared $ 81,555
$ 115,789
$ 35,094
$ 3,453
$ 235,891

Distributions reinvested in shares of common stock paid $ 23,836
$ 53,027
$ 6,198
$ 407
$ 83,468
Cash distributions paid 39,686
30,906
7,399
1,733
79,724
Total distributions paid $ 63,522
$ 83,933
$ 13,597
$ 2,140
$ 163,192

~~(Back to Index)~~

~~RESOURCE APARTMENT REIT III, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~SEPTEMBER~~

At June 30, ~~2017~~

~~(unaudited)~~

Nine Months Ended September 30, 2017
Class A Class T Class R Class I Total
Distributions declared $ 119,955
$ 142,039
$ 35,094
$ 3,453
$ 300,541

Distributions reinvested in shares of common stock paid $ 39,923
$ 69,246
$ 6,198
$ 407
115,774
Cash distributions paid 72,248
37,000
7,399
1,733
118,380
Total distributions paid $ 112,171
$ 106,246
$ 13,597
$ 2,140
$ 234,154

~~At September 30, 2017,~~2019, the Company had accrued ~~$91,561~~approximately $1.3 million for the cash distributions paid or to be paid, in cash or DRIP shares, on ~~October~~July 31, ~~2017,~~2019, August 30, 2019, and September 30, 2019, which is reported in distributions payable in the consolidated balance sheet.

~~Stock Dividends~~

On April 25, 2017, the Company's board of directors authorized a stock dividend in the amount of 0.01 shares of common stock, on each outstanding share of common stock to all common stockholders of record as of the close of business on July 1, 2017. The stock dividend was issued in the same class of shares as the shares for which such stockholder received the stock dividend. The Company issued this stock dividend on July 14, 2017.

NOTE 12 - FAIR VALUE MEASURES AND DISCLOSURES

In analyzing the fair value of its ~~financial instruments~~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.

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.

(Back to Index)

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

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) were acquired in conjunction with the acquisition of Bay Club for $14,600.~~

Derivatives are reported at fair value in the consolidated balance sheets and 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)

~~(Back to Index)~~

~~RESOURCE APARTMENT REIT III, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~SEPTEMBER 30, 2017~~

~~(unaudited)~~

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:

	Level 1		Level 2		Level 3		Total
June 30, 2019
Assets:
Interest rate caps	$	—	$	199	$	—	$	199

December 31, 2018
Assets:
Interest rate caps	$	—	$	2,293	$	—	$	2,293

Level 1 Level 2 Level 3 Total
September 30, 2017
Assets:
Interest rate caps $ —
$ 5,204
$ —
$ 5,204

December 31, 2016
Assets:
Interest rate caps $ —
$ —
$ —
$ —

The carrying amount and estimated fair values of the Company’s mortgage notes payable ~~- outstanding borrowings, which was not carried at fair value on the consolidated balance sheets at September 30, 2017 and December 31, 2016,~~ were as follows:

June 30, 2019

December 31, 2018

Carrying

Amount

Estimated Fair

Value

Carrying

Amount

Estimated Fair

Value

Mortgage notes payable- outstanding borrowings

147,287,697

146,712,929

101,315,236

100,698,311

September 30, 2017 December 31, 2016
Carrying Amount Fair Value Carrying Amount Fair Value
Mortgage notes payable - outstanding borrowings $ 23,122,909
$ 21,335,161
$ 1,625,000
$ 1,625,000

The carrying amount of the mortgage notes payable presented is the outstanding borrowings excluding ~~premium or discount and~~ deferred finance costs, net. ~~At September 30, 2017, the~~The fair value of mortgage notes payable was estimated using ~~a discounted cash flow model and~~ rates available to the Company for debt with similar terms and remaining ~~maturity. At December 31, 2016, the carrying value of the mortgage note payable was estimated to be the fair value due to the recent issuance of the mortgage obtained~~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.

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RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

As a condition to certain of the Company’s financing facilities, 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.

Cash Flow Hedges of Interest Rate Risk

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 ~~one~~two interest rate ~~cap~~caps that ~~was~~were designated as a cash flow ~~hedge.~~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~~accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three ~~and nine~~ months ended ~~September~~June 30, ~~2017,~~2019, such derivatives were used to hedge the variable cash flows, indexed to USD-LIBOR, associated with ~~the Bay Club Mortgage Loan.~~existing variable-rate loan agreements. The ineffective portion of the

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~~RESOURCE APARTMENT REIT III, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~SEPTEMBER 30, 2017~~

~~(unaudited)~~

change in fair value of the derivatives iswill be recognized directly in earnings. During each of the three and ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016,~~2019, the Company recorded $2,109 and $2,963, respectively, of hedge ineffectiveness in earnings. There was no hedge ineffectiveness in ~~earnings.~~

earnings during the three and six months ended June 30, 2018.

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. At ~~September~~June 30, ~~2017,~~2019, the Company ~~had~~estimates that an additional $20,726 will be reclassified as an increase to interest expense over the next 12 months.

The following table presents the Company's outstanding interest rate derivatives that were designated as cash flow hedges of interest rate ~~risk:~~risk at June 30, 2019 and December 31, 2018:

Interest Rate

Derivative

Number of

Instruments

Notional

Amount

Maturity Dates

June 30, 2019

Interest rate caps

54,145,000

August 1, 2020 and April 1, 2021

December 31, 2018

Interest rate caps

54,145,000

August 1, 2020 and April 1, 2021

Interest Rate Derivative Number of Instruments Notional Amount Maturity Dates
Interest rate cap 1 $ 21,520,000
August 1, 2020

Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet

The following table presents the fair value of the Company’s derivative financial ~~instrument, an interest rate cap,~~instruments as well as ~~its~~their classification on the consolidated balance sheets at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016:~~2018:

Asset Derivatives

Liability Derivatives

June 30, 2019

December 31, 2018

June 30, 2019

December 31, 2018

Balance Sheet

Fair Value

Balance

Sheet

Fair Value

Balance

Sheet

Fair Value

Balance

Sheet

Fair Value

Prepaid expenses and other assets

$199

Prepaid expenses

and other assets

$2,293

—

$ —

—

$ —

Asset Derivatives Liability Derivatives
September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
Balance Sheet Fair Value Balance Sheet Fair Value Balance Sheet Fair Value Balance Sheet Fair Value
Prepaid expenses and other assets $ 5,204
N/A $ —
— $ —
N/A $ —

NOTE 14 - OPERATING EXPENSE LIMITATION

Under its charter, the Company must limit its total operating expenses to the greater of 2% of its average invested assets or 25% of its net income for the four most recently completed fiscal quarters, unless the conflicts committee of the Company’s board of directors has determined that such excess expenses were justified based on unusual and non-recurring factors.

Operating expenses for the four fiscal quarters ended ~~September~~June 30, ~~2017~~2019 exceeded the charter imposed limitation; however, the conflicts committee of the Company's board of directors determined that the relationship of the Company's operating expenses to its average invested assets was justified for these periods given the costs of operating a public company and the early stage of the Company's operations.

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RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

NOTE 15 - SUBSEQUENT EVENTS

On October 30, 2017, the Company's board of directors declared cash distributions on the outstanding shares of all classes of the Company's common stock based on daily record dates from October 31, 2017 through December 28, 2017, which distributions the Company expects to pay on November 30, 2017 and December 29, 2017, respectively. Distributions for these periods have been or will be calculated based on stockholders of record each day during these periods at a rate of (i) $0.001434521 per share per day less (ii) the applicable daily distribution and shareholder servicing fees accrued for and allocable to any class of common stock, divided by the number of shares of common stock of such class outstanding as of the close of business of each respective record date.

The Company has evaluated subsequent events through the filing of these financial statements and determined no events have occurred ~~other than those discussed above~~ that would require adjustments to or additional disclosure in the consolidated financial statements.

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~~ITEM 2.~~	~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION~~

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (unaudited)

The following discussion and analysis should be read in conjunction with the accompanying financial statements of Resource Apartment REIT III, Inc. and the notes thereto. See also "Cautionary Note Regarding Forward-Looking Statements" preceding Part I, as well as the notes to our financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations provided in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018. As used herein, the terms "we," "our" and "us" refer to Resource Apartment REIT III, Inc., a Maryland corporation, and, as required by context, Resource Apartment REIT III OP, LP, a Delaware limited partnership, and to their subsidiaries.

Overview

Resource Apartment REIT III, Inc. is a Maryland corporation that intends to take advantage of its sponsor's multifamily investing and lending platforms to invest in apartment communities in order to provide stockholders with growing cash flow and increasing asset values. We intend to acquire underperforming apartments which we will renovate and stabilize in order to increase rents. To a lesser extent, we will also seek to originate and acquire commercial real estate debt secured by apartments. We cannot predict, however, the ultimate allocation of net proceeds from our initial public offering between property acquisitions and debt investments at this time because this allocation will depend, in part, on market conditions and opportunities and on the amount of financing that we are able to obtain with respect to the types of assets in which we seek to invest. If we are not able to raise a substantial amount of offering proceeds, our plan of operation will be scaled down considerably, and we would expect to acquire a limited number of assets. We may make adjustments to our target portfolio based on real estate market conditions and investment opportunities. We will not forego a good investment because it does not precisely fit our expected portfolio composition. Thus, to the extent that Resource REIT Advisor, LLC ~~(formerly known as Resource Apartment Advisor III, LLC)~~ (our "Advisor") presents us with attractive investment opportunities that allow us to meet the real estate investment trust ("REIT") requirements under the Internal Revenue Code of 1986, as amended, our portfolio composition may vary from what we initially expect.

Results of Operations

We were formed on July 15, 2015. We commenced active real estate operations on August 19, 2016 with the acquisition of our first multifamily property. At June 30, 2019, we owned seven multifamily properties. As such, we had limited operating results during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016. At September 30, 2017, we owned two multifamily properties.~~

2018.

Our management is not aware of any material trends or uncertainties, favorable or unfavorable, other than national economic conditions affecting our targeted portfolio or the U.S. apartment community industry, which may reasonably be expected to have a material impact on either capital resources or the revenues or incomes to be derived from the operation of such assets or those that we expect to acquire.

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Three Months Ended June 30, 2019Compared to theThree Months Ended June 30, 2018

The following table sets forth the results of our operations:

	Three Months Ended June 30,
	2019			2018
Revenues:
Rental income	$	4,091,185		$	1,827,196
Total revenues		4,091,185			1,827,196

Expenses:
Rental operating - expenses		809,644			346,784
Rental operating - payroll		412,606			199,196
Rental operating - real estate taxes		579,216			182,989
Subtotal- rental operating		1,801,466			728,969
Property management fees		2,624			2,344
Management fees - related parties		630,599			290,565
General and administrative		602,250			527,348
Loss on disposal of assets		131,611			3,879
Depreciation and amortization expense		2,216,145			1,152,791
Total expenses		5,384,695			2,705,896
Loss before other income (expense)		(1,293,510	)		(878,700	)

Other income (expense):
Interest income		83,164			44,292
Interest expense		(1,391,557	)		(554,042	)
Total other income (expense)		(1,308,393	)		(509,750	)
Net loss	$	(2,601,903	)	$	(1,388,450	)

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The following table presents the results of operations separated into two categories: property activity and company level activity for the three ~~and nine~~ months ended ~~September~~June 30, ~~2017~~2019 and ~~2016:~~2018:

	Three Months Ended June 30, 2019									Three Months Ended June 30, 2018
	Property activity			Company level activity			Total			Property activity			Company level activity			Total
Revenues:
Rental income	$	3,841,429		$	—		$	3,841,429		$	1,721,683		$	—		$	1,721,683
Utilities income		201,706			—			201,706			79,732			—			79,732
Ancillary tenant fees		48,050			—			48,050			25,781			—			25,781
Total revenues		4,091,185			—			4,091,185			1,827,196			—			1,827,196

Expenses:
Rental operating -expenses		809,644			—			809,644			346,784			—			346,784
Rental operating - payroll		412,606			-			412,606			199,196			-			199,196
Rental operating - real estate taxes		579,216			—			579,216			182,989			—			182,989
Subtotal- rental operating		1,801,466			-			1,801,466			728,969			-			728,969
Property management fees		2,624			—			2,624			2,344			—			2,344
Management fees - related parties		171,388			459,211			630,599			77,952			212,613			290,565
General and administrative		76,192			526,058			602,250			71,679			455,669			527,348
Loss on disposal of assets		131,611			—			131,611			3,879			—			3,879
Depreciation and amortization expense		2,216,145			—			2,216,145			1,152,791			—			1,152,791
Total expenses		4,399,426			985,269			5,384,695			2,037,614			668,282			2,705,896
Loss before other income (expense)		(308,241	)		(985,269	)		(1,293,510	)		(210,418	)		(668,282	)		(878,700	)

Other income (expense):
Interest income		545			82,620			83,165			20			44,272			44,292
Interest expense		(1,391,558	)		—			(1,391,558	)		(554,042	)		—			(554,042	)
Total other income (expense)		(1,391,013	)		82,620			(1,308,393	)		(554,022	)		44,272			(509,750	)
Net loss	$	(1,699,254	)	$	(902,649	)	$	(2,601,903	)	$	(764,440	)	$	(624,010	)	$	(1,388,450	)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Revenues:
Rental income $ 544,431
$ 25,178
$ 645,585
$ 25,178
Total revenues 544,431
25,178
645,585
25,178

Expenses:
Rental operating 236,562
3,249
277,163
3,249
Acquisition costs 823,411
112,711
906,644
112,711
Property management fees 2,776
1,501
7,538
1,501
Management fees - related parties 82,938
3,110
96,395
3,110
General and administrative 342,956
322,765
883,360
349,223
Loss on disposal of assets 185,114
—
—
185,114
—
Depreciation and amortization expense 345,352
10,376
394,050
10,376
Total expenses 2,019,109
453,712
2,750,264
480,170
Loss before other income (expense) (1,474,678 ) (428,534 ) (2,104,679 ) (454,992 )

Other income (expense):
Other income —
—
1,500
—
Interest income 3,902
432
9,386
432
Interest expense (132,007 ) (2,989 ) (157,987 ) (2,989 )
Net loss $ (1,602,783 ) $ (431,091 ) $ (2,251,780 ) $ (457,549 )

~~During~~

Total revenues

Total revenues for the three ~~and nine~~ months ended ~~September~~June 30, ~~2017~~2019 increased by approximately $2.3 million as compared to the three months ended June 30, 2018 due to seven properties owned at June 30, 2019 as compared to three properties owned at June 30, 2018.

Rental operating - expenses, payroll, and ~~2016, we incurred~~real estate taxes

Rental operating - expenses, payroll, and real estate taxes for the ~~following general~~three months ended June 30, 2019 increased by approximately $1.1 million as compared to the three months ended June 30, 2018 due to seven properties owned at June 30, 2019 as compared to three properties owned at June 30, 2018.

Management fees - related parties

Management fees - related parties expense for the three months ended June 30, 2019 increased by approximately $340,000 as compared to the three months ended June 30, 2018 due to an increase in property management fees and asset management fees due to the acquisition of four additional properties.

General and administrative

General and administrative ~~expenses:~~expense for the three months ended June 30, 2019 increased by approximately $75,000 as compared to the three months ended June 30, 2018 due to the acquisition of four additional properties.

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Loss on disposal of assets

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Allocated payroll and benefits $ 139,404
$ 174,636
$ 390,813
$ 174,636
Directors' fees 18,770
29,000
84,868
29,000
Allocated rent 24,202
16,928
71,693
16,928
Professional fees 37,047
24,434
111,726
50,472
Travel and entertainment 25,117
2,188
38,905
2,188
Insurance 25,809
30,080
18,486
30,404
IT related expenses 60,369
36,409
131,845
36,505
Other 12,238
9,090
35,024
9,090
$ 342,956
$ 322,765
$ 883,360

$ 349,223

~~As a result~~

Loss on disposal of assets for the three months ended June 30, 2019 increased by approximately $128,000 as compared to the three months ended June 30, 2018 due to the timing of the ~~commencement~~replacement of appliances at our rental properties in conjunction with unit upgrades.

Depreciation and amortization

Depreciation and amortization expense for the three months ended June 30, 2019 increased by approximately $1.1 million as compared to the three months ended June 30, 2018 due to seven properties owned at June 30, 2019, with a net asset value of approximately $198.0 million as compared to three properties owned at June 30, 2018, with a net asset value of approximately $73.6 million.

Interest expense

Interest expense for the three months ended June 30, 2019 increased by approximately $838,000 as compared to the three months ended June 30, 2018 due to seven properties owned at June 30, 2019, which secured debt totaling approximately $147.3 million, as compared to three properties owned at June 30, 2018, which secured debt totaling approximately $55.7 million.

Six Months Ended June 30, 2019 Compared to the Six Months Ended June 30, 2018

The following table sets forth the results of our ~~public offering~~operations:

	Six Months Ended June 30,
	2019			2018
Revenues:
Rental income	$	7,746,967		$	2,690,315
Total revenues		7,746,967			2,690,315

Expenses:
Rental operating - expenses		1,491,055			483,280
Rental operating - payroll		783,480			278,532
Rental operating - real estate taxes		1,076,447			307,192
Subtotal- rental operating		3,350,982			1,069,004
Property management fees		5,235			4,361
Management fees - related parties		1,204,637			426,491
General and administrative		1,394,922			955,120
Loss on disposal of assets		218,473			6,488
Depreciation and amortization expense		4,453,246			1,714,946
Total expenses		10,627,495			4,176,410
Loss before other income (expense)		(2,880,528	)		(1,486,095	)

Other income (expense):
Interest income		152,980			70,214
Interest expense		(2,659,762	)		(798,724	)
Total other income (expense)		(2,506,782	)		(728,510	)
Net loss	$	(5,387,310	)	$	(2,214,605	)

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The following table presents the results of operations separated into two categories: property activity and ~~our active~~company level activity for the six months ended June 30, 2019 and 2018:

	Six Months Ended June 30, 2019									Six Months Ended June 30, 2018
	Property activity			Company level activity			Total			Property activity			Company level activity			Total
Revenues:
Rental income	$	7,224,407		$	—		$	7,224,407		$	2,544,864		$	—		$	2,544,864
Utility income		418,424			—			418,424			114,205			—			114,205
Ancillary tenant fees		104,136			—			104,136			31,246			—			31,246
Total revenues		7,746,967			—			7,746,967			2,690,315			—			2,690,315

Expenses:
Rental operating - expenses		1,491,053			—			1,491,053			483,280			—			483,280
Rental operating - payroll		783,480			-			783,480			277,262			1,270			278,532
Rental operating - real estate taxes		1,076,448			—			1,076,448			307,192			—			307,192
Subtotal- rental operating		3,350,981			-			3,350,981			1,067,734			1,270			1,069,004
Property management fees		5,237			—			5,237			4,361			—			4,361
Management fees - related parties		330,475			874,161			1,204,636			115,670			310,821			426,491
General and administrative		176,128			1,218,794			1,394,922			92,121			862,999			955,120
Loss on disposal of assets		218,473			—			218,473			6,488			—			6,488
Depreciation and amortization expense		4,453,245			—			4,453,245			1,714,946			—			1,714,946
Total expenses		8,534,539			2,092,955			10,627,494			3,001,320			1,175,090			4,176,410
Loss before other income (expense)		(787,572	)		(2,092,955	)		(2,880,527	)		(311,005	)		(1,175,090	)		(1,486,095	)

Other income (expense):
Other income		562			152,418			152,980			190			70,024			70,214
Interest income		(2,659,763	)		—			(2,659,763	)		(798,724	)		—			(798,724	)
Interest expense		(2,659,201	)		152,418			(2,506,783	)		(798,534	)		70,024			(728,510	)
Net loss	$	(3,446,773	)	$	(1,940,537	)	$	(5,387,310	)	$	(1,109,539	)	$	(1,105,066	)	$	(2,214,605	)

Total revenues

Total revenues for the six months ended June 30, 2019 increased by approximately $5.1 million as compared to the six months ended June 30, 2018 due to seven properties owned at June 30, 2019 as compared to three properties owned at June 30, 2018.

Rental operating - expenses, payroll, and real estate ~~operations, comparative~~taxes

Rental operating ~~results are not relevant to a discussion of operations~~- expenses, payroll, and real estate taxes for the ~~two periods represented. We expect revenues and expenses~~six months ended June 30, 2019 increased by approximately $2.3 million as compared to the six months ended June 30, 2018 due to seven properties owned at June 30, 2019 as compared to three properties owned at June 30, 2018.

Management fees - related parties

Management fees - related parties expense for the six months ended June 30, 2019 increased by approximately $778,000 as compared to the six months ended June 30, 2018 due to an increase in ~~future periods~~property management fees and asset management fees due to the acquisition of four additional properties.

General and administrative

General and administrative expense for the six months ended June 30, 2019 increased by approximately $440,000 as ~~we acquire~~compared to the six months ended June 30, 2018 due to the acquisition of four additional ~~investments.~~

properties, as well as increases in professional fees.

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Loss on disposal of assets

Loss on disposal of assets for the six months ended June 30, 2019 increased by approximately $212,000 as compared to the six months ended June 30, 2018 due to the timing of the replacement of appliances at our rental properties in conjunction with unit upgrades.

Depreciation and amortization

Depreciation and amortization expense for the six months ended June 30, 2019 increased by approximately $2.7 million as compared to the six months ended June 30, 2018 due to seven properties owned at June 30, 2019, with a net asset value of approximately $198.0 million as compared to three properties owned at June 30, 2018, with a net asset value of approximately $73.6 million.

Interest expense

Interest expense for the six months ended June 30, 2019 increased by approximately $1.9 million as compared to the six months ended June 30, 2018 due to seven properties owned at June 30, 2019, which secured debt totaling approximately $147.3 million, as compared to three properties owned at June 30, 2018, which secured debt totaling approximately $55.7 million.

Liquidity and Capital Resources

We are offering and selling to the public in our public offering up to $1.1 billion in shares of common stock, consisting of up to $1.0 billion of shares in our primary offering and up to $100.0 million of shares pursuant to our distribution reinvestment plan ("DRIP").

Through ~~June 30,~~July 2, 2017, we offered shares of Class A and Class T common stock in our primary ~~offering at prices of $10.00 per share~~ and ~~$9.47 per share, respectively.~~DRIP offering. As of July 3, 2017, we ceased offering shares of Class A and Class T common stock in our primary offering and commenced offering shares of Class R and Class I common stock in both the primary and DRIP offering.

On June 27, 2018 and March 21, 2019, our ~~primary offering at~~

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~~prices~~board of ~~$9.52~~directors determined an estimated net asset value (“NAV”) per share of the common stock of $9.05 and ~~$9.13~~$9.12, respectively, based on the estimated market value of the portfolio of our investments as of March 31, 2018 and December 31, 2018, respectively. Based on the estimated NAV per share, ~~respectively. The initial~~our board of directors established updated offering ~~price~~prices for shares ~~offered pursuant~~of Class R and Class I common stock to be sold in the primary portion of our initial public offering by adding certain offering costs to the estimated NAV per share. Pursuant to the terms of the DRIP, ~~is $9.60~~following the establishment of an estimated NAV per share, shares of common stock are sold at the most recent estimated NAV per share.

The prices per share for ~~Class A, $9.09~~each class of shares of our common stock through March 31, 2019 were as follows:

	Class A		Class T		Class R		Class I
Primary Offering Price
Inception through July 2, 2017	$	10.00	$	9.47	n/a		n/a
July 3, 2017 through July 1, 2018	n/a		n/a		$	9.52	$	9.13
July 2, 2018 through March 24, 2019	n/a		n/a		$	9.68	$	9.28
March 25, 2019 through June 30, 2019	n/a		n/a		$	9.75	$	9.35

Offering Price under the DRIP
Inception through July 2, 2017	$	9.60	$	9.09	n/a		n/a
July 3, 2017 through July 1, 2018	$	9.60	$	9.09	$	9.14	$	8.90
July 2, 2018 through March 24, 2019 ⁽¹⁾	$	9.05	$	9.05	$	9.05	$	9.05
March 25, 2019 through June 30, 2019 ⁽¹⁾	$	9.12	$	9.12	$	9.12	$	9.12

(1) Shares of common stock pursuant to our DRIP are sold at our most estimated NAV per ~~share for Class T, $9.14 per share for Class R and $8.90 per share for Class I.~~

share.

We anticipate deriving the capital required to purchase real estate investments and conduct our operations from the proceeds of our initial public offering and any future offerings we may conduct, from secured or unsecured financings from banks or other lenders and from proceeds from the sale of assets. In addition, our Advisor has and will advance funds to us for certain accrued organization and offering costs. As of ~~September~~June 30, ~~2017,~~2019, we have purchased ~~two~~seven properties using both offering proceeds and debt financing.

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If we are unable to raise substantial funds in the offering, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments we make and the value of an investment in us will fluctuate with the performance of the specific assets we acquire. Further, we will have certain fixed operating expenses, including certain expenses as a publicly offered REIT, regardless of whether we are able to raise substantial funds in our offering. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions. As of ~~September~~June 30, ~~2017,~~2019, we have raised approximately ~~$21.9~~$108.3 million in our public offering.

We intend to make reserve allocations as necessary to aid our objective of preserving capital for our investors by supporting the maintenance and viability of properties we acquire in the future. If reserves and any other available income become insufficient to cover our operating expenses and liabilities, it may be necessary to obtain additional funds by borrowing, refinancing properties or liquidating our investment in one or more properties, debt investments or other assets we may hold. We cannot assure you that we will be able to access additional funds when we need them or upon acceptable terms.

~~On December 15, 2016, we, through~~

Capital Expenditures

We deployed a ~~wholly owned subsidiary, entered into a 30-year secured mortgage loan with JPMorgan Chase Bank, N.A., an unaffiliated lender, for borrowings~~total of approximately ~~$1.6~~$2.8 million secured by Payne Place (the "Payne Place Mortgage Loan"). The Payne Place Mortgage Loan matures on January 1, 2047. The Payne Place Mortgage Loan bears interest at an initial fixed rate of 3.11% until January 1, 2020. Beginning January 1, 2020, the loan will bear interest at a rate of LIBOR plus 2.25%. Monthly payments include repayments of principal and interest. Any remaining principal balance and all accrued and unpaid interest and fees will be due at maturity. We may prepay the Payne Place Mortgage Loan in full at any time or in part from time to time: (1) during the ~~first year~~six months ended June 30, 2019 for capital expenditures:

Multifamily Community	Capital deployed during six months ended June 30, 2019		Remaining capital budgeted
Payne Place	$	-	$	33,801
Bay Club		256,963		842,883
Tramore Village		845,108		2,189,796
Matthews		654,195		2,215,487
Kensington		652,522		1,466,351
Wimbledon Oaks		403,268		2,016,406
Summit		-		2,821,855
	$	2,812,056

Gross offering proceeds

At June 30, 2019, shares of our $0.01 par value Class A, Class T, Class R, and Class I common stock have been issued as follows:

	Class A					Class T					Class R					Class I
	Shares Issued			Gross Proceeds		Shares Issued			Gross Proceeds		Shares Issued			Gross Proceeds		Shares Issued		Gross Proceeds
Shared issued through primary offering ⁽¹⁾		586,207		$	5,601,476		1,049,996		$	9,943,465		9,051,083		$	86,943,065		612,560	$	5,649,613
Shares issued through stock dividends		12,860			—		15,495			—		—			—		—		—
Shares issued through distribution reinvestment plan		26,085			244,121		64,618			586,806		244,080			2,219,124		1,702		15,418
Shares issued in conjunction with the Advisor's initial investment, net of 5,000 share conversion		15,000			200,000		—			—		—			—		—		—
Total		640,152		$	6,045,597		1,130,109		$	10,530,271		9,295,163		$	89,162,189		614,262	$	5,665,031
Shares redeemed and retired		(16,914	)				(30,695	)				(945	)				—
Total shares issued and outstanding at June 30, 2019		623,238					1,099,414					9,294,218					614,262

(1)Includes 222,222 of Class A shares issued to RAI.

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Mortgage Debt

The following table presents a summary of our mortgage notes payable, net:

	June 30, 2019							December 31, 2018
Collateral	Outstanding Borrowings		Deferred Financing Costs, net			Carrying Value		Outstanding borrowings		Deferred Financing Costs, net			Carrying Value
Payne Place		1,542,697	$	(29,283	)	$	1,513,414	$	1,560,236	$	(30,220	)	$	1,530,016
Bay Club		21,520,000		(232,127	)		21,287,873		21,520,000		(255,957	)		21,264,043
Tramore Village		32,625,000		(334,217	)		32,290,783		32,625,000		(363,784	)		32,261,216
Matthews Reserve		23,850,000		(291,348	)		23,558,652		23,850,000		(315,236	)		23,534,764
The Park at Kensington		21,760,000		(282,523	)		21,477,477		21,760,000		(305,399	)		21,454,601
Wimbledon Oaks		18,410,000		(254,804	)		18,155,196		—		—			—
Summit		27,580,000		(444,129	)		27,135,871		—		—			—

Total	$	147,287,697	$	(1,868,432	)	$	145,419,265	$	101,315,236	$	(1,270,596	)	$	100,044,640

For maturity dates, related interest rates, monthly debt service, and monthly escrow payments, see Note 8 of the ~~loan upon payment~~notes to our consolidated financial statements.

As of ~~a prepayment premium equal to 3% of~~June 30, 2019, the amount prepaid; (2) during the second year of the loan upon payment of a prepayment premium equal to 2% of the amount prepaid; (3) during the third year of the loan upon payment of a prepayment premium equal to 1% of the amount prepaid; and (4) after the third year of the loan with no prepayment premium. The Payne Place Mortgage Loan is guaranteed by us and Resource America, Inc. ("RAI"), the parent of our Manager.

On July 31, 2017, we, through a wholly owned subsidiary, entered into a seven year, $21.5 million secured mortgage loan with CBRE Capital Markets, Inc., an unaffiliated lender, secured by Bay Club (the "Bay Club Mortgage Loan"). The Bay Club Mortgage Loan matures on August 1, 2024. The Bay Club Mortgage Loan bears interest at a rate of LIBOR plus 1.87%, with a maximumweighted average interest rate of 5.75%. Monthly payments are interest only for the first 24 months. Beginning on August 1, 2019, we will pay both principal and interest based on 30 year amortization. Any remaining principal balance and all accrued and unpaid interest and fees will be due at maturity. We may prepay the Bay Club Mortgage Loan in full at any time (1) after July 31, 2019 and until April 30, 2024 upon payment of a prepayment premium equal to 1% of the principal amount prepaid; and (2) after April 30, 2024 with no prepayment premium. The non-recourse carveouts under the loan documents for the Bay Club Mortgage Loan are guaranteed by us.

our outstanding indebtedness was 4.21%.

Although there is no limit on the amount we can borrow to acquire a single real estate investment, we may not leverage our assets with debt financing such that our borrowings are in excess of 300% of our net assets unless a majority of our independent directors find substantial justification for borrowing a greater amount. Examples of such a substantial justification include, without limitation, obtaining funds for the following: (i) to repay existing obligations, (ii) to pay sufficient distributions to maintain REIT status, or (iii) to buy an asset where an exceptional acquisition opportunity presents itself and the terms of the debt agreement and the nature of the asset are such that the debt does not increase the risk that we would become unable to meet our financial obligations as they became due. On a total portfolio basis, however, based on current lending market conditions, we expect to leverage our assets in an amount equal to 55% to 60% of the cost of our assets.

We may finance the acquisition costs of individual real estate investments, as well as the acquisition costs of all or a group of real estate investments acquired by us, by causing our subsidiaries to borrow directly from third-party financial institutions or other commercial lenders. Under these circumstances, our Advisor anticipates that certain properties acquired will serve as collateral for the debt we incur to acquire those particular properties and that we will seek to obtain nonrecourse financing for the acquisition of the properties. However, there is no guarantee that our Advisor will be successful in obtaining financing arrangements on a

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property-by-property basis and that the loans would be nonrecourse to us. Additionally, we may obtain corporate-level financing through a line of credit from third-party financial institutions or other commercial lenders. Our assets will serve as collateral for this type of debt incurred to acquire real estate investments. We may also obtain seller financing with respect to specific assets that we acquire.

Organization and Offering Costs

We incur organization and offering costs in pursuit of our ~~financing.~~capital raise. Our organization and offering costs (other than selling commissions, the dealer manager fees and distribution and shareholder servicing fees) are initially being paid by the Advisor on our behalf. Organization costs include all expenses that we incur in connection with our formation, including but not limited to legal fees and other costs to incorporate.

Pursuant to the ~~Advisory Agreement,~~advisory agreement, we will be obligated to reimburse the Advisor for organization and offering costs paid by the Advisor on our behalf, up to an amount equal to 4.0% of gross offering proceeds as of the termination of this offering if we raise less than $500.0 million in the primary offering, and 2.5% of gross offering proceeds as of the termination of this offering if we raise $500.0 million or more in the primary offering. However, if we raise the maximum offering amount in the primary offering, we expect organization and offering expenses (other than selling commissions, the dealer manager fee and the distribution and shareholder servicing fee) to be approximately $10.0 million or 1% of gross offering proceeds. These organization and offering expenses include all actual expenses (other than selling commissions, the dealer manager fee and the

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distribution and shareholder servicing fee), including reimbursements to our Advisor for the portion of named executive officer salaries allocable to activities related to this offering, to be incurred on our behalf and paid by us in connection with the offering.

~~Through September~~

On April 13, 2018, our board of directors approved an amendment to the advisory agreement that provides that we are not responsible for the reimbursement of any unreimbursed organization and offering expenses or operational expenses incurred by our Advisor on our behalf through March 31, 2018 until after the termination of the primary portion of our ongoing initial public offering. Additionally, the amendment provides that such unreimbursed organization and offering expenses or operational expenses incurred or paid by our Advisor on our behalf through March 31, 2018 will be reimbursed ratably starting after the termination of the primary portion of our ongoing initial public offering through April 30, ~~2017,~~2021 for organization and offering expenses and through April 30, 2020 for operating expenses.

As of June 30, 2019, we have ~~charged~~incurred approximately ~~$501,000 to equity~~$9.1 million for ~~the payment of~~public offering costs consisting of accounting, advertising, allocated payroll, due diligence, marketing, legal ~~printing~~ and similar costs. ~~At September~~As of June 30, ~~2017, the~~2019, our Advisor has ~~incurred~~advanced approximately ~~$5.4~~$8.1 million of these costs on our behalf and we have paid approximately $249,000 of these costs directly and reimbursed approximately $747,000 to our Advisor.

As of June 30, 2019, we have charged approximately $4.3 million of offering costs to equity, which ~~approximately $4.9 million has been deferred at September 30, 2017. A~~represents the portion of deferred offering costs ~~will be charged~~allocated to ~~equity upon the sale of~~ each share of common stock sold ~~under~~in the public offering. ~~Such~~Deferred offering costs ~~will only become a liability~~of $4.8 million represent the portion of the ~~Advisor~~total offering costs incurred that have not yet been charged to equity. Upon completion of the ~~extent that~~public offering, any deferred offering costs in excess of the limit on organization and offering expenses (excluding selling commissions, dealer manager fees and and the distribution and shareholder servicing fee) incurred by us exceed 4.0% of the gross proceeds of the initial public offering if we raise less than $500 million or 2.5% of gross proceeds of the initial public offering if we raise $500 million or more. If, however, we raise the maximum offering amount in the primary offering, organization and offering expenses (excluding selling commissions, dealer manager fees and the distribution and shareholder servicing fee) are estimatedcosts discussed above, will not be payable to ~~be approximately 1.0% of the gross proceeds of the initial public offering. When recorded by us, organization~~our Advisor.

Organization costs, ~~are expensed as incurred,~~ which include all expenses incurred by us in connection with our formation, including but not limited to legal fees and other costs to ~~incorporate.~~incorporate, are expensed as incurred. There can be no assurance that our plans to raise capital will be successful.

Outstanding Class T shares issued in our primary offering are subject to ~~a 1.0%~~an annual distribution and shareholder servicing fee in the amount of 1% of the estimated NAV of the share (1% of purchase price prior to June 29, 2018) for five years from the date on which such share is issued. We will cease paying the distribution and shareholder servicing fee on each Class T share prior to the fifth anniversary of its issuance on the earliest of the following, should any of these events occur: (i) the date at which, in the aggregate, underwriting compensation from all sources equals 10% of the gross proceeds from our primary offering (i.e., excluding proceeds from sales pursuant to our DRIP); (ii) the date on which we list our common stock on a national securities exchange; and (iii) the date of a merger or other extraordinary transaction in which we are a party and in which our common stock is exchanged for cash or other securities. We cannot predict if or when any of these events will occur.

Outstanding Class R shares issued in our primary offering are also subject to ~~a 1.0%~~an annual distribution and shareholder servicing ~~fee.~~fee in the amount of 1% of the estimated NAV of the share (1% of purchase price prior to June 29, 2018). We will cease paying the distribution and shareholder servicing fee with respect to Class R shares held in any particular account, and those Class R shares will convert into a number of Class I shares determined by multiplying each Class R share to be converted by the applicable "Conversion Rate," on the earlier of (i) the date after the termination of the primary offering at which, in the aggregate, underwriting compensation from all sources equals 10% of the gross proceeds from our primary offering; (ii) a listing of the Class I shares on a national securities exchange; (iii) a merger or consolidation of the company with or into another entity, or the sale or other disposition of all or substantially all of our assets; and (iv) the end of the month in which the total underwriting compensation (which consists of selling commissions, dealer manager fees and distribution and shareholder servicing fees) paid with respect to such Class R shares purchased in a primary offering is not less than 8.5% (or a lower limit, provided that, in the case of a lower limit, the agreement between the Dealer Manager and the broker-dealer in effect at the time Class R shares were first issued to such account sets forth the lower limit and the Dealer Manager s advises our transfer agent of the lower limit in writing) of the gross offering price of those Class R shares purchased in such primary offering (excluding shares purchased through our distribution reinvestment plan).

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We record the distribution and ~~stockholder serving~~shareholder servicing fees as a reduction to additional paid-in capital and the related liability in an amount equal to the maximum fees payable in relation to the Class T and Class R shares on the date the shares are issued. The liability will be relieved over time, as the fees are paid to the Dealer Manager, or ~~it will be~~as the fees are adjusted if(if the fees are no longer payable pursuant to the conditions described ~~above.~~above). For issued Class T shares, we have accrued an estimate of the total distribution and shareholder servicing ~~fee~~fees of ~~$497,173~~$465,638 for the full five year period at ~~September~~June 30, ~~2017,~~2019, of which we paid ~~$40,491~~$207,141 cumulatively through ~~September~~June 30, ~~2017.~~2019. For issued Class R shares, we have accrued an estimate of the total distribution and shareholder servicing ~~fee~~fees of ~~$176,075~~$2.4 million at ~~September~~June 30, ~~2017,~~2019, of which we paid ~~$713~~$753,435 cumulatively through ~~September~~June 30, ~~2017.~~

2019. The total accrual of approximately $1.9 million is included in due to related parties on our consolidated balance sheet at June 30, 2019.

Acquisition and Asset Management Costs

In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to make payments to our Advisor. During our acquisition stage, we expect to make payments to our Advisor in connection with the acquisition of real estate investments. In addition, we expect to continue to make payments to our Advisor for the management of our assets and costs incurred by our Advisor in providing services to us.

Operating Expenses

At the end of each fiscal quarter, our Advisor must reimburse us the amount by which our aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of our average invested assets or 25% of our net income, unless the conflicts committee of our board of directors has determined that such excess expenses were justified based on unusual and non-recurring factors.

Operating expenses for the four fiscal quarters ended ~~September~~June 30, ~~2017~~2019 exceeded the charter imposed limitation; however, the conflicts committee determined that the relationship of our operating expenses to our average invested assets was justified for these periods given the costs of operating a public company and the early stage of our operations.

"Average invested assets" means the average monthly book value of our assets invested, directly or indirectly, in equity interests in and loans secured by real estate during the 12-month period before deducting depreciation, bad debts or other non-cash reserves. "Total operating expenses" means all expenses paid or incurred by us, as determined under accounting principles generally accepted in the United States ("GAAP"), that are in any way related to our operation, including advisory fees, but excluding (i) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and stock exchange listing of our stock; (ii) interest payments; (iii) taxes; (iv) non-cash expenditures such as depreciation, amortization and bad debt reserves; (v) incentive fees paid in accordance with the NASAA Statement of Policy Regarding Real Estate Investment Trusts (the "NASAA REIT Guidelines"); (vi) acquisition fees and expenses (including expenses relating to potential investments that we do not close); (vii) real estate commissions on the sale of property; and (viii) other fees and expenses connected with the acquisition, disposition, management and ownership of real estate interests, loans or other property (such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property).

Distributions

Cash Distributions

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, we declared and paid aggregate distributions, which were paid from operating activities, debt financing, and offering proceeds, as follows:

	Three Months Ended June 30, 2019										Six Months Ended June 30, 2019
	Class A		Class T		Class R		Class I		Total		Class A		Class T		Class R		Class I		Total
Distributions declared	$	84,122	$	121,467	$	1,047,968	$	99,443	$	1,353,000	$	169,363	$	243,997	$	2,034,919	$	161,764	$	2,610,043

Distributions reinvested in shares of common stock paid	$	26,066	$	74,229	$	558,826	$	7,235	$	666,356	$	51,470	$	146,516	$	1,035,611	$	9,631	$	1,243,229
Cash distributions paid		59,019		48,096		418,723		70,168		596,007		115,178		92,942		764,725		115,985		1,088,830
Total distributions paid	$	85,085	$	122,325	$	977,549	$	77,403	$	1,262,363	$	166,648	$	239,459	$	1,800,336	$	125,616	$	2,332,059

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Nine Months Ended September 30, 2017
Class A Class T Class R Class I Total
Distributions declared $ 119,955
$ 142,039
$ 35,094
$ 3,453
$ 300,541

Distributions reinvested in shares of common stock paid $ 39,923
$ 69,246
$ 6,198
$ 407
$ 115,774
Cash distributions paid 72,248
37,000
7,399
1,733
118,380
Total distributions paid $ 112,171
$ 106,246
$ 13,597
$ 2,140
$ 234,154

At ~~September~~June 30, ~~2017, the Company~~2019, we had accrued ~~$91,561~~$1.3 million for the cash distributions paid or to be paid, in cash or DRIP shares, on ~~October~~July 31, ~~2017,~~2019, August 30, 2019, and September 30, 2019, which is reported in distributions payable in the consolidated balance sheet and included in the distributions declared above.

Distributions paid, distributions declared and sources of distributions paid were as follows for the ~~nine~~six months ended ~~September~~June 30, ~~2017:~~2019:

	Distributions Paid									Distributions Declared				Sources of Distributions Paid
														Operating Activities	Offering Proceeds	Debt Financing
2019	Cash		Distributions Reinvested (DRIP)		Total		Cash Provided by/ (Used in) Operating Activities			Total		Per Share⁽¹⁾		Amount Paid / Percent of Total	Amount Paid / Percent of Total	Amount Paid / Percent of Total
First quarter	$	492,823	$	576,873	$	1,069,696	$	(254,605	)	$	1,257,043	$	0.134	- / -	$1,069,696 / 100%	- / -
Second quarter		596,007		666,356		1,262,363		(164,958	)		1,353,000		0.135	- / -	1,262,363 / 100%	- / -

Total	$	1,088,830	$	1,243,229	$	2,332,059	$	(419,563	)	$	2,610,043

Distributions Paid Distributions Declared Sources of Distributions Paid
2017 Cash Distributions Reinvested (DRIP) Total Cash Used in Operating Activities Total
Per Share⁽¹⁾
Operating Activities Offering Proceeds Debt Financing
Amount Paid / Percent of Total Amount Paid / Percent of Total Amount Paid / Percent of Total
First quarter $ 16,429
$ 11,092
$ 27,521
$ (4,598 ) $ 11,083
$0.015 - / - $ 27,521
/100% - / -
Second quarter $ 22,227
$ 21,214
$ 43,441
$ (64,700 ) $ 53,567
$0.051 - / - $ 43,441
/100% - / -
Third quarter $ 79,724
$ 83,468
$ 163,192
$ (325,606 ) $ 235,891
$0.132 - / - - / - $ 163,192
/100%
Total $ 118,380
$ 115,774
$ 234,154
$ (394,904 ) $ 300,541

(1) ~~Distributions for Class T and Class R shareholders were reduced for the distribution and shareholder servicing fee.~~

~~Cash distributions paid since inception were as follows:~~

Fiscal Period Paid
Per Share ⁽¹⁾
Distributions
Reinvested in
Shares of
Common Stock Net
Cash
Distributions Total
Aggregate
Distributions
12 months ended December 31, 2016 $.000547945 per day $ 4,380
$ 11,524
$ 15,904
Seven months ended July 31, 2017 $.000547945 per day 41,012
47,682
88,694
Two months ended September 30, 2017 $.001434521 per day 74,762
70,698
145,460
$ 120,154
$ 129,904
$ 250,058

~~(1)~~ Distributions for Class T and Class R shareholders were reduced for the distribution and shareholder servicing fee.

Cash distributions paid since inception were as follows:

Fiscal Period Paid	Per Share ₍₁₎	Distributions Reinvested in Shares of Common Stock		Net Cash Distributions		Total Aggregate Distributions
12 months ended December 31, 2016	$0.000547945 per day	$	4,380	$	11,524	$	15,904
Seven months ended July 31, 2017	$0.000547945 per day		41,012		47,682		88,694
Five months ended December 31, 2017	$0.001434521 per day		248,431		227,843		476,274
Six months ended June 30, 2018	$0.001434521 per day		605,527		496,157		1,101,684
Six months ended December 31, 2018	$0.001458630 per day		922,889		780,864		1,703,753
Three months ended March 31, 2019	$0.001458630 per day		576,873		492,823		1,069,696
Three months ended June 30, 2019	$0.001469178 per day		666,356		596,007		1,262,363

		$	3,065,468	$	2,652,900	$	5,718,368

(1)Distributions for Class T and Class R shareholders were reduced for the distribution and shareholder servicing fee.

Our net loss attributable to common stockholders for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 was ~~$2,251,780~~approximately $5.4 million and net cash used in operating activities was ~~$394,904.~~$419,563. Our cumulative cash distributions and net loss attributable to common stockholders from inception through ~~September~~June 30, ~~2017~~2019 are ~~$250,058~~approximately $5.7 million and approximately ~~$3.0~~$16.1 million, respectively. We have funded our cumulative distributions, which include net cash distributions and distributions reinvested by stockholders, with cash flows from operating activities, proceeds from our public offering and proceeds from debt financing. To the extent that we pay distributions from sources other than our cash flow from operating activities, we will have fewer funds available for investment in commercial real estate and real estate-related debt, the overall return to our stockholders may be reduced and subsequent investors may experience dilution.

~~Stock Dividends~~

On April 25, 2017, the Company's board of directors authorized a stock dividend, in the amount of 0.01 shares of common stock, on each outstanding share of common stock to all common stockholders of record as of the close of business on July 1,

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~~2017. The stock dividend was issued in the same class of shares as the shares for which such stockholder received the stock dividend. The Company issued this stock dividend on July 14, 2017.~~

Funds from Operations and Modified Funds from Operations

Funds from operations, or FFO, is a non-GAAP financial performance measure that is widely recognized as a measure of REIT operating performance. We use FFO as defined by the National Association of Real Estate Investment Trusts to be net income (loss), computed in accordance with GAAP excluding extraordinary items, as defined by GAAP, and gains (or losses) from sales of property (including deemed sales and settlements of pre-existing relationships), plus depreciation and amortization on real estate assets, and after related adjustments for unconsolidated partnerships, joint ventures and subsidiaries and noncontrolling interests. We believe that FFO is helpful to our investors and our management as a measure of operating performance because it excludes real estate-related depreciation and amortization, gains and losses from property dispositions, and extraordinary items, and as a result, when compared year to year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, development activities, general and administrative expenses, and interest costs, which are not immediately apparent from net income. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate and intangibles diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting alone to be insufficient. As a result, our management believes that the use of FFO, together with the required GAAP presentations, is helpful for our investors in understanding our performance. Factors that impact FFO include start-up costs, fixed costs, delay in buying assets, lower yields on cash held in accounts, income from portfolio properties and other portfolio assets, interest rates on acquisition financing and operating expenses.

Since FFO was promulgated, GAAP has adopted several new accounting pronouncements, such that management and many investors and analysts have considered the presentation of FFO alone to be insufficient. Accordingly, in addition to FFO, we use modified funds from operations, or MFFO, as defined by the ~~Investment Program Association,~~Institute for Portfolio Alternatives, or IPA. MFFO excludes from FFO the following items:


(1)	acquisition fees and ~~expenses;~~expenses (incurred prior to January 1, 2018, as explained below);


(2)	straight-line rent amounts, both income and expense;


(3)	amortization of above- or below-market intangible lease assets and liabilities;


(4)	amortization of discounts and premiums on debt investments;


(5)	impairment charges;


(6)	gains or losses from the early extinguishment of debt;


(7)	gains or losses on the extinguishment or sales of hedges, foreign exchange, securities and other derivatives holdings except where the trading of such instruments is a fundamental attribute of our operations;


(8)	gains or losses related to fair-value adjustments for derivatives not qualifying for hedge accounting, including interest rate and foreign exchange derivatives;


(9)	gains or losses related to consolidation from, or deconsolidation to, equity accounting;


(10)	gains or losses related to contingent purchase price adjustments; and


(11)	adjustments related to the above items for unconsolidated entities in the application of equity accounting.

We believe that MFFO is helpful in assisting management assess the sustainability of operating performance in future periods and, in particular, after our offering and acquisition stages are complete, primarily because, prior to January 1, 2018, as explained below, it ~~excludes~~excluded acquisition expenses that affect property operations only in the period in which the property is acquired. Thus, MFFO provides helpful information relevant to evaluating our operating performance in periods in which there is no acquisition activity.

As explained below, management’s evaluation of our operating performance excludes the items considered in the calculation based on the following economic considerations. Many of the adjustments in arriving at MFFO are not applicable to us. Nevertheless, we explain below the reasons for each of the adjustments made in arriving at our MFFO definition:

Acquisition expenses. In evaluating investments in real estate, including both business combinations and investments accounted for under the equity method of accounting, management’s investment models and analysis

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differentiate costs to acquire the investment from the operations derived from the investment. ~~Prior to 2009, acquisition costs for both of these types of investments were capitalized under GAAP; however, beginning in 2009,~~Under current GAAP, acquisition costs related to business combinations are expensed and are capitalized for asset acquisitions. Prior to January 1, 2018, all of our acquisitions were accounted for as business combinations and their related costs were expensed. On January 1, 2018, we adopted Financial Accounting Standards Board Accounting Standards Update No. 2017-01, and we anticipate that most property acquisitions will be treated as asset acquisitions and the related costs will be capitalized. Acquisition costs will continue to be funded from both the proceeds of debt financing and the proceeds of property dispositions, not from cash flows from operations. We believe that by excluding expensed acquisition costs, MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition expenses include those costs paid to our Advisor or third parties.

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•

Adjustments for straight-line rents and amortization of discounts and premiums on debt investments. In the proper application of GAAP, rental receipts and discounts and premiums on debt investments are allocated to periods using various systematic methodologies. This application will result in income recognition that could be significantly different than underlying contract terms. By adjusting for these items, MFFO provides useful supplemental information on the realized economic impact of lease terms and debt investments and aligns results with management’s analysis of operating performance.

~~Adjustments for straight-line rents and amortization of discounts and premiums on debt investments.~~ In the proper application of GAAP, rental receipts and discounts and premiums on debt investments are allocated to periods using various systematic methodologies. This application will result in income recognition that could be significantly different than underlying contract terms. By adjusting for these items, MFFO provides useful supplemental information on the realized economic impact of lease terms and debt investments and aligns results with management’s analysis of operating performance.

Adjustments for amortization of above or below market intangible lease assets.Similar to depreciation and amortization of other real estate related assets that are excluded from FFO, GAAP implicitly assumes that the value of intangibles diminishes predictably over time and that these charges be recognized currently in revenue. Since real estate values and market lease rates in the aggregate have historically risen or fallen with market conditions, management believes that by excluding these charges, MFFO provides useful supplemental information on the performance of the real estate.

Impairment charges, gains or losses related to fair-value adjustments for derivatives not qualifying for hedge accounting and gains or losses related to contingent purchase price adjustments.Each of these items relates to a fair value adjustment, which is based on the impact of current market fluctuations and underlying assessments of general market conditions and specific performance of the holding which may not be directly attributable to current operating performance. As these gains or losses relate to underlying long-term assets and liabilities, management believes MFFO provides useful supplemental information by focusing on the changes in our core operating fundamentals rather than changes that may reflect anticipated gains or losses. In particular, because GAAP impairment charges are not allowed to be reversed if the underlying fair values improve or because the timing of impairment charges may lag the onset of certain operating consequences, we believe MFFO provides useful supplemental information related to current consequences, benefits and sustainability related to rental rate, occupancy and other core operating fundamentals.

Adjustment for gains or losses related to early extinguishment of hedges, debt, consolidation or deconsolidation and contingent purchase price. Similar to extraordinary items excluded from FFO, these adjustments are not related to continuing operations. By excluding these items, management believes that MFFO provides supplemental information related to sustainable operations that will be more comparable between other reporting periods and to other real estate operators.

By providing MFFO, we believe we are presenting useful information that also assists investors and analysts in the assessment of the sustainability of our operating performance after our offering and acquisition stages are completed. We also believe that MFFO is a recognized measure of sustainable operating performance by the real estate industry. MFFO is useful in comparing the sustainability of our operating performance after our acquisition stage is completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities or as affected by other MFFO adjustments. However, investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our offering and acquisition stages are completed, as it excludes acquisition costs that have a negative effect on our operating performance and the reported book value of our common stock and stockholders’ equity during the periods in which properties are acquired.

Neither FFO nor MFFO should be considered as an alternative to net income attributable to common stockholders, nor is an indication of our liquidity, nor are any of these measures indicative of funds available to fund our cash needs, including our ability to fund distributions. In particular, as we intend to continue to acquire properties as part of our ongoing operations, acquisition costs and other adjustments that are increases to MFFO are, and may continue to be, a significant use of cash. Accordingly, FFO and MFFO should be reviewed in connection with other GAAP measurements. Our FFO and MFFO as presented may not be comparable to amounts calculated by other REITs.

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The following section presents our calculation of FFO and MFFO and provides additional information related to our operations:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net loss attributable to common stockholders - GAAP	$	(2,601,903	)	$	(1,388,450	)	$	(5,387,310	)	$	(2,214,605	)
Depreciation expense		1,747,306			715,940			3,345,339			998,662
FFO attributable to common stockholders		(854,597	)		(672,510	)		(2,041,971	)		(1,215,943	)
Adjustments for straight-line rents		13,498			5,513			11,243			6,458
Amortization of intangible lease assets		468,839			436,851			1,107,906			716,284
MFFO attributable to common stockholders	$	(372,260	)	$	(230,146	)	$	(922,822	)	$	(493,201	)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net loss attributable to common stockholders - GAAP $ (1,602,783 ) $ (431,091 ) $ (2,251,780 ) $ (457,549 )
Depreciation expense 184,618
3,288
205,446
3,288
FFO attributable to common stockholders (1,418,165 ) (427,803 ) (2,046,334 ) (454,261 )
Adjustments for straight-line rents (58 ) —
1,885
—
Amortization of intangible lease assets 160,734
7,088
188,604
7,088
Acquisition costs 823,411
112,711
906,644
112,711
MFFO attributable to common stockholders $ (434,078 ) $ (308,004 ) $ (949,201 ) $ (334,462 )

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Critical Accounting Policies

For a discussion of our critical accounting policies and estimates, see the discussion in our Annual Report on Form ~~10-~~

K10-K for the year ended December 31, ~~2016~~2018 under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies."

Subsequent Events

We have evaluated subsequent events and determined that no events have occurred, which would require an adjustment to or additional disclosure in the consolidated financial ~~statements, except for the following:~~

On October 30, 2017, our board of directors declared cash distributions on the outstanding shares of all classes of our common stock based on daily record dates from October 31, 2017 through December 28, 2017, which distributions we expect to pay on November 30, 2017 and December 29, 2017, respectively. Distributions for this period have been or will be calculated based on stockholders of record each day during these periods at a rate of (i) $0.001434521 per share per day less (ii) the applicable daily distribution and shareholder servicing fees accrued for and allocable to any class of common stock, divided by the number of shares of common stock of such class outstanding as of the close of business of each respective record date.

statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and qualitative disclosures about market risk have been omitted as permitted under rules applicable to smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision of our principal executive officer and principal financial officer, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that

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evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective as of ~~September~~June 30, ~~2017.~~

2019.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the quarter ended ~~September~~June 30, ~~2017~~2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become party to legal proceedings, which arise in the ordinary course of our business. We

are not currently involved in any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by governmental authorities.

ITEM 1A. RISK FACTORS

Risk factors have been omitted as permitted under rules applicable to smaller reporting companies.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

During the period covered by this report, we did not sell any unregistered securities.

Use of Proceeds

On April 28, 2016, our Registration Statement on Form S-11 (File No. 333-207740), covering our initial public offering of up to $1.1 billion in shares of common stock, was declared effective under the Securities Act of 1933. We retained Resource Securities LLC (our "Dealer Manager") as the dealer manager for our offering.

We expect to offer shares of common stock in the primary offering until the registration statement relating to our proposed follow-on offering is declared effective by the Securities and Exchange Commission.

We are offering up to $1.1 billion of shares of our common stock, consisting of up to $1.0 billion of shares in our primary offering and up to $100.0 million of shares pursuant to our DRIP.

On June 27, 2018 and March 21, 2019, our ~~primary offering at prices~~board of ~~$9.52~~directors determined an estimated net asset value (“NAV”) per share of the common stock of $9.05 and ~~$9.13~~$9.12, respectively, based on the estimated market value of the portfolio of our investments as of March 31, 2018 and December 31, 2018, respectively. Based on the estimated NAV per share, ~~respectively. The initial~~our board of directors established updated offering ~~price~~prices for shares ~~offered pursuant~~of Class R and Class I common stock to be sold in the primary portion of our initial public offering by adding certain offering costs to the estimated NAV per share. Pursuant to the terms of the DRIP, ~~is $9.60~~following the establishment of an estimated NAV per share, shares of common stock are sold at the most recent estimated NAV per share.

The prices per share for ~~Class A~~each class of shares of our common stock ~~$9.09 per share for Class T~~through June 30, 2019 were as follows:

	Class A		Class T		Class R		Class I
Primary Offering Price
Inception through July 2, 2017	$	10.00	$	9.47	n/a		n/a
July 3, 2017 through July 1, 2018	n/a		n/a		$	9.52	$	9.13
July 2, 2018 through March 24, 2019	n/a		n/a		$	9.68	$	9.28
March 25, 2019 through June 30, 2019	n/a		n/a		$	9.75	$	9.35

Offering Price under the DRIP
Inception through July 2, 2017	$	9.60	$	9.09	n/a		n/a
July 3, 2017 through July 1, 2018	$	9.60	$	9.09	$	9.14	$	8.90
July 2, 2018 through March 24, 2019 ⁽¹⁾	$	9.05	$	9.05	$	9.05	$	9.05
March 25, 2019 through June 30, 2019 ⁽¹⁾	$	9.12	$	9.12	$	9.12	$	9.12

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(1)Shares of common stock ~~$9.14~~pursuant to our DRIP are sold at our most estimated NAV per ~~share for Class R common stock and $8.90 per share for Class I common stock. As of September~~share.

At June 30, ~~2017, our Advisor has incurred costs on our behalf of approximately $5.4 million.~~

~~At September 30, 2017,~~2019, a total of 601,207 Class A shares, including shares purchased by both our Advisor and RAI, 1,049,996 Class T shares, ~~616,508~~9,051,083 Class R shares and ~~28,557~~612,561 Class I shares of common stock have been issued in connection with our public offering resulting in gross offering proceeds of approximately ~~$21.9~~$108.3 million. From the commencement of our public offering through ~~September~~June 30, ~~2017,~~2019, we incurred selling commissions, dealer manager fees, other underwriting compensation and other organization and offering costs in the amounts set forth below. We generally paid selling commissions and dealer manager fees to our Dealer Manager for the sale of shares in our primary offering and our Dealer Manager reallowed all selling commissions and a portion of the dealer manager fees to participating broker-dealers. In addition, we reimburse our Advisor and Dealer Manager for certain organizational and offering costs.

Type of Expense	Amount
Selling commissions	$	2,470,734
Dealer manager fees		3,193,004
Distribution and shareholder servicing fee ⁽¹⁾		2,873,936
Other organization and offering costs ⁽²⁾		4,333,505
Total expenses	$	12,871,178

Type of Expense Amount
Selling commissions $ 556,667
Dealer manager fees 592,077
Distribution and shareholder servicing fee ⁽¹⁾
673,248
Other organization and offering costs ⁽²⁾
501,303
Total expenses $ 2,323,295

(1)

~~(1)~~

Outstanding Class T and R shares issued in our primary offering are subject to a 1% annual distribution and shareholder servicing fee from the date on which each share is issued. Such fees are not paid from offering proceeds and do not reduce the amount of net offering proceeds to us. At ~~September~~June 30, ~~2017, $632,044~~2019, $1,913,072.4 of these fees are unpaid and included in due to related parties on our consolidated balance sheets.

(2)
~~(2)~~	At ~~September~~June 30, ~~2017,~~2019, this amount is included in due to related parties on the consolidated balance sheets.

From the commencement of our initial public offering through ~~September~~June 30, ~~2017,~~2019, the net offering proceeds to us, after deducting the total expenses incurred as described above, excluding the distribution and shareholder servicing fee as such fees do not reduce the net offering proceeds to us, were approximately ~~$20.2~~$98.3 million. As of ~~September~~June 30, ~~2017,~~2019, we have used the net proceeds from our ongoing initial public offering and debt financing to acquire ~~approximately $30.8~~approximately$199.9 million in real estate

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investments. Of the amount used for the purchase of these investments, approximately ~~$665,000~~$4.4 million was paid to our Advisor as acquisition fees and approximately ~~$43,000~~$238,000 was paid to other affiliates for acquisition expense reimbursements.

Share Redemption Program

Our common stock is currently not listed on a national securities exchange and we will not seek to list our common stock unless and until such time as our ~~board of directors~~Board determines that the listing of our common stock would be in the best interests of our stockholders. In order to provide stockholders with the benefit of some interim liquidity, our ~~board of directors~~Board has adopted a share repurchase program that enables our stockholders to sell their shares back to us after they have held them for at least one year, subject to significant conditions and limitations. The terms of our share repurchase program are more flexible in cases involving the death or disability of a stockholder.

We may reject any request for repurchase of shares. Repurchases of shares of our common stock, when requested, generally will be made quarterly. We ~~will~~ limit the number of shares repurchased during any calendar year to 5.0% of the weighted-average number of shares of ~~our~~ common stock outstanding ~~on December 31~~during the 12-month period immediately prior to the effective date of ~~the previous calendar year.~~redemption. In addition, we are only authorized to repurchase shares using proceeds from our DRIP plus 1.0% of the operating cash flow from the previous fiscal year (to the extent positive) ~~and any additional operating funds, if any, as our Board in its sole discretion may reserve for this purpose.~~. Due to these limitations, we cannot guarantee that we will be able to accommodate all repurchase requests.

~~Unless~~

A stockholder must have beneficially held the shares ~~of our common stock are being repurchased in connection with a stockholder’s death or qualifying disability, the purchase price~~ for ~~shares repurchased under~~at least one year prior to offering them for sale to us through our share repurchase program, ~~will be as set forth below until June 30, 2018 (the "NAV Pricing Date"). Prior to the NAV Pricing Date, and~~ unless the shares are being repurchased in connection with a stockholder’s death, or qualifying disability, ~~we will repurchase~~or certain other involuntary exigent circumstances, in which our Board reserves the right, in its sole discretion, at any time and from time to time, to waive the one-year holding period requirement.

Prior to June 29, 2018, shares ~~at a price equal to, or at a discount from, the purchase price paid for the shares being repurchased as follows:~~



~~Share Purchase Anniversary~~		~~Redemption Price as a Percentage of Purchase Price~~
~~Less than 1 year~~		~~No Repurchase Allowed~~
~~1 year~~		~~92.5%~~
~~2 years~~		~~95.0%~~

Notwithstanding the foregoing, until the NAV Pricing Date, shares received as a stock dividend will be redeemed at a purchase price of $0.00. In addition, the purchase price per share will be adjusted for any stock combinations, splits, recapitalizations and the like with respect to the shares of common stock and reduced by the aggregate amount of net sale or refinance proceeds per share, if any, distributed to the stockholder prior to the repurchase date. Shares repurchased in connection with a stockholder’s death or qualifying disability ~~will be~~were repurchased at a price per share equal to 100% of the amount the stockholder paid for each share, ~~or, once we have established an estimated NAV per share, 100% of such amount, as determined by our board of directors,~~ subject to any special distributions previously made to our stockholders. Effective June 29, 2018, shares repurchased in connection with a stockholder’s death or qualifying disability are repurchased at a price per share equal to 100% of the current NAV.

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Shares repurchased in connection with a stockholder’s other involuntary exigent circumstances, such as bankruptcy or a mandatory distribution requirement under a stockholder’s IRA, within one year from the purchase date, will be repurchased at a price per share equal to the price per share we would pay had the stockholder held the shares for one year from the purchase date, and at all other times in accordance with the terms described ~~above. A stockholder must have beneficially held~~below.

Notwithstanding the foregoing, prior to June 29, 2018, shares received as a stock dividend were redeemed at a purchase price of $0.00. Effective June 29, 2018, shares received as a stock dividend are redeemed at the redemption price applicable to that stockholder’s initial share purchase anniversary.

Unless the shares ~~for at least one year prior to offering them for sale to us through~~of our ~~share repurchase program, unless the shares are being~~common stock were repurchased in connection with a stockholder’s death qualifying disability, or certain other exigent circumstances. Our Board of Directors reserves the right, in its sole discretion, at any time and from time to time, to waive the one-year holding period requirement in the event of the death or qualifying disability, the purchase price for shares repurchased under our share repurchase program were as set forth below as of ~~a stockholder, other involuntary exigent circumstances such as bankruptcy, or a mandatory distribution requirement under a stockholder’s IRA.~~June 30, 2019:

Share Purchase Anniversary	Redemption Price
Less than 1 year	No repurchase allowed
1 year	$	8.44
2 years	$	8.66
3 years	$	8.89
4 years	$	9.12

During the ~~period covered by this report,~~six months ended June 30, 2019, we ~~did not repurchase any~~redeemed shares of our ~~securities~~Class A and Class T common stock as ~~no securities~~follows:

	Class A				Class T
Period	Total Number of Shares Redeemed		Average Price Paid per Share		Total Number of Shares Redeemed		Average Price Paid per Share
January 2019		—		—		—		—
February 2019		—		—		—		—
March 2019		—		—		—		—
April 2019		—		—		—		—
May 2019		—		—		—		—
June 2019		16,914	$	8.66		28,087	$	8.61

		16,914				28,087

All redemption requests submitted in good order were ~~eligible for repurchase.~~

~~ITEM 3. DEFAULTS UPON SENIOR SECURITIES~~


a.	~~Not applicable~~


b.	~~Not applicable~~

~~ITEM 5. OTHER INFORMATION~~

~~Unaudited pro forma consolidated financial information of the Company~~honored for the ~~nine~~six months ended ~~September~~June 30, ~~2017 is filed as Exhibit 99.3 to this quarterly report on Form 10-Q. The unaudited pro forma consolidated statement of operations for~~

2019.

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the nine months ended September 30, 2017 is derived from the historical consolidated financial statements of the Company and has been adjusted to give effect to the Bay Club acquisition, as if it had occurred on January 1, 2016. Information regarding this transaction is set forth in Part I. Financial Information, Item 1. Financial Statements –Note 5. Acquisitions.

ITEM 6. EXHIBITS

Exhibit No.		Description

~~Exhibit No.~~ 3.1		~~Description~~
~~3.1~~		Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Pre-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed April 11, 2016)
~~3.2~~
3.2		Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed November 2, 2015)
~~3.3~~
3.3		Articles of Amendment (incorporated by reference to Exhibit 3.3 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed June 28, 2017)
~~3.4~~
3.4		Articles Supplementary for the Class R shares of common stock (incorporated by reference to Exhibit 3.4 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed June 28, 2017)
~~3.5~~
3.5		Articles Supplementary for the Class I shares of common stock (incorporated by reference to Exhibit 3.5 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed June 28, 2017)
~~4.1~~
4.1		Form of Subscription Agreement (incorporated by reference to Exhibit 4.1 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 68 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed ~~September 28, 2017)~~April 27, 2018)
~~4.2~~
4.2		Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates) (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed November 2, 2015)
~~4.3~~
4.3		Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Exhibit 4.1 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 68 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed ~~September 28, 2017)~~April 27, 2018)
~~4.4~~
4.4		~~Escrow Agreement among the Company, Resource Securities, Inc.~~Second Amended and ~~UMB Bank, N.A., dated April 28, 2016~~Restated Distribution Reinvestment Plan (incorporated by reference to Exhibit ~~4.4~~99.1 to the ~~Company’s Quarterly Report on Form 10-Q filed November 14, 2016)~~
~~10.1~~		~~Amended and Restated Dealer Manager Agreement, by and among Resource Apartment REIT III, Inc. and Resource Securities, Inc.(incorporated by reference to Exhibit 1.1 to the Company’s~~Company's Current Report on Form 8-K filed ~~July 5, 2017)~~June 29, 2018)
~~10.2~~		Amendment to Selected Dealer Agreement, dated July 11, 2017, by and among Resource Apartment REIT III, Inc., Ameriprise Financial Services, Inc., Resource Securities, Inc., Resource REIT Advisor, LLC, and Resource Real Estate, Inc. (incorporated by reference to Exhibit 1.4 to Post-Effective Amendment No. 6 to the Company's Registration Statement on Form S-11 (No.333-207740) filed September 28, 2017)
~~10.3~~
10.1		Multifamily Loan and Security Agreement by and between RRE ~~Bay Club~~Summit Holdings, LLC and CBRE Capital Markets, Inc., dated ~~July 31, 2017~~June 24, 2019 (incorporated by reference to Exhibit ~~10.8 to Post-Effective Amendment No. 6~~10.18 to the Company’s Registration Statement on Form S-11 (No. ~~333-207740)~~333-231012) filed ~~September 28, 2017)~~July 24, 2019)
~~10.4~~
10.2		Virginia Amended and Restated Multifamily Note by RRE ~~Bay Club~~Summit Holdings, LLC in favor of CBRE Capital Markets, Inc., dated ~~July 31, 2017~~June 24, 2019 (incorporated by reference to Exhibit ~~10.9 to Post-Effective Amendment No. 6~~10.19 to the Company’s Registration Statement on Form S-11 (No. ~~333-207740)~~333-231012) filed ~~September 28, 2017)~~July 24, 2019)
~~31.1~~
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
~~31.2~~
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
~~32.1~~
32.1		Certification of Chief Executive Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
~~32.2~~
32.2		Certification of Chief Financial Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
~~99.1~~		~~Share Redemption Program (incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed November 2, 2015)~~
~~99.2~~ 99.1		Second Amended and Restated Share Redemption Program (incorporated by reference to Exhibit 99.1 to the ~~Company’s~~Company's Current Report on Form 8-K filed July ~~5, 2017)~~24, 2018)
~~99.3~~		~~Unaudited Pro Forma Consolidated Financial Information for the Nine Months Ended September 30, 2017~~
101.1		Interactive Data Files

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~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	RESOURCE APARTMENT REIT III, INC.

~~November 13, 2017~~ August 9, 2019		By: ~~/s/~~	/s/ Alan F. Feldman
			Alan F. Feldman
			Chief Executive Officer
			(Principal Executive Officer)

~~November 13, 2017~~ August 9, 2019		By: ~~/s/~~	/s/ Steven R. Saltzman
			Steven R. Saltzman
			Chief Financial Officer
			(Principal Financial and Accounting Officer)

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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)



Large accelerated filero	☐	Accelerated ~~filer~~ o filer.	☐
Non-accelerated filero	~~(Do not check if a smaller reporting company)~~ ☑	Smaller reporting companyþ	☑
		Emerging growth companyþ	☑

		PAGE
PART I	FINANCIAL INFORMATION
		~~PAGE~~
~~PART I~~ ITEM 1.	~~FINANCIAL INFORMATION~~ Financial Statements

~~ITEM 1.~~	~~Financial Statements~~

	Consolidated Balance Sheets ~~- September~~– June 30, ~~2017~~2019 (unaudited) and December 31, ~~2016~~201 8	4

	Consolidated Statements of Operations and Comprehensive Loss - For the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 (unaudited)	5

	Consolidated ~~Statement~~Statements of Changes in Stockholders' Equity ~~- Nine~~– Three and Six Months Ended ~~September~~June 30, ~~2017~~2019 and 2018 (unaudited)	7

	Consolidated ~~Statement~~Statements of Cash Flows - For the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 (unaudited)	8 9

	Notes to Consolidated Financial Statements ~~- September~~– June 30, ~~2017~~2019 (unaudited)	9 10

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31 34

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	39 47

ITEM 4.	Controls and Procedures	39 47

PART II	OTHER INFORMATION

ITEM 1.	Legal Proceedings	41 48

ITEM 1A.	Risk Factors	41 48

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41 48

ITEM 3.6.	~~Defaults Upon Senior Securities~~Exhibits	42 51

~~ITEM 6.~~		~~Exhibits~~	43

SIGNATURES		44 52


☑
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934


☐
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
n/a		n/a		n/a



	September 30, 2017				December 31, 2016
	(unaudited)
ASSETS
Investments:
Rental properties, net	$	29,654,938			$	2,445,835
Identified intangible assets, net	562,568				27,870
Total investments	30,217,506				2,473,705

Cash	10,914,545				3,351,536
Restricted cash	427,116				7,733
Tenant receivables, net	721				788
Due from related parties	4,553				2,352
Subscriptions receivable	676,851				210,000
Prepaid expenses and other assets	147,562				100,485
Deferred offering costs	4,933,424				2,848,199
Total assets	$	47,322,278			$	8,994,798

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Mortgage notes payable, net of unamortized deferred financing costs of $353,061 and $34,166	$	22,769,848			$	1,590,834
Accounts payable and accrued expenses	253,350				214,284
Accrued real estate taxes	236,986				—
Due to related parties	7,594,906				3,616,713
Tenant prepayments	19,644				—
Security deposits	64,066				3,300
Distributions payable	91,561				25,174
Total liabilities	$	31,030,361			$	5,450,305

Stockholders’ equity:
Preferred stock, par value $0.01: 10,000,000 shares authorized, none issued and outstanding	—				—
Convertible stock, par value $0.01: 50,000 shares authorized, 50,000 and 50,000 issued and outstanding, respectively	500				500
Class A common stock, par value $0.01: 25,000,000 and 250,000,000 shares authorized, respectively, 618,569 and 384,195 issued and outstanding, respectively	6,186				3,842
Class T common stock, par value $0.01: 25,000,000 and 750,000,000 shares authorized, respectively, 1,073,229 and 114,037 issued and outstanding, respectively	10,732				1,140
Class R common stock, par value $0.01: 750,000,000 and 0 shares authorized, respectively, 617,186 and 0 issued and outstanding, respectively	6,172				—
Class I common stock, par value $0.01: 75,000,000 and 0 shares authorized, respectively, 28,602 and 0 issued and outstanding, respectively	286				—
Additional paid-in capital	19,922,440			��	4,380,126
Accumulated other comprehensive loss	(9,396		)		—
Accumulated deficit	(3,645,003		)		(841,115		)
Total stockholders’ equity	$	16,291,917			$	3,544,493
Total liabilities and stockholders’ equity	$	47,322,278			$	8,994,798



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues:
Rental income	$	544,431		$	25,178		$	645,585		$	25,178
Total revenues	544,431			25,178			645,585			25,178

Expenses:
Rental operating	236,562			3,249			277,163			3,249
Acquisition costs	823,411			112,711			906,644			112,711
Property management fees	2,776			1,501			7,538			1,501
Management fees - related parties	82,938			3,110			96,395			3,110
General and administrative	342,956			322,765			883,360			349,223
Loss on disposal of assets	185,114			—			185,114			—
Depreciation and amortization expense	345,352			10,376			394,050			10,376
Total expenses	2,019,109			453,712			2,750,264			480,170
Loss before other income (expense)	(1,474,678		)	(428,534		)	(2,104,679		)	(454,992		)

Other income (expense):
Other income	—			—			1,500			—
Interest income	3,902			432			9,386			432
Interest expense	(132,007		)	(2,989		)	(157,987		)	(2,989		)
Net loss	$	(1,602,783	)	$	(431,091	)	$	(2,251,780	)	$	(457,549	)

Other comprehensive loss:
Designated derivatives, fair value adjustments	(9,396		)	—			(9,396		)	—
Total other comprehensive loss	(9,396		)	—			(9,396		)	—
Comprehensive loss	$	(1,612,179	)	$	(431,091	)	$	(2,261,176	)	$	(457,549	)



	Nine Months Ended September 30,
	2017			2016
Cash flows from operating activities:
Net loss	$	(2,251,780	)	$	(457,549	)
Adjustment to reconcile net loss to net cash (used in) provided by operating activities:
Loss on disposal of assets	185,114			—
Depreciation and amortization	394,050			10,376
Amortization of deferred financing costs	5,390			651
Changes in operating assets and liabilities:
Restricted cash	(38,443		)	—
Tenant receivable, net	67			(3,800		)
Due from related parties	4,971			(1,489		)
Prepaid expenses and other assets	285,774			(241,402		)
Due to related parties	982,779			494,154
Accounts payable and accrued expenses	13,040			204,886
Tenant prepayments	16,912			—
Security deposits	7,222			—
Net cash (used in) provided by operating activities	(394,904		)	5,827

Cash flows from investing activities:
Property acquisitions	(7,591,828		)	(2,493,672		)
Capital expenditures	(22,965		)	(1,979		)
Restricted cash	(6,056		)	—
Net cash used in investing activities	(7,620,849		)	(2,495,651		)

Cash flows from financing activities:
Net proceeds from issuance of common stock	15,719,233			2,254,961
Proceeds from borrowings	—			555,000
Payments on borrowings	(22,091		)	(250,000		)
Distributions paid on common stock	(118,380		)	—
Net cash provided by financing activities	15,578,762			2,559,961

Net increase in cash	7,563,009			70,137
Cash at beginning of period	3,351,536			200,000
Cash at end of period	$	10,914,545		$	270,137



	September 30, 2017		December 31, 2016
Real Estate Taxes	$	226,529	$	7,733
Insurance	67,031		—
Capital Improvements	133,556		—
Total	$	427,116	$	7,733



					Fair Value Assigned
Multifamily Community Name	City and State	Date of Acquisition	Contractual Purchase Price⁽¹⁾		Land		Building and Improvements		Furniture, Fixtures and Equipment		Intangible Assets		Other Liabilities
Bay Club	Jacksonville, Florida	7/31/2017	$	28,300,000	$	3,321,081	$	23,879,553	$	376,064	$	723,302	$	(232,980	)



	Three months ended September 30, 2017			Nine Months Ended September 30, 2017
Total Revenues	$	489,521		$	489,521
Net Loss	(707,429		)	(707,429		)
Acquisition Costs	211,080			294,313
Acquisition Fee	612,331			612,331



Collateral	Maturity Date	Annual Interest Rate		Average Monthly Debt Service		Average Monthly Escrow
Payne Place	1/1/2047	3.11%	₍₁₎₍₄₎	$	6,948	$	1,933
Bay Club	8/1/2024	3.10%	₍₂₎₍₃₎	56,479		40,667



2018	$	34,006
2019	70,044
2020	474,335
2021	491,320
2022	506,982
Thereafter	21,546,222
	$	23,122,909



2018	$	49,998
2019	49,956
2020	49,517
2021	48,346
2022	47,271
Thereafter	107,973
	$	353,061



	Class A Share	Class T Share		Class R Share		Class I Share
Initial Offering Price	$10.00	$9.47		$9.52		$9.13
Selling Commissions Paid by Company (per shares)	7.0%	2.0%		3.0%	⁽¹⁾	None
Dealer Manager Fee (per share)	3.0%	3.0%		3.5%	⁽¹⁾	1.5%
Annual Distributions and Shareholder Servicing Fee	None	1.0%	⁽²⁾	1.0%	⁽³⁾	None
Initial Offering Price Under the DRIP	$9.60	$9.09		$9.14		$8.90



	September 30, 2017				December 31, 2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Mortgage notes payable - outstanding borrowings	$	23,122,909	$	21,335,161	$	1,625,000	$	1,625,000



Interest Rate Derivative	Number of Instruments	Notional Amount		Maturity Dates
Interest rate cap	1	$	21,520,000	August 1, 2020



	Three Months Ended September 30,							Nine Months Ended September 30,
	2017			2016				2017			2016
Revenues:
Rental income	$	544,431		$	25,178			$	645,585		$	25,178
Total revenues	544,431			25,178				645,585			25,178

Expenses:
Rental operating	236,562			3,249				277,163			3,249
Acquisition costs	823,411			112,711				906,644			112,711
Property management fees	2,776			1,501				7,538			1,501
Management fees - related parties	82,938			3,110				96,395			3,110
General and administrative	342,956			322,765				883,360			349,223
Loss on disposal of assets	185,114			—			—	185,114			—
Depreciation and amortization expense	345,352			10,376				394,050			10,376
Total expenses	2,019,109			453,712				2,750,264			480,170
Loss before other income (expense)	(1,474,678		)	(428,534		)		(2,104,679		)	(454,992		)

Other income (expense):
Other income	—			—				1,500			—
Interest income	3,902			432				9,386			432
Interest expense	(132,007		)	(2,989		)		(157,987		)	(2,989		)
Net loss	$	(1,602,783	)	$	(431,091	)		$	(2,251,780	)	$	(457,549	)



Fiscal Period Paid	Per Share ⁽¹⁾	Distributions Reinvested in Shares of Common Stock		Net Cash Distributions		Total Aggregate Distributions
12 months ended December 31, 2016	$.000547945 per day	$	4,380	$	11,524	$	15,904
Seven months ended July 31, 2017	$.000547945 per day	41,012		47,682		88,694
Two months ended September 30, 2017	$.001434521 per day	74,762		70,698		145,460
		$	120,154	$	129,904	$	250,058